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When E.F. Hutton Talks | Epsilon Theory

When E.F. Hutton Talks | Epsilon Theory

If you like your health plan, you can keep your health plan.

– Barack Obama

Of course, one objective of both traditional and nontraditional policy during recoveries is to promote a return to productive risk-taking.

– Ben Bernanke

Most people are other people. Their thoughts are someone else’s opinion, their lives a mimicry, their passions a quotation.

 Oscar Wilde (“De Profundis”)

Don’t piss down my back and tell me it’s raining.

– Fletcher (“The Outlaw Josey Wales”)

EU = Max(E(1+r)α/α)                    

– Paul Samuelson, Nobel Prize winner, author of all-time best-selling economics textbook

 Through his research, teaching, and writing Paul Samuelson had more impact on the economic life of this country and the world than any government economic official and many presidents.

– Larry Summers, former Treasury Secretary (and Paul Samuelson’s nephew)

EU = Max(E log(1+r)2)

– Edward Thorp, hedge fund manager, author of all-time best-selling gambling textbook

Edward O. Thorp and the Kelly criterion have been a lighthouse for risk management for me and PIMCO for over 45 years. First at the blackjack tables, and then in portfolio management, the Kelly system has helped to minimize risk and maximize return for thousands of PIMCO clients.

– Bill Gross, Co-CIO PIMCO


The concept of utility is the most fundamental concept in economics. It gets wrapped up in impressive sounding terms like “exogenous preference functions”, and written in all sorts of arcane runes and formulas, but all utility means is that you like something more than something else.  The assumptions that economic theory makes about utility are really pretty simple and mostly about consistency – if you like vanilla ice cream more than chocolate ice cream, and chocolate more than strawberry, then economic theory assumes you also like vanilla more than strawberry – and continuity – if you like one scoop of vanilla ice cream, then you like two scoops even more. But as far as what you like, what your tastes or preferencesare in ice cream or music … or health insurance plans … economic theory is intentionally silent. Economics is all about making rational decisions given some set of likes and dislikes. It doesn’t presume to tell you what you should like or dislike, and it assumes that you do in factknow what you like or dislike.

Or at least that’s what economic theory used to proclaim. Today economic theory is used as the intellectual foundation for a political stratagem that goes something like this: you do not know what you truly like, and in particular you do not know your economic self-interest, but luckily for you we are here to fix that. This is the common strand between QE and Obamacare. The former says that you are wrong to prefer safety to risk in your investments, and so we will fix that misconception of yours by making it extremely painful for you not to take greater investment risks than you would otherwise prefer. The latter says that you arewrong to prefer no health insurance or a certain type of health insurance to another type of health insurance, and so we will make it illegal for you to do anything but purchase a policy that we are certain you would prefer if only you were thinking more clearly about all this.

Anyone who believes that this political maneuver is inherently a phenomenon of the Left is kidding himself. The Right – in the form of sectarian or secular authoritarianism that imposes behavioral politics on the justification that this is how to get into heaven or demonstrate true patriotism – is no stranger to exactly this sort of political aggrandizement. Nor am I arguing that it’s smart to put your money under a mattress or that it’s wise to use the local emergency clinic as your primary care provider. What I’m saying is that the notion that we know your interests better than you know your interests is inherently an anti-liberal position, whether it comes from the Left or the Right. That’s liberalism with a small-l, the liberalism of Adam Smith and John Stuart Mill, not Walter Mondale … a political philosophy that argues for your right to be as stupid as you want to be in your personal economic decisions.

While there are hundreds of examples of anti-liberal policies in the annals of Western history, QE and Obamacare stand out in two important respects.

First, they’re big. Really big. Either policy on its own would be the largest instantiation in human history of what the French call dirigisme, at least on an absolute scale. I suppose you could argue that the US Social Security system has evolved into something even larger, but that took 70+ years to match what QE and Obamacare have accomplished in a few dozen months. I’ve written at length about the manner in which emergency policy responses to national traumas like wars and depressions are transformed into permanent government programs, so I won’t repeat that here. Suffice it to say that it’s not a coincidence that Social Security is a child of the Great Depression in the same way that both QE and Obamacare are children of the Great Recession. The institutionalization and expansion of centralized economic policy is what always happens after an economic crisis, but the scale and scope of QE and Obamacare, particularly when considered together as two sides of the same illiberal coin, are unprecedented in US history.

