Things That Make You Go Hmmm… Like The Freaking Fed | Zero Hedge
Things That Make You Go Hmmm… Like The Freaking Fed | Zero Hedge. (source/full article)
The Fed has painted itself into an almighty corner with QE, and it looks as though we are finally getting to the point in the process where that fact begins to (a) occur to people and (b) matter.
Bill Fleckenstein has often spoken about the Fed’s reaching the point where it “loses control of the bond market”, and it is quite possible that we are rapidly approaching that point (the signs have certainly been strong in Japan). We may be there already. We won’t know until we can look in the rearview mirror, I’m afraid; but the nonvirtuous circle the Fed has created is extremely clear:
The simple truth, as you can see from the diagram above, is that the economy and the markets are now 100% dependent on the largesse of the Federal Reserve to sustain them. What you CAN’T see from the diagram is the scary proposition that the Federal Reserve in turn is entirely dependent upon hope to get itself out of this unholy cycle.
The Fed is hoping (as are the ECB, BoE, and BoJ) that the economy recovers sufficiently through massive stimulus so that the recovery will be “self-sustaining”; but, as can clearly be seen by the action of the markets in recent weeks and months, that strategy (such as it is) appears doomed to failure.
Fortunately, Obama has finally been left with just nominated Janet Yellen as the new Fed chair, and she can be relied upon to continue Greenspan & Bernanke’s work in conjuring unlimited free money out of thin air
Which is great for the status quo, but if we take another look at that chart of the US 10-year Treasury yield again, we see something that ought to set alarm bells ringing…
The retracement of interest rates AFTER the Fed’s refusal to follow up their tough talk with a Taper has been far less marked than the rout that ensued after the subject was first tabled; and that spells trouble, because the housing market — the engine of the US “recovery” — cannot stand higher rates without being choked off…
Well, Janet Yellen might well confound everybody and launch the Taper as her first order of business. Or Buysenberg may even begin it as his last act in power; but either way, the market will now likely call the Fed’s bluff, because it knows that the gun hanging on the wall in the shape of the Taper is not guaranteed to be fired. It may even turn out to be completely superfluous to the narrative; and if that is the case, then chances are it will never be fired.
Just as Walter White’s honest intentions in trying to protect his family ended up trapping him in an ever-worsening spiral where countless millions of dollars only made his situation worse, Ben Bernanke is in a similar prison of his own making.
The Fed realizes the truth of that — hence the abandonment of both the Taper and their own credibility — but their chances of averting catastrophe are receding daily.
Full Grant Williams Letter below…
- Things That Make You Go Hmmm… Like Ben “Barrel’o’Monkeys” Bernanke (zerohedge.com)
- The Problem Isn’t Janet Yellen, It’s the Fed (thedailyblogreport.wordpress.com)
The U.S. Debt Ceiling Has Been Suspended | project chesapeake
The U.S. Debt Ceiling Has Been Suspended | project chesapeake. (source)
The U.S. Debt Ceiling Has Been Suspended
Posted by sierra2one
By: Tom Chatham
When is a debt ceiling not a ceiling? When it has been removed. That is the solution that was enacted on Wednesday night to fund the government for the next 90 days. This will last from Oct. 17, 2013 until Feb. 7, 2014. This has some very dangerous implications for Americans. It means as of right now there is no debt ceiling and the federals can spend as much as they like. With all of the previous spending by DHS, and the impending economic crash that we face in the near future, it is terrifying to think what the federals might buy in the next 90 days that they can use against American citizens.
With this scenario in place the writing is on the wall and foreigners can read it well even if Americans cannot. The dumping of treasuries will likely increase substantially over the next few months as the collapse becomes evident to everyone but Americans. This is the end game and most people don’t even know they are in it.
With the debt ceiling removed even temporarily, the government has the ability to overspend and when the ceiling is reinstated in 90 days any new debt over the current limit will not be debatable. The limit will automatically have to be raised to that amount. That is why President Obama answered “no” when asked if there would be a renewed debt debate next year. He knows he can bypass it. When the time comes for the House to raise the debt limit they will either have to raise it to encompass the additional spending or not raise it and possibly trigger a default. Either way the Democrats can blame the Republicans for the additional debt increase or a default.
It could go something like this. The government decides how much extra money they will need until after the elections next year and borrow it now. The money is dispersed into the usual slush funds until needed to avoid any new debt debates before the election. The Republicans will lose the ability to stop uncontrolled government growth next year and the Democrats will deprive them of any debt debates before Nov. This will give the Democrats a big edge in the elections and could allow them to take some seats in the house. Not that changing from one party to the other will change anything, it will just determine how fast we collapse.
By this time next year I suspect the Petrodollar will be on life support if not completely dead and high inflation will be rearing its’ ugly head. The governments answer to this will be price controls which will lead to shortages. Then things go downhill fast from there. That’s if we actually make it to next fall without a serious incident in the U.S. before then.
These are truly perilous times for the U.S. and everyone should prepare as they deem appropriate. The west line has shifted and we are now on the trailing edge of history. If we are to survive as a nation and prosper again we must learn to operate with a smaller more efficient economy as others before us have done. This will entail a smaller more localized economy with more small producers and a stable medium of exchange. The only alternative is to become a failed third world nation with no future.
