Economic Blogs

UK Election Forecast 2015 - Budget Bribes Fail, SNP Insurgency Catastrophe - Video

The Market Oracle - Tue, 24/03/2015 - 09:01
George Osborne's pre-election bribes budget apparently just did not live upto voter expectations as £3k bunged to first time buyers and £200 to basic rate savers amongst several smaller bribes was just not enough as the Conservatives saw a 10 seat projected swing to Labour. Meanwhile the Labour party is playing with fire as it dances around whether or not they would rely on SNP MP's to prop up a Labour government that would prove to be a catastrophe as this video illustrates.
Categories: Economic Blogs

France Limits Cash Transactions to €1,000, Puts Restrictions on Gold

Financial Sense - Tue, 24/03/2015 - 05:00

A few days ago I asked How Long Before Cash is Banned? My question was in reference to reader CNA (Cards Not Appreciated) who made a comment. My belief is that cash is going the way of the dinosaur.

Categories: Economic Blogs

Conference Board Leading Economic Index Remains in Growth Territory

Financial Sense - Tue, 24/03/2015 - 05:00

The Latest Conference Board Leading Economic Index (LEI) for February is now available. The index rose 0.2 percent, which follows a 0.2 percent January increase and a 0.4% December increase. The latest number...

Categories: Economic Blogs

Louise Yamada on "Very Frustrating" Fed-Induced Bull Market

Financial Sense - Tue, 24/03/2015 - 05:00

"It's been a very frustrating environment. I'm even looking at the intra-day moves today and we've gone plunging down and surging back up and now it's going to a new low...if you look at the overall pattern of the S&P or the Dow, the barely 4% pullback we've had so far..."

Categories: Economic Blogs

Watch for Fed to Lower U.S. Growth, Inflation Outlook

Financial Sense - Tue, 24/03/2015 - 05:00

The spotlight is on the Fed today, with market participants expecting today’s Fed statement, economic projections and Chairwoman Janet Yellen’s press conference to provide clarity for interest rate policy going forward.

Categories: Economic Blogs

IMF Fears “Taper Tantrum”; Rear View Mirror Discovery

Financial Sense - Tue, 24/03/2015 - 05:00

Central banks, other policy makers, and the IMF only see problems after they are well established. Now, out of the blue, they warn of currency crises and emerging market instability that should have been easy to spot over a year ago.

Categories: Economic Blogs

Now the Energy Pain Begins: 100,000 Layoffs and Counting

Financial Sense - Tue, 24/03/2015 - 05:00

This time a year ago, the oil industry's biggest problem was finding a way to deal with the “retirement tsunami” about to crash down on it as older oilfield workers hung up their cork boots to enjoy freedom-55.

Categories: Economic Blogs

Is There a Bubble Brewing in Biotech?

Financial Sense - Tue, 24/03/2015 - 05:00

“Biotech...is very extended and in some cases at multi-year extremes,” said Jonathan Krinsky, Chief Market Technician at MKM Partners, in a recent interview with Financial Sense Newshour. Looking at a chart of the biotech ETF (IBB), we see that is up over 500%...

Categories: Economic Blogs

China Lands Hard: Rail Volume Plunges, PMI Tumbles Into Contraction, Employment Worst Since Lehman

Zero Hedge - Tue, 24/03/2015 - 02:50

Chinese rail freight collapses 9.1% YoY; China Manufacturing PMI tumbled back to a contractionary 49.2 - lowest in 11 months; and the Employment sub-index plunged to its lowest since Lehman ... yeah but apart from that, everything is awesome. And for those excited about just how disastrous Chinese data is (and thus how huge the next stimulus unleashing will be), think again - China now sees exactly where the last trillion dollar QE went... a de minimus and unsustained blip in the economy and liquidity-fueled rampage in stocks (which is not what a corruption-crackdown politburo wants to encourage).

 

Single Whammy: CHINA JAN.-FEB. RAILWAY CARGO VOLUME FALLS 9.1% Y/Y

 

Double Whammy: China Manufacturing PMI prints 49.2 - lowest in 11 months

 

Everything is un-awesome...

 

Triple Whammy: Employment collapses...

 

*  *  *

Copper prices have continued to collapse and retraced the entire US day session jerk higher...

 

And Shanghai Composite tried to rally but failed...

*  *  *

Of course, HSBC and Markit are screaming for moar QE...

“The HSBC Flash China Manufacturing PMI signalled a slight deterioration in the health of China’s manufacturing sector in March. A renewed fall in total new business contributed to a weaker expansion of output, while companies continued to trim their workforce numbers. Meanwhile, manufacturing companies continued to benefit from falling input costs, stemming from the recent global oil price decline. However, relatively muted client demand has led firms to pass on savings in a bid to boost new work, and cut their selling prices at a similarly sharp rate.”

And sure enough...

  • *JPMORGAN SEES CHINA RRR CUT TO BE AS EARLY AS APRIL

Charts: Bloomberg








Categories: Economic Blogs

Regime Change: America's Failing Weapon Of International Deception

Zero Hedge - Tue, 24/03/2015 - 02:31

Authored by Ben Tanosborn,

For years, Winston Churchill’s famous quote, “It has been said that democracy is the worst form of government except all the others that have been tried,” has served as Americans’ last word in any political discussion which requires validation of the US government, no matter how corrupt or flawed in its behavior, as the best in the planet, comparatively or by default.  Never mind the meaning that Mr. Churchill had intended back in 1947, or how the international political panorama has changed during the past seven decades.

These remarks were made by Britain’s prime minister before the House of Commons a few months before there was a changing of the guards in the “Anglo-Saxon Empire” as the Brits gave away their colonial hegemony in favor of the super-influential economic and military power represented by the United States.  And that was symbolically marked by Britain’s relinquishing its mandate in Palestine, and the creation of Israel.

Such reference to democracy in the quote, explicitly defining it as a “government by the people,” basically applied to Britain and the United States at the close of World War II; but such condition has deteriorated in the US to the point where the “common people” no longer have a say as to how the nation is run, either directly or through politicians elected with financial support provided by special interests, undoubtedly expecting their loyalty-vote.  Yet, while this un-democratization period in our system of government was happening, there were many nations that were adopting a true code of democracy, their citizens having a greater say as to how their countries are governed.  Recognizing such occurrence, however, is a seditious sin for an American mind still poisoned by the culture of exceptionalism and false pride in which it has been brainwashed.

And that’s where our empire, or sphere of influence, stands these days… fighting the windmills of the world, giants that we see menacing “American interests,” and doing it under the banner of “for democracy and human rights.”  Such lofty empire aims appear to rationalize an obscene military budget almost twice as large as those of Russia, China, India and United Kingdom combined!  Americans, representing less than 5 percent of the world’s population, are footing a military bill almost twice as large as that expended by half of the world’s population.  If that isn’t imperialistic and obscene, it’s difficult to image what other societal behavior could be more detrimental to peace and harmony in this global village where we all try to co-exist.