Second, and this is what really distinguishes the dirigiste policies of today from those of the past, the political and bureaucratic advocates of QE and Obamacare have co-opted the Narrative of Science to promote these policies to the public. If you look at the financial media’s representation of monetary policy during, say, the Volcker years, you see a curious thing. These articles almost never mention academic papers or Fed research. Today you can’t go a week without tripping over a prominent WSJ or FT article trumpeting this Fed publication or that IMF working paper as the reason behind a monetary policy rhyme. The authority vested in the Volcker Fed was based on a Narrative of Experience, an argument for trust based on a representation of personal leadership and experiential wisdom. Today, the argument for trusting the Fed places zero weight on the real-world experience or personal wisdom of the Fed Chair. Instead, both Bernanke and Yellen are presented as Wizards who channel the transcendent magic of economic theory. For better or worse, a popular faith in Economic Science is the source of their authority.

As for healthcare policy … the entire edifice of Obamacare has been presented as a self-consciously scientific, enlightened economic argument. This allows its political adversaries to be painted as bizarrely opposed to an objectively correct scientific position, as either know-nothing rubes who probably don’t even believe in evolution or as greedy stooges of the criminally rapacious insurance industry. Contrast this to the media presentation of healthcare policy initiatives in the 1960’s, particularly the establishment of Medicare as part of Johnson’s Great Society. As the phrase “Great Society” implies, arguments for Medicare had nothing to do with macroeconomic theories of efficiency and everything to do with political theories of justice. All of Johnson’s political initiatives, from Medicare to the Civil Rights Act, were based on a Narrative of Social Justice, an explicitly political argument that made little pretense of marshaling social science to prove the point. Seems like a more honest mode of politics to me, one that recognizes and embraces the hot-blooded nature of politics for what it is rather than hiding it within a cool armor of Science, and maybe that’s why Johnson’s policies have stood the test of time.

Why has the Narrative of Science been co-opted in this way? Because it works. Because Science is the dominant religion, i.e. belief system in transcendent forces, in the West today. Because politicians have always sought to direct or tap into these belief systems for their own ends. In exactly the same way that French kings in the 13th century used ecclesiastical arguments and Papal bulls to justify their conquest of what we now know as southern France in the Albigensian Crusades, so do American Presidents in the 21st century use macroeconomic arguments and Nobel prize winner op-eds to justify their expansionist aims. Economists play the same role in the court of George W. Bush or Barack Obama as clerics played in the court of Louis VIII or Louis IX. They intentionally write and speak in a “higher” language that lay people do not understand, they are assigned to senior positions in every bureaucratic institution of importance, and they are treated as the conduits of a received Truth that is – at least in terms of its relationship to politics – purely a social construction. I’m not trying to be flippant about this, but when you read the history of the Middle Ages I find it impossible not to be struck by the similarity in social meaning between clerics then and economists today.

So why does this bug me so much? What’s the big deal about wrapping a political argument in the mantle of Economics in the same way that it used to be wrapped in the mantle of Catholicism? Isn’t this what powerful political and commercial interests have done since the dawn of time, drawing on some outside source of social authority to support their cause?

Part of the answer is that as a limited government, small-l liberal I’m on the losing side of this particular political argument. I believe that it’s crucial to allow everyone to be as stupid as they want to be in their personal economic decisions because a) economic vitality and growth in the aggregate requires plenty of individual mistakes and losers along the way (sorry, but it does), and b) the alternative – allowing or requiring government to make these decisions on our behalf – inevitably creates a terribly fragile system where a single poor decision can lead to permanent ruin. Is it difficult and at times inefficient to maintain limited government in a mass society? Absolutely. Should we make small exceptions to these liberal principles to grease the wheels of effective governance in ordinary times, and big exceptions to these principles in a national emergency? Without a doubt. I think Lincoln saved the United States in 1861 when he suspended habeas corpus and imposed martial law in wide swaths of the country. I think Bernanke saved the world in 2009 when he implemented QE 1. But like the Roman dictator Cincinnatus, a great leader goes back to the farm after he saves the Republic. It’s the hardest thing to do in politics … to voluntarily relinquish emergency powers used wisely for the common good, to maintain a personal humility and trust in the system in the aftermath of great success. George Washington did it, and that’s why he’s the greatest President this country ever had. I understand that it’s not terribly likely we’ll ever see Washington’s like again … different times, different world, etc., etc. … but hope springs eternal.