- The Real Next Debt Ceiling Deadline Might Not Be Until June Or July (businessinsider.com)
- U.S. debt jumps $300 billion – tops $17 trillion for first time (washingtontimes.com)
- The Debt Ceiling Wasn’t Raised, Just Disregarded (personalliberty.com)
- Senate Debt Deal Includes Provision Lessening Congress’ Power On Debt Ceiling… (breitbart.com)
- How to Disarm Congress’s Suicide Bomb – Bloomberg (bloomberg.com)
Rexton Protest In N.B. Sparks Renewal Of Idle No More (PHOTOS)
Rexton Protest In N.B. Sparks Renewal Of Idle No More (PHOTOS). (source)
HALIFAX – Justice Minister Peter MacKay is calling for an end to any confrontations and the resumption of talks to resolve a dispute over shale gas exploration in eastern New Brunswick.
MacKay was briefed early Friday on the incidents a day earlier near Rexton where the RCMP arrested at least 40 people during protests that saw police vehicles set on fire and the Mounties allege they were the target of Molotov cocktails.
“There’s obviously a need to respect the law and to avoid violence and return to discussions,” he said at a roundtable discussion on justice issues in Halifax.
“That is what we’re all encouraging and hoping for, but when violence erupts you can expect the police are there to keep the peace and to protect citizens.”
The Mounties say the arrests were made after Molotov cocktails were thrown at officers and police vehicles were torched when officers began enforcing an injunction to end a weeks-long demonstration.
Const. Jullie Rogers-Marsh said at least five RCMP vehicles were destroyed after they were set ablaze and at least one shot was fired by someone other than a police officer at the site of a protest.
Protesters were arrested for firearms offences, threats, intimidation, mischief and violating the court-ordered injunction.
Rogers-Marsh said police decided to enforce the injunction because threats had been made against private security guards at the site on Wednesday night. She wouldn’t reveal what tactics police were using to contain the crowd and refused to comment on reports that officers had fired rubber bullets.
Robert Levi, a councillor with the Elsipogtog First Nation, said police pepper-sprayed dozens of people after he arrived at a protest site in the Rexton area with the chief and council on Thursday morning.
The RCMP blocked Route 134 on Sept. 29 after a protest there began spilling onto the road. Protesters subsequently cut down trees that were placed across another part of the road, blocking the entrance to the compound.
In other parts of the country, demonstrations were held to support the protests in Rexton, with more scheduled for Friday.
The mayor of the village of Perth-Andover in western New Brunswick said about three dozen protesters from the Tobique First Nation blocked traffic on the Trans-Canada Highway for several hours Thursday before ending their protest at 8 p.m.
Peter Ritchie said truck traffic was backed up for several kilometres on both sides of the highway.
In Winnipeg, about 50 protesters disrupted traffic at Portage and Main in support of the Rexton protesters. The demonstration was relatively peaceful, but protesters did burn a Canadian flag before making their way to the RCMP building on Portage Avenue.
In southern Ontario, provincial police said 30 to 40 protesters shut down Highway 6 on Thursday between the communities of Hagersville and Caledonia. A local news agency, Turtle Island News, said the protest by Six Nations members was also staged in solidarity with the protests in eastern New Brunswick.
Levi said he expects a meeting Friday between New Brunswick Premier David Alward and Elsipogtog Chief Arren Sock in Fredericton.
Levi and Sock were among the dozens of people arrested Thursday. The protesters, who include members of Elsipogtog, want SWN Resources to stop seismic testing and leave the province.
Alward has also said he wants a peaceful resolution, adding that he still believes a shale gas industry can be developed in the province both safely and in a sustainable way.
In a statement issued Thursday, New Brunswick’s Green party leader said Alward has missed an opportunity to reset his government’s relationship with First Nations in New Brunswick.
“The people of Elsipogtog and local residents of Kent County were simply trying to protect their right to safe water and the well-being of their communities through peaceful civil disobedience,” David Coon said. “Their cause is just and deserves respect. The decision to respond with force will deepen the conflict.”
SWN Resources issued a statement Friday saying it is in the early stages of exploration in New Brunswick.
“Our employees are dedicated to the safety of people and the environment, as well as ensuring we are in full compliance with all regulations,” it said.
- N.B. shale gas clash leads to protests across Canada (globalnews.ca)
- Most RCMP withdraw after shale gas clash in Rexton – New Brunswick – CBC News (olduvaiblog.wordpress.com)
- Five police cruisers torched, 40 protesters arrested as native anti-fracking rally turns violent (news.nationalpost.com)
- RCMP pepper spray, arrest N.B. anti-shale gas protesters, police cars set on fire (globalnews.ca)
- Reaction to violent protest in New Brunswick (metronews.ca)
- Sacred Fires Lighting for Elsipogtog First Nation (netnewsledger.com)
Is a Large Wealth Grab on the Way? |
Is a Large Wealth Grab on the Way? |. (source)
IMF Discusses ‘One-Off’ Wealth Tax
It is undoubtedly nice to have a job with the World Bank or the IMF. One of the most enticing aspects for those employed at these organizations (which n.b. are entirely funded by tax payers), is no doubt that apart from receiving generous salaries and perks, they themselves don’t have to pay any taxes. What a great gig! Since these organizations are so to speak ‘extra-territorial’, they are held to be outside the grasp of specific tax authorities.