Empires and global powers of the past most often resorted to deposing of antagonistic foreign rulers by invading their countries and installing amicable/subservient puppet rulers.  The United States and the United Kingdom, perhaps trying to find refuge, or an excuse, in their democratic tradition, have resorted to regime change “manipulations” to deal with adversary governments-nations. [Bush43’s Iraq invasion stands as a critical exception by a mongrel government: half-criminal (Dick Cheney-as mentor), and half-moronic (George W. Bush-as mentee).]

Regime change has served the United States well throughout much of the Americas from time immemorial; an endless litany of dictators attesting to shameless in-your-face puppetry… manipulations taking the form of sheer military force, or the fear of such force; bribery of those in power, or about to attain power – usually via military coup; or the promise of help from the Giant of the North (US) in improving economic growth, education and health.  Kennedy’s 1961 Alliance for Progress proved to be more political-PR than an honest, effective effort to help the people in Latin America… such program becoming stale and passé in Washington by decade’s end; the focus shifting in a feverish attempt to counter the efforts by Castro’s Cuba to awaken the revolutionary spirit of sister republics in Central and South America (Bolivia, Ecuador, Nicaragua…).

After almost two centuries of political and economic meddling in Latin America under the Monroe Doctrine (1823) banner, much of it involving regime change, the US is finally coming to terms with the reality that its influence has not just waned but disappeared.  Not just in nations which may have adopted socialist politics, but other nations as well.  US’ recent attempt to get other regional republics to label Venezuela (Maduro’s leftist government) as a security threat not only met with opposition from the twelve-country Union of South American Nations (UNASUR) but has brought in the end of an era.  It’s now highly unlikely that secretive efforts by the CIA to effect regime change in Latin America will find support; certainly not the support it had in the past.

To Washington’s despair, similar results, if for other reasons, are happening throughout North Africa and the extended Middle East; certainly not the results the US had hoped for or anticipated from the revolutionary wave in the Arab Spring, now entering its fifth year.  It is no longer the flow of oil that keeps Washington committed to a very strong presence in the Middle East.  It is America’s Siamese relationship with Israel.

But if regime change is no longer an effective weapon for the US in Latin America or the Middle East, the hope is still high that it might work in Eastern Europe, as America keeps corralling Russian defenses to within a holler of American missilery.  Ukraine’s year-old regime change is possibly the last hurrah in US-instigated regime changes… and it is still too early to determine its success; the US counting on its front-line European NATO partners to absorb the recoil in terms of both the economy and a confrontational status now replacing prior smooth relations.

Somehow it is difficult to envision an outcome taking place in Ukraine which would allow the United States a foothold at the very doorsteps of Russia; something totally as inconceivable as if China or Russia were contemplating establishing military bases in Mexico or any part of Central America or the Caribbean.

The era of using regime change as a weapon of mass deception may have already ended for the United States of America… and hopefully for the entire world.








Categories: Economic Blogs

Fortescue Explains Why Failed Refinancing Didn't Really Fail

Zero Hedge - Tue, 24/03/2015 - 02:00

Last week, Fortescue, the world’s fourth largest iron ore miner, did something “disciplined and prudent”: they pulled a failed bond offering. Some observers suggested that perhaps the reason the issue wasn’t well received was because a three-year chart for iron ore prices looks like this: 

The company doesn’t see it that way though and as CFO Stephen Pearce was quick to remind the media, Fortescue’s cost curve position is “bulletproof.” Not only that, but production costs didn’t factor into the deal’s lukewarm reception either. So essentially it’s a mystery if you let the company tell it. The other interesting thing about the failed refinancing is that it didn’t really fail. Here’s CEO Nev Power:

“The bond issue didn’t fail, we walked away…because we weren’t getting the pricing we wanted out of it.”

Right. So it failed. See the thing about refinancing something is that you do it to take advantage of lower rates, so when the market wants 9% to do the deal, but the debt you’re refinancing yields 7%, that’s really a lot like failure as far as refinancing things goes. In any event, Fortescue doesn’t blame this not-failure on iron ore nor does the fact that industry giants are doing their best Saudi Arabia impression have anything to do with it. Instead, it’s Janet Yellen and oil’s fault.

Via WSJ:

The company’s net profit fell 80% in the six months to the end of December.

 

Mr. Power said a sharp fall in oil prices earlier this month and uncertainty about the path of U.S. Federal Reserve policy caused jitters among investors ahead of its planned bond sale last week. The issue had mostly been marketed to U.S. bond investors…

 

Despite Mr. Power’s assertion that Fortescue is in “great shape,” some analysts believe the company has been a victim of a strategy by iron-ore giants Rio Tinto PLC and BHP Billtion PLC to keep raising their iron-ore output even as prices fall.

Fortunately, Fortescue doesn’t have anything maturing for two years so it’s got some time to spare but in a bind, Power notes that the company can always sell assets. Here’s more from WSJ:

The company could also sell and lease back some of its assets.

 

Mr. Power also suggested that the group’s mining assets, based in the Pilbara region of Western Australia, could be an attractive asset for buyers, as all of the investment needed to build the mines and to start operating them had already been made.

 

“Now is the perfect time for investors who want to have certainty around production and cash flows and an operating history for those assets,” Mr. Power said.

But before anyone goes out and starts an Australian iron ore mine crowdfunding site, consider the following from Citi:

We remain bearish iron ore and re-iterate our expectation that prices will fall below $50/t. Downside levels will be determined primarily by mining cost deflation and underlying Chinese steel demand as deleveraging limits inventory levels.

 

Demand has improved seasonally but remains fundamentally weak. Real Chinese steel demand fell significantly year-on-year in January and February. While we have entered a strong seasonal period, we still see fundamental headwinds.

 

Deleveraging limits the market’s ability to absorb increased supply. Chinese iron ore inventories are falling, but this is a reflection of deleveraging across the industry and may well continue. Given the lack of ability to finance iron ore inventories, increased supply must be met by lower prices in the absence of improved demand.

 

Steel production is likely to remain weak in the near-term given weak domestic demand, the impact of the removal of export subsidies on boron (time will be needed to switch to chrome), and still modest steel margins.








Categories: Economic Blogs

The Real Reason The American Dream In Unraveling

Zero Hedge - Tue, 24/03/2015 - 01:30

Submitted by Jim Quinn via The Burning Platform blog,

Marketwatch posted an article this week titled Why the American Dream is Unraveling, in 4 charts. As usual, the MSM journalist and the liberal Harvard academic can create charts that reveal a huge problem, but they completely misdiagnose the causes and offer the typical wrong solution of taking more money from producers and handing it to the poor, with no strings attached. This has been the standard operating procedure since LBJ began his War on Poverty 50 years ago. Do these control freaks ever step back and assess how that war is going?

The poverty rate had plunged from 34% in 1950 to below 20% before LBJ ever declared war. It continued down to 15% just as the welfare programs began to be implemented. The percentage of people living in poverty hasn’t budged from the 15% range since the war began. This war has been just as successful as the war on drugs and the war on terrorism. Any time a politician declares war on something, expect a huge price tag and more of the “problem” they are declaring war upon.