The other part of the answer is that using Science for political ends subverts its usefulness (as does using Religion for political ends … just ask Martin Luther). We lose something very important when we associate a particular social scientific hypothesis with a winning policy outcome or a losing policy outcome, and that’s the recognition that social science – particularly economic science – is never True or False, but only more or less useful depending on whatever it is in life that you value … your utility function. Both as individuals and as collectives, we can achieve much greater levels of utility – we can be happier – if we maintain this agnostic view of Truth when it comes to social science. Politicians want to sell us on the notion that they have The Answer, that they can deliver the good life if only we keep them in power. Social scientists – or at least honest ones – recognize that there are no Answers in the patterns and relationships they identify, even if those patterns can be written in the highly precise language of mathematics. There is More Useful and Less Useful in social science … that’s all … and claims to the contrary detract from the very real benefits and advances that social science can provide.

Here’s a concrete example of what I mean …

Let’s say that you’re interested in wealth maximization, that this is the utility function you are most concerned with as an investor, and you want to know what percentage of your wealth you should allocate to the different investment opportunities you can choose from. Paul Samuelson, the most influential economist of the post-World War II era and the first American winner of the Nobel prize in Economics has an answer for you: EU = Max(E(1+r)α/α) . Translation: the more confident you are in the expected return of the investment choice, the more you should allocate to that choice, but in a more or less linearly proportional manner. On the other hand, Edward Thorp, author of “Beat the Dealer” and evangelist of the Kelly Criterion – an algorithm designed by mathematician John Kelly at Bell Labs in the 1950’s and used by investors like Warren Buffett, Bill Gross, and Jim Simons (if you’ve never read “Fortune’s Formula”, by William Poundstone, you should) – has a different answer for you: EU = Max(E log(1+r)2). Translation, the more confident you are in the expected return of the investment choice, the more you should allocate to that choice, but in a logarithmically proportional manner.

The difference between investing on the basis of linear proportionality and logarithmic proportionality is vast and incommensurable. With the Kelly criterion, even a small expected advantage in the investment odds – say a 52% chance of doubling your investment and a 48% chance of losing it all – requires you to invest a significant portion of your overall wealth, in this case about 2%. With a larger expected advantage in the investment odds, the recommended allocation gets very large, very fast. If the odds are 60/40 on doubling up/losing the entire investment, Kelly says invest 20% of your total wealth; if the odds are 80/20, Kelly says invest 60% of your total wealth in this single bet! Definitely not for the faint of heart, and definitely a far riskier strategy at any given point in time than the straightforward Samuelson expected utility approach. But you never lose ALL of your money with the Kelly criterion, and over a long enough period of time (maybe a very long period of time) with infinitely divisible bet amounts and correct assessment of the investment odds, the Kelly criterion will, by definition, maximize the growth rate of your wealth.

These are two VERY different answers to the wealth maximization question by two world-class geniuses, each with a legion of world-class genius supporters. Samuelson is a lot more famous and received far more public accolades; Thorp made a lot more money from investing (Kelly died of a stroke at age 41 in 1965 and never made a dime from his theory). But they can’t BOTH be right, the politician would say. What’s The Answer to the wealth maximization question so we can institute the right policy? Well … they ARE both right, there is no Answer, and the correct choice between the two depends entirely on your individual utility function. In fact, choosing either wealth maximization algorithm and imposing it on everyone is guaranteed to make everyone worse off in the aggregate.

How’s that? Let’s say I’m investing my life savings, and I’ve only got one shot to get this right. Not one investment, but one shot at implementing a coherent investment strategy for this, the only life’s savings I will ever have. If that’s my personal situation, then I would be nuts to choose the Kelly criterion to drive that strategy. It’s just too risky, and if I’m unlucky I’ll be down so much that I’ll hate myself. Maybe in the long run it maximizes my wealth growth rate, but in the long run I’m also dead. On the other hand, let’s say I’m investing a small bonus. It’s not the only bonus I’ll ever receive, and in and of itself it’s not life changing money. If that’s my personal situation, then I would be nuts NOT to choose the Kelly criterion because it has the very real possibility of transforming the small bonus into life changing money.