This doesn’t keep them from thinking up various ways of how to resolve the by now well-known problem of the looming insolvency of various welfare/warfare states. In fact, they have quite a strong incentive to come up with such ideas, since their own livelihood depends on the revenue streams continuing without a hitch. One recent proposal in particular has made waves lately (it can be found in this paper – pdf), mainly because it sounds precisely like the kind of thing many people expect desperate governments to resort to when push comes to shove, not least because they have taken similar measures repeatedly throughout history.
The recent depositor haircut in Cyprus has also contributed to such expectations becoming more widespread. We believe is that it is far better to let shareholders, bondholders and depositors (in that order) take their lumps in the event of bank insolvencies rather than forcing the bill on unsuspecting tax payers via bailouts. What was odious about the Cypriot haircut was mainly that the government steadfastly lied to its citizens about what was coming and that certain classes of depositors, such as e.g. the president’s relatives, got all their money out just a week or two prior to the bank holiday, by what we are assured was sheer coincidence (this unexpected twist of fate which proved so fortuitous to the president’s clan increased the costs for remaining depositors).
Still, the entire escapade was a salutary event in many respects. It proved that government bonds are not a reliable store of value (it was mainly their holdings of Greek government bonds that got the Cypriot banks into hot water) and it was a reminder that fractionally reserved banks are inherently insolvent. In short, it has helped a bit to concentrate the minds of many of those who still remain whole and has sensitized them to other attempts of grabbing private wealth that may be coming down the pike.
This is probably also the reason why a paragraph in an IMF document that may otherwise not have received much scrutiny as it would have been considered too outlandish an idea, has created quite a stir. That such proposals are made from the comfortable environment of a tax free zone is quite ironic. Here is the paragraph in question:
“The sharp deterioration of the public finances in many countries has revived interest in a “capital levy”— a one-off tax on private wealth—as an exceptional measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair). There have been illustrious supporters, including Pigou, Ricardo, Schumpeter, and—until he changed his mind—Keynes. The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away (these, in turn, are a particular form of wealth tax—on bondholders—that also falls on nonresidents).
There is a surprisingly large amount of experience to draw on, as such levies were widely adopted in Europe after World War I and in Germany and Japan after World War II. Reviewed in Eichengreen (1990), this experience suggests that more notable than any loss of credibility was a simple failure to achieve debt reduction, largely because the delay in introduction gave space for extensive avoidance and capital flight—in turn spurring inflation.
The tax rates needed to bring down public debt to precrisis levels, moreover, are sizable: reducing debt ratios to end-2007 levels would require (for a sample of 15 euro area countries) a tax rate of about 10 percent on households with positive net wealth.”
It is actually not a surprise that there is a ‘wealth of experience to draw on’. Throughout history, governments have thought up all sorts of methods to get their hands on their subjects’ wealth. It would have only been a surprise if there had been no ‘experiences to draw on’. In fact, as wasteful and inefficient as the State is otherwise, this is one of the tasks in which it proves extremely resourceful, inventive and efficient. The extraction of citizens’ wealth is an activity at which it excels.
Apparently the IMF judges that stealing 10% of all private wealth in one fell swoop is perfectly fine as long as ‘some see it as fair‘. Some of course would. There is however a crucial difference between imposing such a levy at gunpoint and letting bondholders take losses. The latter have taken the risk of not getting repaid voluntarily. No-one forced them to buy government bonds.
As to the pseudo-consolation that such a confiscation should be presented as a ‘one off’ event so as ‘not to distort behavior’, let’s be serious. The moment governments gets more loot in, they will start spending it with both hands and in no time at all will find themselves back at square one.
States and Taxation
As Franz Oppenheimer has pointed out, States are essentially the result of conquests by gangs of marauders who realized that operating a protection racket was far more profitable than simply grabbing everything that wasn’t nailed down and making off with. In modern democracies it has become easier for citizens to join the ruling class (i.e., the more civilized version of these marauders), which has greatly increased acceptance of the State. Also, a large number of people has been bought off with ‘free’ goodies and all and sundry have had it drilled into them throughout their lives that the State is both inevitable and irreplaceable.
There are of course other advantages to be had in democracies, such as the fact that a market economy is allowed to exist (even if it is severely hampered) and that free speech is tolerated. One considerable drawback though is that taxation has historically never been higher than in the democratic order (and still these States are all teetering on the edge of bankruptcyanyway).
As an aside, conscription and the closely associated concept of ‘total war’ are also democratic ‘achievements’. Whereas war was once largely confined to strictly localized battles between professionals, the French revolution and its aftermath was a pivot point that marked a change in thinking about war and ultimately paved the way for legitimizing the all-encompassing atrocities of the 20th century, with civilians suddenly regarded as fair game.