The Federal government runs over 80 means-tested welfare programs that provide cash, food, housing, medical care, and targeted social services to poor and low-income Americans. Over 100 million Americans received benefits from at least one of these programs. Federal and state governments spent $943 billion in 2013 on these programs at an average cost of $9,000 per recipient (not including Social Security & Medicare). That is 27% of the total Federal budget. Welfare spending as a percentage of the Federal budget was less than 2% prior to the launch of the War on Poverty.

In the 50 years since this war started, U.S. taxpayers have spent over $22 trillion on anti-poverty programs. Adjusted for inflation, this spending (which does not include Social Security or Medicare) is three times the cost of all U.S. military wars since the American Revolution. In terms of LBJ’s main goal of reducing the “causes” rather than the mere “consequences” of poverty, the War on Poverty has utterly failed. In fact, a large proportion of the population is now completely dependent upon government handouts, incapable of self-sufficiency, and enslaved in a welfare mentality that has destroyed their communities.

The primary cause of their poverty and dependency on government are the policies implemented by liberal politicians which have destroyed the family unit, promoted deviant behavior, encouraged the production of bastard children, eliminated the need for personal responsibility, provided no consequences for bad life choices, and bankrupted the nation. The rise of the welfare state has coincided with the decline of the American state. The proliferation of welfare programs has broken down the behaviors, social norms and cultural standards that lead to self-reliance, generating a pattern of growing inter-generational reliance upon government handouts. By undermining productive social norms, welfare creates a need for even greater succor in the future.

So let’s get to the four charts that supposedly reveal why the American dream is unraveling. The Marketwatch article makes the following claim:

The upper-middle-class families Putnam profiles separate themselves into affluent suburbs, with separate public schools and social spheres from those of their poorer counterparts. As a result, the poorer children not only face greater hardships, but they also lack good models of what is possible. They are effectively cut off from opportunity.

The faux journalist makes the laughable argument the reason poor children don’t succeed in life is because people who have studied hard, graduated college, succeeded in life, and moved out of poor neighborhoods have left the poor children to face hardship and lack of opportunity. This is a classic liberal storyline. Blame those who have succeeded through their own blood, sweat and tears for the failure of those who languish in poverty due to their own life choices, lack of respect for education, and lack of work ethic. Chart number one reveals one thing to the Harvard academic Robert Putnam and another to me. He believes kids of people who have a college education have some sort of unfair advantage over kids of lesser educated parents:

“The most important thing about the experience of being young and poor in America is that these kids are really isolated, and really don’t have close ties with anybody. They are completely clueless about the kinds of skills and savvy and connections needed to get ahead.”

Why are poor kids isolated, with no ties with anybody? Isolated from whom? They don’t have ties to their family? That is a ludicrous contention, supported with no facts. All kids are completely clueless. You don’t get ahead in life through savvy and connections. You have the best chance to get ahead in life through opening a book, studying hard, and getting good grades, all with the support of concerned involved parents. There are no guarantees in life, but education, involved parents, and working hard dramatically increase your odds of success. It’s not a secret formula. Putnam believes the chart below reveals that kids in households with college educated parents have an unfair advantage over kids in households without college educated parents. To me it reveals the complete and utter failure of LBJ’s Great Society programs and the feminist mantra that men aren’t necessary to raise children.

The percentage of children living in single parent households with a college educated parent is virtually the same today as it was in the early 1960’s, just under 10%. The percentage of children living in single parent households with a high school educated parent in the early 1960’s was 20%. Today that number has risen to 65%. Liberals purposely misdiagnose the problem because admitting the true cause of this disastrous trend would destroy their credibility and reveal the failure of their beloved welfare programs. The key point is that prior to LBJ’s War on Poverty less than 10% of ALL children grew up in a single parent households. Today, that number is 33%. The lesson is you get more of what you encourage and incentivize. The liberal academic solution is for college educated households to give more of their money to the high school or less educated households. Academics with an agenda never ask why their solutions haven’t worked in 50 years.

The number of households in the U.S. in 1960 totaled 53 million and there were 24 million traditional married couple with children households, or 45%. There were 3 million single parent households with children, or 6%. Today the total number of households in the U.S. is approximately 122 million and there are only 25 million with traditional married couple with children households, or 20%. Meanwhile single parent families with children households have skyrocketed to 13 million, or 11%. The war on traditional two parent families by the government, liberal mainstream media, Hollywood, feminists, and academics has been far more successful than the War on Poverty.

The drastic increase in households with fatherless children, especially in the black community, is the primary reason the poverty rate hasn’t dropped over the last 50 years. It is the primary reason poor children remain poor. It is the primary reason why every urban enclave in America continues to degenerate into dangerous, filthy, lawless ghettos.  The statistics tell the story of decline, depravity, failure, and an endless loop of poverty.

  • An estimated 24.7 million children (33%) live absent their biological father.
  • Of students in grades 1 through 12, 39% (17.7 million) live in homes absent their biological fathers.
  • 57.6% of black children, 31.2% of Hispanic children, and 20.7% of white children are living absent their biological fathers.
  • Among children who were part of the “post-war generation,” 87.7% grew up with two biological parents who were married to each other. Today only 68.1% will spend their entire childhood in an intact family.

Annual divorce rates are only marginally higher today than they were in the early 1960’s. So that does not account for the drastic increase in fatherless households. But, the differences among races is dramatic. Blacks divorce at a rate twice as high as whites and three times as high as Asians.

Marriage rates of Asians are almost three times higher than marriage rates of blacks. Marriage rates of whites are two times higher than marriage rates of blacks. Is it really surprising that Asian children score the highest on all educational achievement tests?

The facts prove that people (no matter what race) who marry and stay married offer their children a tremendously better opportunity to succeed academically, thereby giving them a much higher chance of moving up the socioeconomic ladder. This doesn’t mean that children from a single parent household can’t succeed. It just means they have a better chance with two parents. It’s just simple math. Two adults working together can provide higher income, more help with school work, and offer a more stable environment for the child. The liberal media and those with a social agenda scorn the traditional family as if it precludes people from living however they choose. The results of the war on families can be seen in the chart below.

The unwed birth rate stayed below 5% from 1945 through the early 1960’s. As soon as the government began incentivizing people to not get married and to have children out of wedlock, the rates skyrocketed. Today, four out of ten children are born out of wedlock. Seven out of ten black children are born out of wedlock. Only two out of ten black children were born out of wedlock in 1964. These births out of wedlock are not the result of dumb teenagers making a mistake. Almost 80% of these births are to mothers over the age of 20, with 40% of the births to mothers over the age of 25. And these horrific results are after the 55 million abortions since 1973. This didn’t happen because of women’s rights or women feeling empowered to raise children on their own. Knowledge about and access to contraceptives is not a reason for unwed pregnancies. Poor women and the men who impregnate them receive more welfare benefits by remaining unmarried and receive additional benefits by having more children out of wedlock.