No one’s utility function for money is linear – $20 has more than 20 times the utility to me than $1 – and no two people have the same utility function for money – I’m sure there are people out there who care as little about $20 as I do about $1. Everyone’s utility function for money changes over time, and most are contextually dependent. It is impossible to design a one-size-fits-all wealth maximization formula, which is why human financial advisors have such an important job. It’s also why government efforts to force us to converge on a utility function for investment choices, healthcare choices, or any other sort of personal economic choice result in such a widespread gnashing of teeth and popular dissatisfaction. At best, it’s a myopic conception of how to generate more economic utility. At worst, it’s an intentional subversion of useful social science to cloak politics as usual. In either event, it’s something that deserves to be called out, and that’s what I’ll keep doing with Epsilon Theory.



Two quick points on portfolio management, utility functions, and the Kelly criterion that I’ll present without elaboration and will probably only be of interest to professional investors who are immersed in this sort of thing.

1)      In several important respects, risk parity investment allocations are to 60/40 stock/bond allocations what the Kelly criterion is to Samuelson expected utility.

2)      The allocation of capital by an investment manager who wants to establish multiple independent Kelly criterion strategies across traders or sub-investment managers, each of whose individual utility functions favors a fractional Kelly or Samuelson expected utility function, is a solvable game.


Climate Change Could Throw Atlantic Canada into Chaos | David Suzuki

Climate Change Could Throw Atlantic Canada into Chaos | David Suzuki.

David Suzuki Foundation supporters who live in Western Canada often have eyes riveted on Ottawa to see what the federal government’s next move will be when it comes to environmental issues. So we sometimes too easily overlook Canadians in the Maritimes and Newfoundland and Labrador — coastal regions, like ours, on the front lines of climate change.

As oceans warm, water expands and sea levels rise. Melting glaciers, icebergs and ice sheets add to the water volume. Scientists predict oceans could rise by more than a metre before the end of the century. They’re also increasingly convinced that escalating carbon emissions are linked to the risk of extreme weather events and intensified storms, such as the recent Typhoon Haiyan in the Philippines or super storm Sandy in the U.S. in 2012. A key finding from the latest Intergovernmental Panel on Climate Change report is that Atlantic Canada faces similar risks if climate change is left unchecked, with more severe storms causing surging tides, flooding and widespread coastal erosion.

For his captivating documentary, Climate Change in Atlantic Canada, Ian Mauro, an environmental and social scientist at Mount Allison University in New Brunswick, interviewed farmers, fishers, local residents, First Nations community members, scientists and business people from all around the Atlantic provinces. All say climate change is affecting their communities and livelihoods. They also agree something must be done and that the “business as usual” scenario is no longer an option.

The heart of the problem is our seemingly unquenchable thirst for mainly fossil-fuel based energy resources. As our desire for comfort and efficiency grows, so does our energy consumption, prompting the search for sources increasingly difficult to extract. The wordstar sandsshale gasoffshore drilling and fracking have only entered our vocabulary in just the past few decades – including in Atlantic communities, many of which now also rely on these fossil-based industries to fuel economic prosperity.

But with current talks about oil and gas exploration in the Gulf of St. Lawrence, shale gasfracking in New Brunswick, and moving tar sands bitumen from Alberta to the East Coast, we must ask if economic profit and prosperity for a few are worth the environmental and social risks to so many — especially when the latest IPCC report suggests that to avoid global catastrophic climate chaos, we must leave much of the known reserves of fossil fuels in the ground.

In light of what the scientific community is telling us about the scope and impacts of climate change – largely a result of burning fossil fuels – we owe it ourselves and our children and grandchildren to consider the implications of the choices we’re about to make in Atlantic Canada and the rest of the country. As former Environment and Sustainable Development Commissioner Scott Vaughan reminded us before leaving his position earlier this year, Canada is not prepared for a major oil spill off the East Coast. And, as New Brunswick Chief Medical Health Officer Eilish Cleary points out regarding the economics of shale gas development, “[We] cannot simply assume that more money equates to a healthier population.”