A little historical excursion: Under medieval kings there was at least occasionally a chance that a tax might actually be repealed, even if only temporarily. For instance, in 1012 the heregeld was introduced in England, an annual tax first assessed by King Ethelred the Unready (better: ‘the Ill-Advised’). Its purpose was to help pay for mercenaries to fight the invasion of England by King Sweyn Forkbeard of Denmark.
Ethelred had been forced to pay a tribute to the Danes for many years, known as ‘Danegeld‘. In 1002 AD he apparently got fed up and in a fit of pique ordered the murder of all Danes in England, an event known as the St. Brice’s Day Massacre. Not surprisingly, this incensed the Danes and Sweyn Forkbeard’s invasion was the result. Sweyn seized the English throne in 1013, but died in 1014, upon which Ethelred was invited back by the nobles (under the condition that he ‘rule more justly’). However, he soon died as well, which left Edmund Ironside in charge for a few months in 1016. Sweyn’s son Knut eventually conquered England later in the same year. Knut simply continued to collect the heregeld tax after ascending to the throne. The heregeld was a land tax based on the number of ‘hides’ one owned (the hide is a medieval area measure, the precise extent of which is disputed among historians; one hide was once thought to be equivalent to 120 acres, but this is no longer considered certain). The tax was finally abolished by King Edward the Confessor in 1051 (Edward was Ethelred’s seventh son and was later canonized. He was the last king of the House of Wessex). The tax relief unfortunately proved short-lived. Shortly after Edward’s death in 1066, the Normans conquered England and ‘hideage‘ was reintroduced.
Ethelred the Unready, inventor of the heregeld tax, holding an oversized sword. Although he is generally referred to as ‘the Unready’, this translation of his nickname is actually incorrect: rather, it should be ‘ill-advised’ or ‘ill-prepared’. In the original old English “Æþelræd Unræd”, the term ‘unread’ is actually a pun on his name. ‘Ethelred’ means ‘noble counsel’ (in modern German: ‘Edler Rat’) – his nickname thus juxtaposes ‘noble counsel’ with ‘no counsel’ or ‘evil counsel’.
(Image source: Wikimedia Commons)
Ethelred’s nemesis, the Danish King Sweyn Forkbeard, likewise holding an oversized sword
(Image source: Wikimedia Commons)
The man who abolished the heregeld tax, St. Edward the Confessor. It is noteworthy that he is usually not depicted holding an oversized sword (he was however reportedly not inexperienced in military matters. When Welsh raiders attacked English lands in 1049, they soon had reason for regret. The head of one of their leaders, Rhys ap Rhydderch, was delivered to Edward in 1052. The head was no longer attached to the rest of Rhys). Edward is probably not mainly remembered for this, but he gave England fifteen glorious years free of hideage tax.
(Image source: Wikimedia Commons)
As Murray Rothbard writes in ‘The Ethics of Liberty’ on the State’s monopoly of force and its power to extract revenue by coercion:
“But, above all, the crucial monopoly is the State’s control of the use of violence: of the police and armed services, and of the courts—the locus of ultimate decision-making power in disputes over crimes and contracts. Control of the police and the army is particularly important in enforcing and assuring all of the State’s other powers, including the all-important power to extract its revenue by coercion.
For there is one crucially important power inherent in the nature of the State apparatus. All other persons and groups in society (except for acknowledged and sporadic criminals such as thieves and bank robbers) obtain their income voluntarily: either by selling goods and services to the consuming public, or by voluntary gift (e.g., membership in a club or association, bequest, or inheritance). Only the State obtains its revenue by coercion, by threatening dire penalties should the income not be forthcoming. That coercion is known as “taxation,” although in less regularized epochs it was often known as “tribute.” Taxation is theft, purely and simply even though it is theft on a grand and colossal scale which no acknowledged criminals could hope to match. It is a compulsory seizure of the property of the State’s inhabitants, or subjects.
It would be an instructive exercise for the skeptical reader to try to frame a definition of taxation which does not also include theft. Like the robber, the State demands money at the equivalent of gunpoint; if the taxpayer refuses to pay his assets are seized by force, and if he should resist such depredation, he will be arrested or shot if he should continue to resist. It is true that State apologists maintain that taxation is “really” voluntary; one simple but instructive refutation of this claim is to ponder what would happen if the government were to abolish taxation, and to confine itself to simple requests for voluntary contributions. Does anyone really believe that anything comparable to the current vast revenues of the State would continue to pour into its coffers? It is likely that even those theorists who claim that punishment never deters action would balk at such a claim. The great economist Joseph Schumpeter was correct when he acidly wrote that “the theory which construes taxes on the analogy of club dues or of the purchase of the services of, say, a doctor only proves how far removed this part of the social sciences is from scientific habits of mind.”
(emphasis in original)
In the pages following this excerpt, Rothbard expertly demolishes numerous spurious arguments that have been forwarded in support of taxes by people claiming that they are somehow akin to voluntary contributions.