So all of the data confirms the fact children who grow up in two parent households do better in school, are far less likely to be enslaved in poverty, and have a chance to succeed in life, not matter what the educational level of their parents. In the early 1960s there were very few households with college educated parents. My Dad was a truck driver and my mother was a stay at home mom until we were in high school. We were lower middle class, but all three of their children attained college degrees by studying hard, working part-time jobs to help pay for their education, and having the support of concerned parents. Could we have gotten college degrees if we had been raised by only my mother? I doubt it.

Harvard Professor Putnam prefers to ignore the politically incorrect fact that a return to traditional families would begin to reverse the 50 years of damage caused by the War on Poverty. He believes it is in the moral interest of wealthier families to help improve the economic prospects of poorer children. Liberals also don’t think the $13,000 spent per student per year is enough to educate them properly. He actually believes taking more money from producers and handing it to non-producers will boost the U.S. economy.

“The U.S. economy would get a major boost if the opportunity gap were closed. We cannot continue to live in our own bubbles, or compartments on a plate, without consequences. What I hope people take away is that helping poor kids, giving them more skills and more support would economically benefit their kids.”

The country has spent $22 trillion on the war on poverty and spends approximately $1 trillion per year, but liberal academics think if we just spend more, the complete and utter failure of their solutions will be reversed. They ignore the fact a Democratic President (Clinton) and a Republican Congress instituted welfare reform in 1996 that temporarily stopped the increase in spending, halted the rise in unwed births, and put poor people back to work. Today only one welfare program, Temporary Assistance for Needy Families (TANF), effectively promotes self-reliance. Reforms that created TANF in 1996 moved 2.8 million families off the welfare rolls and into jobs. Those gains were reversed as the Obama administration and congressional leadership undid the employment and training requirements enacted 14 years ago. Liberals think it is cruel and inhumane to make poor people work.

Putnam’s final three charts just reinforce the fact traditional families, involved parents, and higher education lead to higher incomes and upward mobility for children in these settings. The reason children in households with college educated parents get more daily attention is because those households are far more likely to have two parents. The time was equal in the early 1970s when two parent families were more prevalent. Having strangers raise kids in government subsidized daycare centers as a substitute for fathers hasn’t worked out so well.

In another shocker, poor children, who are predominantly from single parent households, without a role model to replace their missing fathers, score far worse in tests that predict success in college. The key attribute to educational success is not the educational level of the parents, it’s the need for poor, middle class or wealthy households to have two parents invested in the future of their children.

Attributing obesity rates of children from non-college educated households to the parents’ eduction is quite a reach. In the early 1970’s the obesity rates were very close between high school educated households and college educated households. So why has it surged? The liberals claim the poor go hungry and don’t have enough food. Shouldn’t that lead to higher malnutrition rates and not higher obesity rates? Maybe the surging obesity rates are due to the government lunch programs, the fast food culture in urban ghettos, no fathers around to encourage outside activities, and using food stamps to buy junk food rather than healthier foods. Bad choices generally lead to bad outcomes. Obesity is a choice. Of course liberals now classify it as a disability which needs to be subsidized by the government.

The American dream has unraveled for many reasons. Not spending enough on welfare programs is not one of the reasons. The welfare/warfare state is bankrupt. We spend $1 trillion on welfare programs, $1.4 trillion on Social Security and Medicare, and over $1 trillion on the military/surveillance apparatus. It’s a bipartisan bankruptcy, as Republicans agree to increase the welfare state as long as the Democrats agree to increase the warfare state. The only thing sustaining this debt based house of cards is a Federal Reserve which provides zero interest financing and a never ending willingness to debase our currency to keep the status quo in power. The current rate of spending on the welfare/warfare state is unsustainable. We could voluntarily reduce the spending before the financial collapse or the spending will stop abruptly when our country undergoes a catastrophic financial implosion that will make 2008 look like a walk in the park.

Voluntarily putting the country back on a path of self reliance could be done if there was a will to do so. Reversing the culture of dependency would require a major dose of tough love that would upend the entire ideology of liberalism. Able-bodied, non-elderly adult recipients in all federal welfare programs would be required to work, prepare for work, or at least look for a job as a condition of receiving food stamps or housing assistance. This would promote personal responsibility and provide the recipients with some self respect.  Obama is a big proponent of national service, why not national service for recipients of welfare?

Anti-marriage penalties should be removed from welfare programs, and long-term steps should be taken to rebuild the family in lower-income communities. Marriage penalties occur in many means-tested programs such as food stamps, public housing, Medicaid, day care, and Temporary Assistance for Needy Families. The welfare system needs to be revamped to reduce these counterproductive incentives. The appeal of welfare programs as an alternative to work and marriage could be reduced by requiring able-bodied parents to work or prepare for work as a condition of receiving aid. Today government advertises in an effort to get more people to sign up for food stamps and dozens of other welfare programs. Government should be promulgating the facts on how marriage prevents social ills – poverty, poor education, juvenile crime – associated with children born to unmarried women.

Lastly, we need to cutoff the illegal influx of low-skill immigrants from the South, whose children will receive far more in welfare benefits than they pay in taxes, if they pay any taxes. The country must reject blanket amnesty or “earned citizenship” for millions of illegal immigrants who then could access the welfare system. The welfare system is already unsustainable and adding millions of illegals into the system would be the tipping point.

Lyndon B. Johnson’ s goal was not to create an ever increasing welfare state, but to give the poor a helping hand towards self-sufficiency. His idealistic aim was to cure and prevent poverty. But, once a program is put into the hands of politicians looking to get re-elected every two years, the unintended negative consequences expand exponentially. $22 trillion later the American Dream is virtually non-existent for the 47 million Americans languishing in poverty and the once prosperous middle class who have seen their real wages stagnate due to Federal Reserve created inflation and taxes increase to pay for the ever expanding welfare/warfare state. One chart provides a major explanation of why the American Dream has unraveled, but you won’t see Obama, liberals or the mainstream media talking about it. Traditional married, two parent families are the antidote to poverty, not government welfare programs.

The debate on how to help the poor has raged for centuries. A wise Founding Father told us how the war on poverty would unfold.

“I am for doing good to the poor, but…I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. I observed…that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.” - Benjamin Franklin








Categories: Economic Blogs

Copper Baumgartner'd As China Opens

Zero Hedge - Tue, 24/03/2015 - 01:06

Well that didn't last long. The utterly idiotic surge in Copper futures prices into the US cash equity close has been largely unwound with a small jerk higher on Japan's open and plunge as China joined the fray... retracing ~80% of the rampfest during the day on extremely heavy volume.

 

Because - fun-durr-mentals...

 

Looks like a major squeeze run-stop...








Categories: Economic Blogs

Japan's Pacific Rim Job: Build 250-Mile Anti-Tsunami Wall To Create Jobs

Zero Hedge - Tue, 24/03/2015 - 01:00

It appears Japanese policy-makers are getting inspiration from Hollywood for their latest economic 'fixes'. Having begun the building of a giant 'Game of Thrones'-esque ice-wall to hold back the radiation leaking from Fukushima (only to fail miserably); AP reports the latest cunning plan from the Japanese is to build a Pacific-Rim-esque "massive, costly sea wall to fend off tsunamis." The $6.8 billion, 250-mile-long, 41-foot-high concrete barrier public works project is seen by some as a necessary evil, and by others as a jail... Perhaps The UN's head of Disaster Risk Reduction summed it up best - "There's a bit of an over-belief in technology as a solution."