Coastal regions such as Atlantic Canada have a long cultural history based largely on fishing, tourism and other marine activities. Although fossil-fuel activities have been in Atlantic Canada for decades, proposed new on- and offshore energy projects will likely put Atlantic Canada’s existing economy and way of life at risk, affecting tourism and fishing in the ocean and on rivers like New Brunswick’s famous Miramichi.

When it comes to climate change, our future will not be determined by chance but by choice. We can choose to ignore the science, or we can change our ways and reduce carbon emissions and our dependence on fossil fuels. It’s up to us and our leaders to consider and promote energy alternatives and other solutions that modernize our energy systems, provide a clean, healthy environment for our families and offer long-term economic prosperity.

I’ll be touring Atlantic Canada with local and national experts at the end of November, premiering Mauro’s film and holding conversations with Atlantic communities about climate change and energy issues. Please join us and be part of the solution!

With contributions from David Suzuki Foundation-Quebec Science Project Manager Jean-Patrick Toussaint. Learn more at www.davidsuzuki.org.



BoE Survey Shows Growing Fears Of House Price Crash | www.goldcore.com

BoE Survey Shows Growing Fears Of House Price Crash | www.goldcore.com.

Today’s AM fix was USD 1,271.50, EUR 939.69 and GBP 787.11 per ounce.
Yesterday’s AM fix was USD 1,272.25, EUR 942.13 and GBP 790.12 per ounce.

Gold fell $0.30 or 0.02% yesterday, closing at $1,273.40/oz. Silver slipped $0.09 or 0.44% closing at $20.32/oz. Platinum climbed $3.40 or 0.2% to $1,411.40/oz, while palladium rose $3.75 or 0.5% to $718.47/oz.

Gold in GBP, 1 Year – (Bloomberg)

Gold in sterling terms is testing strong support at the £775/oz level. A breach of this level could lead to gold testing the next level of support at £740/oz and below that at £700/oz which was resistance in 2009 (see 5 year chart below).

Gold was trading in a tight range until it suffered another very sharp concentrated sell off at 1126 GMT which led to prices falling from $1,272/oz to $1,259/50 in seconds. The selling was so furious and concentrated that it led the CME to stop trading for a significant twenty seconds. Some entity appeared determined to get the gold price lower and they succeeded – for now.

Gold failed to make any headway despite dollar weakness after more dovish comments from exiting Fed Chairman Ben Bernanke about the bank’s bond purchases.

Bernanke said yesterday that the Fed will maintain an ultra loose U.S. monetary policy for as long as needed and will only begin to taper bond buying once it is assured that labour market improvements would continue.

The assumption that QE will be trimmed is like a lot of assumptions – wrong. There are strong grounds for believing that the weak state of the U.S. economy may lead to Bernanke’s even more dovish successor, Yellen, increasing the QE programme.

Physical demand continues at these levels but is not at the very high levels seen in recent months.

Many bullion coin and bar buyers have accumulated their allocation of gold and silver and are waiting for higher prices. There is a real sense of the calm before the storm in the gold market. How that will manifest and the catalysts for a resumption of the bull market is yet to be seen.

Gold in GBP, 5 Year – (Bloomberg)

​The Bank of England’s Systemic Risk Survey semi annual report to quantify and track market participants’ views of risks to, and their confidence in, the UK financial system shows increasing concerns of a house price crash.

The report presents the results of the 2013 H2 survey, which was conducted between 23 September and 24 October 2013 with 76 financial services companies.

Fears that a house price crash could damage the financial system have risen sharply in the last year, the key Bank of England survey shows. Increased concerns were expressed by the participants over ultra loose monetary policies and the extended low interest rate period.

Concerns about a property price bubble rose and were mentioned by 36% of respondents, up 21% from 14% since the previous survey in the second half of 2012. Concerns were concentrated almost exclusively on the residential market, where responses focused on the risk of a house price correction.

As we know house price corrections tend to feed on themselves and often lead to house price crashes.