The Vote Changes Nothing
In the course of this disquisition Rothbard also discusses whether the democratic vote actually makes a difference in this context, whether, as he puts it, the “act of voting makes the government and all its works and powers truly “voluntary.” On this topic he quotes from the observations of anarchist political philosopher Lysander Spooner, who wrote the following in ‘No Treason:The Constitution of No Authority’:
“In truth, in the case of individuals their actual voting is not to be taken as proof of consent. . . . On the contrary, it is to be considered that, without his consent having even been asked a man finds himself environed by a government that he cannot resist; a government that forces him to pay money renders service, and foregoes the exercise of many of his natural rights, under peril of weighty punishments.
He sees, too, that other men practice this tyranny over him by the use of the ballot. He sees further, that, if he will but use the ballot himself, he has some chance of relieving himself from this tyranny of others, by subjecting them to his own. In short, he finds himself, without his consent, so situated that, if he uses the ballot, he may become a master, if he does not use it, he must become a slave.
Discussing taxation in the same text, Spooner famously compares government to highwaymen. He is however not merely equating one with the other, but rather concludes that highwaymen are to be preferred. After all, neither are their activities attended by hypocrisy, nor are their demands without limit (we would add to this that no-one ever published learned papers advising them how to best go about grabbing more loot).
“It is true that the theory of our Constitution is, that all taxes are paid voluntarily; that our government is a mutual insurance company, voluntarily entered into by the people with each other. . . .
But this theory of our government is wholly different from the practical fact. The fact is that the government, like a highwayman, says to a man: “Your money, or your life.” And many, if not most, taxes are paid under the compulsion of that threat.
The government does not, indeed, waylay a man in a lonely place, spring upon him from the roadside, and, holding a pistol to his head, proceed to rifle his pockets. But the robbery is none the less a robbery on that account; and it is far more dastardly and shameful.
The highwayman takes solely upon himself the responsibility, danger, and crime of his own act. He does not pretend that he has any rightful claim to your money, or that he intends to use it for your own benefit. He does not pretend to be anything but a robber. He has not acquired impudence enough to profess to be merely a “protector,” and that he takes men’s money against their will, merely to enable him to “protect” those infatuated travelers, who feel perfectly able to protect themselves, or do not appreciate his peculiar system of protection.
He is too sensible a man to make such professions as these. Furthermore, having taken your money, he leaves you, as you wish him to do. He does not persist in following you on the road, against your will; assuming to be your rightful “sovereign,” on account of the “protection” he affords you. He does not keep “protecting” you, by commanding you to bow down and serve him; by requiring you to do this, and forbidding you to do that; by robbing you of more money as often as he finds it for his interest or pleasure to do so; and by branding you as a rebel, a traitor, and an enemy to your country, and shooting you down without mercy if you dispute his authority, or resist his demands. He is too much of a gentleman to be guilty of such impostures, and insults, and villainies as these. In short, he does not, in addition to robbing you, attempt to make you either his dupe or his slave.”
Somehow we don’t think that Mr. Spooner would have been a very big fan of the IMF and its ideas.
Lysander Spooner had their number.
(Image source: Wikimedia Commons)
The particular wealth tax proposal mentioned by the IMF en passant is odious in the extreme, especially as the wealth to be taxed has already been taxed at what are historically stratospheric rates.
It is noteworthy that the alternatives discussed by the IMF for heavily indebted states which are weighed down by the wasteful spending of yesterday appear to have been reduced to ‘default’ (either outright or via hyperinflation) or ‘more confiscation’. How about rigorously cutting spending instead?
One must also keep in mind that any proposals concerning so-called ‘tax fairness’ are in the main about ‘how can we get our hands on wealth that currently still eludes us’. People need to be aware that worsening the situation of one class of tax payers is never going to improve the situation of another. The IMF’s publication is a case in point: in all its yammering about ‘tax fairness’, the possibility of lowering anyone’s taxes is not mentioned once (not to mention that it seems quite hypocritical for people who are exempted from taxes to go on about imposing ‘tax fairness’ on others).
Lastly, a popular as well as populist target of the self-appointed arbiters of ‘fairness’ are loopholes, but as we have previously discussed, they are to paraphrase Mises ‘what allows capitalism to breathe‘. Closing them will in the end only lead to higher costs for consumers, less innovation, lower growth and considerable damage to retirement savings.
Two apposite statues at Trago Mills, UK, dedicated to HM Inland Revenue – Loot & Extortion.
- IMF Proposing a NEW 10% SUPER-TAX BAIL-IN taken from ALL Accounts! (adrianrowles.com)
- IMF Discusses A Super Tax Of 10% On All Savings In Eurozone (oneworldchronicle.com)
- IMF Proposal to Tax Bank Deposits (blacklistednews.com)
- The International Monetary Fund Lays The Groundwork For Global Wealth Confiscation (forbes.com)
charles hugh smith-False Positives & the Limits of Predictive Analysis
charles hugh smith-False Positives & the Limits of Predictive Analysis. (source)
Analytic systems share system limits with financial markets.
Correspondent Lew G. recently sent me a thought-provoking commentary on the limits of “total information awareness” in terms of any information system’s intrinsic rate of generating false positives.