 

 

As AP reports,

Four years after a towering tsunami ravaged much of Japan's northeastern coast, efforts to fend off future disasters are focusing on a nearly 400-kilometer (250-mile) chain of cement sea walls, at places nearly five stories high.

 

Opponents of the 820 billion yen ($6.8 billion) plan argue that the massive concrete barriers will damage marine ecology and scenery, hinder vital fisheries and actually do little to protect residents who are mostly supposed to relocate to higher ground. Those in favor say the sea walls are a necessary evil, and one that will provide some jobs, at least for a time.

 

In the northern fishing port of Osabe, Kazutoshi Musashi chafes at the 12.5-meter (41-foot)-high concrete barrier blocking his view of the sea.

 

"The reality is that it looks like the wall of a jail," said Musashi, 46, who lived on the seaside before the tsunami struck Osabe and has moved inland since.

Pouring concrete for public works is a staple strategy for the ruling Liberal Democratic Party and its backers in big business and construction, and local officials tend to go along with such plans.

The paradox of such projects, experts say, is that while they may reduce some damage, they can foster complacency. That can be a grave risk along coastlines vulnerable to tsunamis, storm surges and other natural disasters. At least some of the 18,500 people who died or went missing in the 2011 disasters failed to heed warnings to escape in time.

 

...

 

"We don't need the sea wall to be higher. What we do need is for everyone to evacuate," Iguchi said.

 

"The safest thing is for people to live on higher ground and for people's homes and their workplaces to be in separate locations. If we do that, we don't need to have a 'Great Wall,'" he said.

While the lack of basic infrastructure can be catastrophic in developing countries, too heavy a reliance on such safeguards can lead communities to be too complacent at times, says Margareta Wahlstrom, head of the U.N.'s Office for Disaster Risk Reduction.

"There's a bit of an overbelief in technology as a solution, even though everything we have learned demonstrates that people's own insights and instincts are really what makes a difference, and technology in fact makes us a bit more vulnerable," Wahlstrom said in an interview ahead of a recent conference in Sendai convened to draft a new framework for reducing disaster risks.

 

...

 

"Actually, many people are in favor of the sea walls, because they will create jobs," said Takahashi. "But even people who really don't like the idea also feel as if they would be shunned if they don't go along with those who support the plan," he said.

Some voices in unexpected places are urging a rethink of the plan.

Prime Minister Shinzo Abe's wife, Akie, offered numerous objections to cementing the northeast coast in a speech in New York last September. She said the walls may prevent residents from keeping an eye out for future tsunamis and would be costly to maintain for already dwindling coastal communities.

 

"Please do not proceed even if it's already decided," she said. Instead of a one-size-fits-all policy, she suggested making the plan more flexible. "I ask, is building high sea walls to shield the coast line really, really the best?"

 

Rikuzentakata, a small city near Osabe whose downtown area was wiped out by the tsunami, is building a higher sea wall, but also moving many tons of earth to raise the land well above sea level.

 

Local leader Takeshi Konno said no construction project will eliminate the need for coastal residents to protect themselves.

 

"What I want to stress is that no matter what people try to create, it won't beat nature, so we humans need to find a way to co-exist with nature," Konno said. "Escaping when there is danger . the most important thing is to save your life."

*  *  *

Jobs for your future...








Categories: Economic Blogs

Caught Between A Housing Bubble And Falling Crude Prices, Norway Will Invest Oil Riches In Foreign Real Estate

Zero Hedge - Tue, 24/03/2015 - 00:30

Norway is stuck between a rock and a hard place. Last week, the Norges Bank defied market expectations by leaving rates unchanged citing an overheating housing market. Here’s the statement

"The key policy rate was reduced in December to counter the risk of a pronounced downturn in the Norwegian economy on account of lower oil prices. So far, the effects on the real economy have been relatively small, and house prices are still rising at a fast pace. The key policy rate has therefore been left unchanged", says Governor Øystein Olsen.

...and a bit more from the bank…

Banks have lowered their residential mortgage rates by a little more than ¼ percentage point. House prices are still rising at a fast pace and are somewhat higher than projected in December. The rate of household debt accumulation has been slightly lower than that projected, but debt continues to rise faster than household income.

As a reminder, here’s what the rise in property prices looks like: 

Clearly, aggressively lowering rates in such an environment could be a decidedly risky proposition because, as the country’s Financial Supervisory Authority warned in January,   “lower interest rates and strong competition in the mortgage lending market could contribute to continued rapid growth in debt and house prices [causing a] self-augmenting spiral.” As bad as self-augmenting spirals are, some commentators think the central bank may be endangering the economy by being too slow to pull the trigger on rate cuts. Here’s more from Bloomberg

The difference between market expectations and what the bank did “is more a matter of timing and perhaps different weighting of different types of risks,” Olsen said.

 

The government is also working on plans to cool a run-away housing market. Norwegians owe their creditors about twice as much as they make in disposable incomes, more than at any time in the country’s history. House prices jumped about 9 percent in February from a year earlier to a record high…

 

Olsen’s decision to hold rates was “ill-advised,” said Kari Due-Andresen, senior economist at Svenska Handelsbanken AB. “The housing market is not what’s going to tip the economy.”

 

She sees Norges Bank being forced to act on its signal for another cut as early as May, followed by more easing in December. “It takes time for the shock to hit the whole economy, I think we will continue to fare worse and worse as we go forward -- then the housing market will cool.”

Meanwhile, the Supervisory Authority begs to differ and last week proposed a new set of requirements on residential mortgage lending citing the increasingly precarious situation:

There is a risk that the prospect of long-lasting low interest rates and easy access to credit will cause the strong growth in debt and house prices to persist. That would further increase households' debt burden and help to maintain demand for goods and services for a time, but such a development is not sustainable. The risk of a subsequent sharp setback and financial instability would thus increase.

 

Finanstilsynet concludes that it would be most appropriate to establish requirements for lending practices in the form of regulations. This course of action is necessary in order to remove or strongly curb banks' scope to deviate from the standards for residential mortgage lending practices.

All in all, the country is truly backed into a corner: ease too much and the housing bubble becomes even more unsustainable, don’t ease enough and the oil-dependent economy gets it. 

Amidst the uncertainty, Norway’s nearly $900 billion sovereign wealth fund (the largest in the world) is keen on being a source of stability in an increasingly unstable world — which is why it’s planning on spending the country’s oil revenue on “a lot” of Asian skyscrapers and shopping malls. Here’s more from Bloomberg:

The Government Pension Fund Global, its official name, targets markets based on growth potential and supply constraints as it seeks to invest in 10 to 15 cities globally. It has already snapped up properties in New York, Paris, London and Berlin among other cities. The fund held about $18 billion, or 2.2 percent of its assets, in real estate last year, and is seeking to build that share to 5 percent.