In essence, the rate of false positives limits the effectiveness of any predictive system. The process of attempting to eliminate false positives is inherently one of diminishing return: even with no expense spared, the effort to eliminate false positives runs into boundaries of signal noise and generation of false positives.
To the degree that financial markets are ultimately predictive systems, this suggests a systemic cause of “unexpected” market crashes: signal noise and the intrinsic generation of false positives lead to a false sense of confidence in the system’s stability and its ability to predict continued stability.
Here are Lew’s comments:
Resources to deal with reality are inherently limited by that reality.Information, to the contrary, is inherently infinite, because of the fractal nature of reality.
A property of that information reality is that ‘meaning’ is relative to other items of info, and that any single item can change the interpretation of a big set of facts. E.g., “Muslim, bought pipes, bought gun powder, visits jihadi sites, attends the Mosque weekly, tithes …” can be completely changed in meaning by a fact such as ‘belongs to the Libertarian Party’, even ‘is a plumber, ‘is a target shooting enthusiast'”.
This will continue to be true no matter how much info the NSA gathers: it will be a small subset of the information needed to answer the question ‘possible terrorist?’.
Thus NSA’s tradeoff of privacy vs security is inconsistent with reality: no matter how much info they gather, no matter how sophisticated their filters, they can never detect terrorists without a false positive rate so high that there will be insufficient resources to follow up on them.
In other words, if the system’s lower boundary is one false positive per million, no additional amount of information gathering or predictive analysis will lower that rate of false positive generation to zero.
Why does this matter? It matters because it reveals that large-scale analytic systems are limited by their very nature. It isn’t a matter of a lack of political will or funding; there are limits to the practical effectiveness of information gathering and predictive analysis.
Though Lew applied this to the NSA’s “total information awareness” program, couldn’t it also be applied to other large-scale information gathering and analysis projects such as analyzing financial markets?
This was the conclusion drawn by the father of fractals, Benoit Mandelbrot, in his bookThe (Mis)Behavior of Markets. As Mandelbrot observed: “When the weather changes, nobody believes the laws of physics have changed. Similarly, I don’t believe that when the stock market goes into terrible gyrations its rules have changed.”
All this should arouse a sense of humility about our ability to predict events, risks and crashes of one kind or another. In other words, risk cannot be entirely eliminated. Beyond a certain point, we’re sacrificing treasure, civil liberties and energy for not just zero gain but negative return, as the treasure squandered on the quixotic quest for zero risk carries a steep opportunity cost: what else could we have accomplished with that treasure, effort and energy?
Spy watchdog to investigate CSIS visit to Hamilton man’s home – Latest Hamilton news – CBC Hamilton
Spy watchdog to investigate CSIS visit to Hamilton man’s home – Latest Hamilton news – CBC Hamilton. (source)
The watchdog agency that oversees the Canadian Security Intelligence Service (CSIS) says it will review the complaint of a Hamilton man who alleges agents visited his house to “intimidate” him.
The Security Intelligence Review Committee (SIRC), the five-person board of political appointees that examines CSIS’s operations, has tapped chair Chuck Strahl to investigate the claim put by longtime activist Ken Stone.
In July, Stone made a formal complaint to SIRC about a Jan. 25 visit by CSIS agents to his Mountain home.
Stone, long a vocal labour and anti-racism advocate, said the agents asked him about an op-ed he wrote titled “Harper is wrong in demonizing Iran” that was published in the Jan. 11 edition of the Hamilton Spectator.
In his letter to SIRC, the 67-year-old alleges that the visit was intended “to intimidate me and members of my family from lawfully exercising our Charter rights to freedom of expression and association” and, counter to CSIS’s mandate, did not address a meaningful security threat.
The visit, he wrote, “caused me and my family a considerable amount of anxiety.” He has asked for a formal apology from CSIS as well as statement from SIRC demanding that CSIS “cease and desist from home and workplace visits to residents of Canada that are designed to intimidate residents of Canada from exercising their Charter rights.”
Last week, Stone received a letter stating that SIRC will hold hearings into the case, but a date for the proceedings has not been set.
Stone said he plans to attend the hearings in Ottawa, and will retain a lawyer to help him make his case.
Both ‘pleased’ and ‘disappointed’
Stone said he’s pleased the committee has chosen to take on his case, but he is doubtful that the process will yield the answers he seeks.
“On the one hand, I’m pleased that they have taken up the complaint because they had the discretion not to take up the complaint. The fact that they chose to take it up is a good sign,” he said.
However, Stone said he’s “disappointed” that Strahl, a former Conservative MP and federal cabinet minister, has been assigned to investigate the case.
“He’s a Conservative Party hack and I don’t expect a lot of sympathy from him.”
That Strahl and his fellow SIRC members are political appointees “shows a fundamental problem with oversight over CSIS,” Stone added.
Committee members, he said, would put their jobs at risk if they slammed the government’s policies, and neither CSIS nor Parliament are required to adopt SIRC’s recommendations.
Contacted by CBC Hamilton on Thursday, SIRC said it would not be able to respond to Stone’s criticism. But in an interview with CBC Hamilton in March, SIRC senior counsel Sylvie Roussel defended the committee’s integrity.
“We have a process and we follow that process,” she said, noting that panel members “take their role very seriously.”
‘Canadians deserve better’
Jean Paul Duval, a spokesman with Public Safety Canada, said the ministry does not comment on specific cases.
However, in an email statement to CBC Hamilton, defended SIRC’s review process.
“SIRC is at arm’s length from the Government and provides independent review that CSIS activities comply with law and Ministerial Direction,” he wrote.
When Stone first went public about the CSIS visit in the winter, he initially said he would not go through with making a complaint to SIRC, figuring it would be futile exercise. He later decided he wanted to his grievance on record, regardless of the outcome.
On Thursday, Stone said he hopes the government will eventually adopt an civilian oversight body — akin to the Ontario Civilian Police Commission — that is independent and not led by political appointees.
“All in all, it’s not a satisfactory oversight process,” Stone said. “Canadians deserve better.”
- Letter warning Stephen Harper against appointing Arthur Porter to oversee spy agency raised no red flags (news.nationalpost.com)
- Globe and Mail Exposed Criminal Csis (canadasblog.wordpress.com)
Stephen Harper unveils EU trade deal in Brussels – Politics – CBC News
Stephen Harper unveils EU trade deal in Brussels – Politics – CBC News. (source)
Canadian beef producers have been assured they will have the ability to export close to 70,000 tonnes of beef to the European Union under a new free-trade deal being unveiled Friday in Brussels.
The quota is almost twice the 40,000-tonne number former EU ambassador Matthias Brinkmann said in May the Europeans were willing to concede to Canada in return for Canada opening up its market to more imports of cheese.
Sources close to the industry say Canadian pork producers will be given an even bigger quota, but did not give a specific number.
The Canadian Agri-food Trade Alliance is hailing the deal, predicting it will boost exports of beef and pork by $1 billion once farmers gear up supply in hormone-free livestock.
But dairy farmers are upset with the loss of quota to mainly French cheese exporters, saying the doubling of imports to about 31,000 tonnes puts Canada’s fine cheese manufacturers in jeopardy.
The government says Canadians will get a first peek at the mammoth free trade deal early Friday morning, including most of the details on quotas. Officials are calling the deal an agreement in principle because a text still needs to be drafted.
Reporters in Ottawa will receive an early-morning briefing on the deal before Prime Minister Stephen Harper and European Commission president Jose Manuel Barroso take part in a signing ceremony in Brussels.
Government officials say the deal with the 28-member EU, known as the Comprehensive Economic and Trade Agreement, is the most ambitious Canada has ever attempted, encompassing every sector of the economy from automobiles to financial services, intellectual property to government procurement.
The deal is expected to call for the phasing out of tariffs on European automobiles, while giving Canadian domestic manufacturers the potential to increase sales into the continent to 100,000 units, from the current 13,000.
Canada has also agreed to extend the life of patented brand-name pharmaceuticals up to two years, which critics say potentially could drive up costs for provincial drug plans and consumers by about $1 billion.
News of the deal has met with wide support among business groups in Canada, but also drawn criticism from unions, civil society groups, and dairy farmers.
- CETA Free Trade Deal: Harper Heading To Europe To Conclude Pact (olduvaiblog.wordpress.com)
- Harper set to sign free-trade deal with European Union (globalnews.ca)
- Canada PM arrives in Brussels to conclude EU deal (boston.com)
- EU, Canada Finalizing Landmark Free Trade Deal (theepochtimes.com)
9 Signs That China Is Making A Move Against The U.S. Dollar
9 Signs That China Is Making A Move Against The U.S. Dollar. (Source)
On the global financial stage, China is playing chess while the U.S. is playing checkers, and the Chinese are now accelerating their long-term plan to dethrone the U.S. dollar. You see, the truth is that China does not plan to allow the U.S. financial system to dominate the world indefinitely. Right now, China is the number one exporter on the globe and China will have the largest economy on the planet at some point in the coming years. The Chinese would like to see global currency usage reflect this shift in global economic power. At the moment, most global trade is conducted in U.S. dollars and more than 60 percent of all global foreign exchange reserves are held in U.S. dollars. This gives the United States an enormous built-in advantage, but thanks to decades of incredibly bad decisions this advantage is starting to erode. And due to the recent political instability in Washington D.C., the Chinese sense vulnerability. China has begun to publicly mock the level of U.S. debt, Chinese officials have publicly threatened to stop buying any more U.S. debt, the Chinese have started to aggressively make currency swap agreements with other major global powers, and China has been accumulating unprecedented amounts of gold. All of these moves are setting up the moment in the future when China will completely pull the rug out from under the U.S. dollar.
Today, the U.S. financial system is the core of the global financial system. Because nearly everybody uses the U.S. dollar to buy oil and to trade with one another, this creates a tremendous demand for U.S. dollars around the planet. So other nations are generally very happy to take our dollars in exchange for oil, cheap plastic gadgets and other things that U.S. consumers “need”.
Major exporting nations accumulate huge piles of our dollars, but instead of just letting all of that money sit there, they often invest large portions of their currency reserves into U.S. Treasury bonds which can easily be liquidated if needed.