 

The focus is on specific markets rather than sectors, Kallevig said.

 

“When we say Singapore and Tokyo, we mean the better parts” of those cities, he said. “My guess is office properties will be the main component, because that’s what’s for sale in those parts of town. There aren’t many shopping malls in the center of Tokyo or the center of Singapore.”

 

The Government Pension Fund Global, its official name, targets markets based on growth potential and supply constraints as it seeks to invest in 10 to 15 cities globally. It has already snapped up properties in New York, Paris, London and Berlin among other cities. The fund held about $18 billion, or 2.2 percent of its assets, in real estate last year, and is seeking to build that share to 5 percent.

 

The focus is on specific markets rather than sectors, Kallevig said.

 

“When we say Singapore and Tokyo, we mean the better parts” of those cities, he said. “My guess is office properties will be the main component, because that’s what’s for sale in those parts of town. There aren’t many shopping malls in the center of Tokyo or the center of Singapore.”

Fortunately, the fund has a sterling track record when it comes to managing risk. For instance, there was the extraordinarily prudent bet on Greek debt in 2010 on the basis that the fund’s investment horizon was “infinity” (via Bloomberg): 

Norway says its long-term perspective will protect it from losses. “One could say we are investing for infinity,” Johnsen said in an Aug. 27 interview. “It is important when you look at the time scope of the fund and the investments that there should be a portion of active management.”

Fast forward to 2012 (Via FT): 

Norway’s oil sovereign wealth fund has sold all its holdings of Irish and Portuguese government debt and reduced its ownership of Spanish and Italian bonds as part of a continuing protest over its forced participation in Greece’s debt restructuring.

So Norway, we wish you the best of luck as it certainly appears you’ll be needing it given that the Norges Bank is facing a lose-lose scenario where leaning one way inflates an epic housing bubble and leaning the other risks exacerbating the negative effects of falling crude prices and speaking of crude, your oil wealth is being invested in Asian properties by the same people who once thought it was a good idea to load up on Greek bonds. 








Categories: Economic Blogs

Russian Sub "Caught" By UK Fisherman After Moscow Threatens To Nuke Denmark

Zero Hedge - Tue, 24/03/2015 - 00:02

As US allies rapidly demonstrate their willingness to abandon Washington on key issues like China’s attempt to move the world away from US-dominated multinational institutions that have held sway for decades, and with NATO simultaneously building a “line of troops” along the Russian border, Moscow seems keen on proving yet again that Russia’s belligerence knob “goes to 11.” As we noted over the weekend, Moscow took the rhetoric up a notch recently when the Kremlin threatened (literally) to blow Danish ships out the water with nuclear missiles, prompting a NATO spokeswoman to dryly note that “such statements do not inspire confidence or contribute to predictability, peace or stability.” Here’s more from Reuters

Russia threatened to aim nuclear missiles at Danish warships if Denmark joins NATO's missile defense system, in comments Copenhagen called unacceptable and NATO said would not contribute to peace.

 

Denmark said in August it would contribute radar capacity on some of its warships to the missile shield, which the Western alliance says is designed to protect members from missile launches from countries like Iran.

 

Moscow opposes the system, arguing that it could reduce the effectiveness of its own nuclear arsenal, leading to a new Cold War-style arms race…

 

In an interview in the newspaper Jyllands-Posten, the Russian ambassador to Denmark, Mikhail Vanin, said he did not think Danes fully understood the

consequences of joining the program.

 

"If that happens, Danish warships will be targets for Russian nuclear missiles," Vanin told the newspaper.

Meanwhile, Russian nuclear subs have apparently been busy cruising around the UK and may have inadvertently become ensnared on one Angus Macleod’s fishing nets. Here’s more from the DailyMail

A fisherman told last night about the one that got away – a suspected Russian submarine which became entangled in his nets after it strayed inside British waters in the North Sea.

 

Angus Macleod, 46, was fishing for haddock and skate when he became convinced that a hostile vessel was caught up below his boat Aquarius.

 

The submarine attempted to free itself (ZH: they’re often unwieldy when caught), taking the 65ft vessel and his two-ton catch with it.

 

‘Had the submarine headed for deeper waters we might have sunk with it, but I don’t want to dwell on that.

 

'We were eventually cut loose when the 150ft-long dog rope, which attaches the nets to the ship, wrapped itself around Aquarius’s propeller and got ripped apart. We were then able to sail back to port.’

...and a bit more color from Live Leak:

Angus Macleod, who has fished Scottish waters for more than 30 years, told how crewmembers became alarmed when their nets began to “overtake” his 62-foot trawler, Aquarius.

 

Speaking to the Sunday Express last night, he said: “We were midway through a trip when the boat started to slow down by around two-thirds of a knot, which can happen when the pots start to collect. 

 

“We started to haul the nets in, and suddenly there was an external force pulling our nets ahead of the boat with some considerable force. This is something we’ve never experienced before. We always have to be ahead of the nets to keep our propeller clear.

 

"We caught up with them, and we continued hauling, but the nets ran forward again. The starboard net continued to lead out aft. We had to do this several times, and the winches which were hauling in the nets were beginning to strain.”

 

Mr. Macleod, 46, added: “At the time we just went through what needed to be done to get out of that situation. We had to keep our propeller clear – that’s our main propulsion. But afterwards we sat down as a crew and we discussed what we’d seen. There is little doubt in our minds that this was caused by a submarine.”

 

“Between the five of us, we’ve had 110 years fishing experience, and none of us have ever seen anything like it. It was a really uncomfortable position to be in. Afterwards, we realised this was the closest we’d ever come to not coming home at all.” 

*  *  *

It wasn’t immediately clear what Macleod and his crew intended to do with the sub had they managed to corral it and haul it up on deck. 








Categories: Economic Blogs

How Much Time Do Americans Spend Plugged Into The Matrix Every Day?

Zero Hedge - Tue, 24/03/2015 - 00:00

Submitted by Michael Snyder via The Economic Collapse blog,

The average American spends more than 10 hours a day using an electronic device.  And most of that activity is not even interactive.  The vast majority of the time we are just passively absorbing content that someone else has created.  This very much reminds me of the movie “the Matrix”, but with a twist.  Instead of humans being forcefully connected to “the Matrix”, we are all willingly connecting ourselves to it.  There is a giant system that defines our reality for us, and the length of time that the average American spends connected to it just continues to keep growing.  In fact, there are millions upon millions of us that simply do not “feel right” unless there is at least something on in the background. 

Just think about it.  How much time do you spend each day with all electronic devices completely turned off?  Thanks to technology, we live at a time when more news, information and entertainment is at our fingertips than ever before, and we are consuming more of it than ever before.  But this also gives a tremendous amount of power to those that create all of this news, information and entertainment.  As I have written about previously, more than 90 percent of the “programming” that we absorb is created by just 6 enormously powerful media corporationsOur conversations, attitudes, opinions and belief systems are constantly being shaped by those entities.  Unfortunately, most of us are content to just sit back and let it happen.

The following numbers regarding the media consumption habits of average Americans come directly from Nielsen’s most recent “Total Audience Report“.  The amount of time per day that Americans spend using these devices is absolutely staggering…

  • Watching live television: 4 hours, 32 minutes
  • Watching time-shifted television: 30 minutes
  • Listening to the radio: 2 hours, 44 minutes
  • Using  a smartphone: 1 hour, 33 minutes
  • Using Internet on a computer: 1 hour, 6 minutes

When you add it all up, the average American spends more than 10 hours a day plugged into the Matrix.

You have heard the old saying “you are what you eat”, right?

Well, the same applies to what we put into our brains.

When you put garbage in, you are going to get garbage out.

In my recent article entitled “It’s Official: Americans R Stupid“, I discussed how the U.S. population is being systematically “dumbed down” and how we are now one of the least intelligent industrialized nations on the entire planet.

A big contributor to our intellectual and social demise is the Matrix that has been constructed all around us.

Virtually every television show, movie, song, book, news broadcast and talk show is trying to shape how you view reality.  Whether you realize it or not, you are constantly being bombarded with messages about what is true and what is not, about what is right and what is wrong, and about what really matters and what is unimportant.  Even leaving something out or ignoring something completely can send an extremely powerful message.

In this day and age, it is absolutely imperative that we all learn to think for ourselves.  But instead, most people seem more than content to let the Matrix do their thinking for them.  If you listen carefully, you will notice that most of our conversations with one another are based on programming from the Matrix.  We all love to talk about the movie that we just saw, or what happened on the latest reality show, or what some famous celebrity is doing, or what we saw on the news that morning.  The things that matter to us in life are the things that the Matrix tells us should matter.

And if someone comes along with information that contradicts the Matrix, that can cause anger and confusion.

I can’t tell you how many times someone has said something like the following to me…

“If that was true I would have seen it on the news.”

To many people, the Matrix is the ultimate arbiter of truth in our society, and so anything that contradicts the Matrix cannot possibly be accurate.

Fortunately, more people than ever are waking up enough to realize that they have a choice.

It is kind of like that moment in the Matrix when Neo is being offered the red pill and the blue pill.

Admittedly, a lot of people that do begin to wake up choose to take the blue pill and go back to sleep.

But there are so many others that are grabbing the red pill.  That is why we have seen such an explosion in the popularity of the alternative media in recent years.  Millions of people all over the planet now understand that they are not getting the truth from the Matrix and they are hungry for real information.

Yes, the Internet is being used for unspeakable evil, but it can also be used for great good.  The Internet has allowed ordinary people like you and I to communicate on a mass scale like never before in history.  The Internet has allowed us to reclaim at least some of the power that we have lost to the Matrix.  I don’t know how long this period of history will last, so we should make full use out of this great tool while we still have it.

On my own website, I have felt called to mainly focus on economics in recent years.  And I will continue to chronicle economic conditions as we descend into the greatest economic crisis in U.S. history.  What is coming is going to be worse than 2008, it is going to be worse than the Great Depression, and it is ultimately going to be worse than most Americans would ever dare to imagine.

But I also want to take my readers on a journey down the rabbit hole.

Our world is about to get really, really strange, and I would like to be a light in the chaos.

Yes, I believe that great darkness is coming.  But I also believe that a great awakening is coming.

Personally, I believe that it is a great privilege to be alive at this time in human history.

It is a time of great evil, but it is also a time of great opportunity.

It is a time when everything that can be shaken will be shaken, but it will also be a time when those that stand for what is right will shine like the stars.








Categories: Economic Blogs

You Too Can Be A Texas Wildcatter With Crowdfunding

Zero Hedge - Mon, 23/03/2015 - 23:30

With the high yield market starting to show signs of becoming less favorable as investors learn the hard way that there’s a reason why the coupon is 11% and with equity issuance already running at 10X last year’s total through March, struggling oil producers may have to get more creative when it comes to raising money if prices remain subdued (which, as we’ve explained at length, they likely will). Fortunately there’s the JOBS act which will not only help you become an angel investor in the next billion dollar app, but will now also let you fulfill your dream of becoming a wildcatter in Texas. Here’s more from Reuters

Equity crowdfunding, or raising capital directly from a large group of investors, is widely used for projects from technology to fashion. Now, at least two small Texas firms are testing the concept in the oil and gas industry.

 

Potential prospectors, hoping to tap into smaller projects that big banks would normally pass over, are taking advantage of recent federal legislation that allows crowdfunding by for-profit companies.

 

EnergyFunders, a tiny 6-person firm in Houston, has signed up 800 investors since its unofficial launch in July, around the time crude prices started a 50 percent slide over the next six months.

So just as you can chip in a few months’ paychecks to fund an indy film, you can now buy into possibly-real oil and gas exploration companies and while the fact that the 6 people who dreamed this up picked the exact moment when prices started to collapse to start the venture might lead some prospective investors to question how deeply their expertise in the field truly runs, EnergyFunders explains that they’re simply helping struggling producers tap into the last available source of funds now that everyone who knows what they’re doing is running for the hills:

"This allows small oil and gas operators to get funds when large institutional investors are turning away from the industry," said Philip Racusin, chief executive officer of EnergyFunders.

CrudeFunders, a similar firm, reminds us that small investors have been throwing their money away for centuries, so really this is just par for the course, only with a hip, modern twist:

"Capital has been raised and invested directly into oil and gas projects for over 100 years, we're just taking it into the 21st Century," Racusin said.

Just as there those who think putting America’s retirement funds into overvalued, private tech startups may be a bad idea, some so-called “experts” caution that drilling for oil and gas is actually quite complicated and without the proper background, it would be very easy for “investors” to dig themselves a hole (no pun intended): 

Christopher Ross, a former BP Plc executive and today finance professor at the University of Houston's C.T. Bauer College of Business, cautioned that directly investing in oil and gas can be tricky for investors unfamiliar with geology, drilling technology, and the arcane world of mineral leases and royalties.

 

"I don't want to pour cold water on what might be a valid new source of funding, but from the investor's point of view I would say a very strong caveat emptor (buyer beware)," he said.

Not so says Austin-based web marketer Scott Morris. It’s all about buying the dip:

Scott Morris, a 57-year-old Web marketer based in Austin, Texas, invested $5,000 in the project.

 

"With oil at $50 (a barrel) or below, it's the perfect environment to get our hands on these."

*  *  *

Enough said. 








Categories: Economic Blogs

US To China: 'Infrastructure Bank' This! - Test-Fires ICBM As A "Visual To The World"

Zero Hedge - Mon, 23/03/2015 - 23:09

With allies migrating en masse to China's new infrastructure bank (and even the US having to admit it will 'cooperate'), it appears America has fallen back on what has worked for it in the past to ensure the world's largest creditor remains the world's reserve currency ad inifinitum - rattle its nuclear missile sabre... As the following clip shows, The US Air Force just test-fired a Minuteman III intercontinental ballistic missile from California, providing a "visual to the world."