So if the U.S. financial system is the core of the global financial system, then U.S. debt is “the core of the core” as some people put it. U.S. Treasury bonds fuel the print, borrow, spend cycle that the global economy depends upon.
That is why a U.S. debt default would be such a big deal. A default would cause interest rates to skyrocket and the entire global economic system to go haywire.
Unfortunately for us, the U.S. debt spiral cannot go on indefinitely. Our debt is growing far, far more rapidly than our GDP is, and therefore our debt is completely and totally unsustainable.
The Chinese understand what is going on, and when the dust settles they plan to be the last ones standing. In the aftermath of a U.S. collapse, China anticipates having the largest economy on the planet, more gold than anyone else, and a respected international currency that the rest of the globe will be able to use to conduct international trade.
And China is not just going to sit back and wait for all of this to happen. In fact, they are already doing lots of things to get the ball moving. The following are 9 signs that China is making a move against the U.S. dollar…
#1 Chinese credit rating agency Dagong has downgraded U.S. debtfrom A to A- and has indicated that further downgrades are possible.
#2 China has just entered into a very large currency swap agreement with the eurozone that is considered a huge step toward establishing the yuan as a major world currency. This agreement will result in a lot less U.S. dollars being used in trade between China and Europe…
The swap deal will allow more trade and investment between the regions to be conducted in euros and yuan, without having to convert into another currency such as the U.S. dollar first, said Kathleen Brooks, a research director at FOREX.com.
“It’s a way of promoting European and Chinese trade, but not doing it with the U.S. dollar,” said Brooks. “It’s a bit like cutting out the middleman, all of a sudden there’s potentially no U.S. dollar risk.”
#3 Back in June, China signed a major currency swap agreement with the United Kingdom. This was another very important step toward internationalizing the yuan.
#4 China currently owns about 1.3 trillion dollars of U.S. debt, and this enormous exposure to U.S. debt is starting to become a major political issue within China.
#5 Mei Xinyu, Commerce Minister adviser to the Chinese government,warned this week that if the U.S. government ever does default that China may decide to completely stop buying U.S. Treasury bonds.
#6 According to Yahoo News, China has already been looking for ways to diversify away from the U.S. dollar…
There have been media reports this week that China’s State Administration of Foreign Exchange, the body that handles the country’s $3.66 trillion of foreign exchange reserve, is looking to diversify into real estate investments in Europe.
#7 Xinhua, the official news agency of China, called for a “de-Americanized world” this week, and also made the following statement about the political turmoil in Washington: “The cyclical stagnation in Washington for a viable bipartisan solution over a federal budget and an approval for raising debt ceiling has again left many nations’ tremendous dollar assets in jeopardy and the international community highly agonized.”
#8 Xinhua also said the following about the U.S. debt deal on Thursday: “[P]oliticians in Washington have done nothing substantial but postponing once again the final bankruptcy of global confidence in the U.S. financial system”. The commentary in the government-run publication also declared that the debt deal “was no more than prolonging the fuse of the U.S. debt bomb one inch longer.”
#9 China is the largest producer of gold in the world, and it has also been importing an absolutely massive amount of gold from other nations. But instead of slowing down, the Chinese appear to be accelerating their gold buying. In fact, money manager Stephen Leeb says that his sources are telling him that China plans to buy another 5,000 tons of gold. There are many that are convinced that China eventually plans to back the yuan with gold and try to make it the number one alternative to the U.S. dollar.
So exactly what would happen if the Chinese announced someday that they were going to back their currency with gold and would no longer be using the U.S. dollar in international trade?
It would change the face of the global economy almost overnight. In a previous article, I described some of the things that we could expect to see happen…
If China does decide to back the yuan with gold and no longer use the U.S. dollar in international trade, it will have devastating effects on the U.S. economy. Demand for the U.S. dollar and U.S. debt would drop like a rock, and prices on the things that we buy every day would soar. At that point you could forget about cheap gasoline or cheap Chinese imports. Our entire way of life depends on the U.S. dollar being the primary reserve currency of the world and being able to import things very inexpensively. If the rest of the world (led by China) starts to reject the U.S. dollar, it would result in a massive tsunami of currency coming back to our shores and a very painful adjustment in our standard of living. Today, most U.S. currency is actually used outside of the United States. If someday that changes and we are no longer able to export our inflation that is going to mean big trouble for us.
The fact that we get to print up giant mountains of money and virtually everyone around the world uses it has been a huge boon for the U.S. economy.
When that changes, the word “catastrophic” is not going to be nearly strong enough to describe what is going to happen.
According to a Rasmussen Reports survey that was released this week, only 13 percent of all Americans believe that the country is on the right track. But the truth is that these are the good times. The American people haven’t seen anything yet.
Someday people will look back and desperately wish that they could go back to the “good old days” of 2012 and 2013. This is about as good as things are going to get, and it is only downhill from here.
- Is China Making A Move Against The U.S. Dollar? (etfdailynews.com)
- China Leads Campaign To Replace The U.S. Dollar As Reserve Currency (etfdailynews.com)
- The sun is setting on the U.S. dollar’s global supremacy (business.financialpost.com)