 


*  *  *

Check out this morning's #ICBM test launch thanks to @30thSpaceWing, F.E. Warren & @AFGlobalStrike #Airmen! http://t.co/QUwj8kbwjQ #AirForce

— U.S. Air Force (@usairforce) March 23, 2015

*  *  *

As RT reports, an intercontinental ballistic missile was fired early Monday from a facility in California, the US Air Force announced, saying the tests were a message to the world about Washington's nuclear capabilities.

The Minuteman III missile was fitted with a “test re-entry vehicle” instead of a live thermonuclear warhead, and was test-launched from Vandenberg Air Force Base (AFB) in California at 03:36 local time (10:36 GMT), according to the Air Force statement.

 

"With these launches, we not only verify our processes and the ICBM (intercontinental ballistic missile) weapon system, we provide a visual to the world that the Minuteman III is capable of striking pretty much anywhere with extreme precision," said Lt. Col Tytonia Moore of the 90th Missile Wing, based out of the Francis E. Warren AFB in Wyoming, according to the statement.

 

The "Mighty Ninety" is one of the USAF’s three missile wing commands – the other two being the 91st at Minot AFB in North Dakota and the 341st at Malstrom AFB in Montana. There are roughly 450 ICBMs between the three.

Take that China! Can't catch one of those in a fishing net...








Categories: Economic Blogs

US "Loses" $500 Million In Weapons Given To Yemen, Now In Al-Qaeda Hands

Zero Hedge - Mon, 23/03/2015 - 23:02

Nobody could have possibly foreseen that yet another US foreign diplomacy "success story" would turn out to be an epic disaster. Well, nobody, except for those who accurately predict that every US intervention abroad is now a staggering fiasco (for everyone involved except the US military-industrial complex of course). As for Yemen, the outcome was clear long ago:

And, naturally, after noting that "the employees said that more than 20 vehicles were taken by the fighters after the Americans departed from Sanaa's airport" we asked how long until we have a "tabulation of losses to US taxpayers, just like the great Islamic State 'robbery' of hundreds of millions in US military equipment in Iraq?" That, of course, was another epic US intervention success story.

Anyway, thanks to WaPo we have an answer: according to Jeff Bezos' recent media acquisition, "the Pentagon is unable to account for more than $500 million in U.S. military aid given to Yemen."

Obviously, "can't account for" means "has lost." But while the US does not know where nearly half a billion in weapons can be found, it is more than informed who is the current owner: there are "fears that the weaponry, aircraft and equipment is at risk of being seized by Iranian-backed rebels or al-Qaeda, according to U.S. officials."

And just like that, America's now laughable, pathetic foreign policy has not only resulted in another US-supported administration to be exiled or worse, but is has directly armed the adversary. And to think it was only 6 months ago when the Teleprompter in Chief was praising the "Yemen success story." From Obama's Statement on ISIL as of September 10, 2014:

Now, it will take time to eradicate a cancer like ISIL.  And any time we take military action, there are risks involved –- especially to the servicemen and women who carry out these missions.  But I want the American people to understand how this effort will be different from the wars in Iraq and Afghanistan.  It will not involve American combat troops fighting on foreign soil.  This counterterrorism campaign will be waged through a steady, relentless effort to take out ISIL wherever they exist, using our air power and our support for partner forces on the ground.  This strategy of taking out terrorists who threaten us, while supporting partners on the front lines, is one that we have successfully pursued in Yemen and Somalia for years.  And it is consistent with the approach I outlined earlier this year:  to use force against anyone who threatens America’s core interests, but to mobilize partners wherever possible to address broader challenges to international order.

Some may find it odd then, that 6 months later this "strategy" has been flipped on its head, and the Obama administration is taking out its partners (in Yemen), while supporting the terrorists who threaten us.

But almost everyone will say this was obvious from day one.

Here is what else was obvious:

With Yemen in turmoil and its government splintering, the Defense Department has lost its ability to monitor the whereabouts of small arms, ammunition, night-vision goggles, patrol boats, vehicles and other supplies donated by the United States. The situation has grown worse since the United States closed its embassy in Sanaa, the capital, last month and withdrew many of its military advisers.

 

U.S. firearms supplied to the Interior Ministry in Yemen, which has
received
$500 million in aid from the United States since 2007 under an
array of
Defense Department and State Department programs. (GAO)


In recent weeks, members of Congress have held closed-door meetings with U.S. military officials to press for an accounting of the arms and equipment. Pentagon officials have said that they have little information to go on and that there is little they can do at this point to prevent the weapons and gear from falling into the wrong hands.

 

“We have to assume it’s completely compromised and gone,” said a legislative aide on Capitol Hill who spoke on the condition of anonymity because of the sensitivity of the matter.

 

* * *

 

Washington has supplied more than $500 million in military aid to Yemen since 2007 under an array of Defense Department and State Department programs. The Pentagon and CIA have provided additional assistance through classified programs, making it difficult to know exactly how much Yemen has received in total.

Below is a graphic representation of all the equipment that has been "misplaced."

Another day for the US State Department under John Kerry, another day of endless embarrassment.

U.S. military officials declined to comment for the record. A defense official, speaking on the condition of anonymity under ground rules set by the Pentagon, said there was no hard evidence that U.S. arms or equipment had been looted or confiscated. But the official acknowledged that the Pentagon had lost track of the items.

 

“Even in the best-case scenario in an unstable country, we never have 100 percent accountability,” the defense official said.

It gets better:

U.S. government officials say al-Qaeda’s branch in Yemen poses a more direct threat to the U.S. homeland than any other terrorist group. To counter it, the Obama administration has relied on a combination of proxy forces and drone strikes launched from bases outside the country.

And now it is relying on an even more radical strategy: arming al-Qaeda directly.

But the absolute punchline is the way the US government justifies this most recent fiasco:

Although the loss of weapons and equipment already delivered to Yemen would be embarrassing, U.S. officials said it would be unlikely to alter the military balance of power there. Yemen is estimated to have the second-highest gun ownership rate in the world, ranking behind only the United States, and its bazaars are well stocked with heavy weaponry. Moreover, the U.S. government restricted its lethal aid to small firearms and ammunition, brushing aside Yemeni requests for fighter jets and tanks.

See, it's no biggie that US taxpayers are half a bill out of pocket: the Yemen branch of Al-Qaeda was already armed to the teeth anyway, peace out.

Up next? US-trained Ukraine troops with ultra-modern equipment mysteriously defect, and end up in the Russian army?

The winner? The US Military Industrial Complex, because as General Sline said in Spies Like Us, "a weapon unused is a useless weapon." And if there is anything the US military-industrial complex is good at, it is exporting war first courtesy of the CIA operating the in the shadows of incompetent figureheads like Hillary Clinton and John Kerry, followed promptly - like in this case - by arms to fight it (while HSBC, JPM and others provide the funding).








Categories: Economic Blogs
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