Other Key Risks To The UK Financial System:
• Perceptions of the two main risks to the UK financial system remain sovereign risk and the risk of an economic downturn, although citations of both have fallen: 74% of respondents mentioned the former (-3 percentage points since May 2013) and 67% (-12 percentage points) the latter. Concerns over sovereign risk continue to focus on Europe, but unsurprisingly given the uncertainty surrounding the U.S. debt ceiling negotiations that prevailed during the survey period, there was a sharp increase in concerns around U.S. sovereign risk.

 For the second survey in succession, risk surrounding the low interest rate environment was the fastest growing, with 43% of respondents citing it, up 17 percentage points since May 2013. Over half of the responses emphasised risks around low rates, with the remainder referring to risks associated with a snapback in those low rates to more normal levels. Perceived risk around property prices also rose, being mentioned by 36% of respondents, up 11 percentage points since the previous survey. Concerns were concentrated almost exclusively on the residential market, where responses focused on the risk of a house price correction.

 Other top risks include regulation/taxes (cited by 41% of respondents, up 1 percentage point since May 2013), financial institution failure/distress (+4 percentage points to 30%) and operational risk (+1 percentage point to 25%).

Outside of the top seven, geopolitical risk has grown in prominence, with concern focusing on instability in the Middle East.

The report may have led to GBP weakness upon its release as the pound fell against the dollar, euro and gold.

UK Rightmove Regional Avg Asking Price Greater London, 2002-Today – (Bloomberg)

Interestingly, also on Monday came news of a sharp 5% drop in London property prices in what could portend a bust of the London property bubble.

Values in the U.K. capital dropped 5%, or 26,956 pounds ($43,500), from the previous month to an average 517,276 pounds, Rightmove PLC said Monday. Across England and Wales, average prices declined by 2.4%.

Estate agents and property industry blamed the falls on a seasonal pre-Christmas decline, however valuations are extremely stretched with very low yields and the hot money that has fueled the huge increase in London property prices may be pulling back.

UK Rightmove Regional Avg Asking Price Greater London, 2006-Today – (Bloomberg)

“This is different” and “this location is different” is the mantra of every property bubble. We will soon see if the London property bubble is truly different or will suffer the fate of bubbles throughout history.

Of the four charts in our market update today, which ones do you think show characteristics of a bubble?

Those diversifying and buying gold in the UK today will be rewarded in the coming years. The smart money is reducing exposure to overvalued London property and increasing exposure to undervalued gold.

Click Gold News For This Week’s Breaking Gold And Silver News
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Money does not exist | Zero Hedge

Money does not exist | Zero Hedge.

Yesterday the US Senate held hearings on “virtual currencies” (meaning Bitcoin).  Meanwhile the “virtual currency” ran up above $800/USD and it was reported it got above $900.  It pulled back but as of now, is hovering above $700.

It was interesting at the hearing, the so called Bitcoin ‘experts’ included FinCen and the Secret Service.  The focus seemed to be on potential criminal activities in the digital currency (not other benefits such as a replacement currency in the event of a US Dollar collapse, etc.).

Using phrases such as “money laundering” and “criminal activity” and “child pornography” certainly did not paint a good picture of Bitcoin, for those watching with less knowledge about Finance and Bitcoin, and especially for those who had the hearings on in various bars, restaurants, airports, and other places where viewers were not focused on the hearings but could pickup the occasional keyword such as “drug trafficking.”  Silk Road and a newly discoveredAssassination Market have been over reported in the news and used by anti-Bitcoin antagonists as a justification to shut down the use of Bitcoin as much as possible (or at least to make it look dirty, as if users of Bitcoin are all drug dealers and child smut peddlers).  To put things in perspective, it’s been reported that the largest holders of US Dollars next to central banks are drug cartels.  Oh, and banks such as HSBC and others have been involved in the laundering of their US Dollars, some knowingly.

It’s being described as the largest cartel money-laundering scheme in history, and today, HSBC Bank headquartered in London, with offices in the U.S. will forfeit $1.256 billion and enter into a deferred prosecution agreement with the Department of Justice (DOJ). HSBC Bank USA violated the BSA by failing to maintain an effective anti-money laundering program and failed to conduct appropriate due diligence on its foreign correspondent account holders, DOJ said.

But the DOJ is not suggesting we stop using the US Dollar because of it’s use in the drug trade, nor are they suggesting HSBC is shut down because it was laundering money for criminals.  They get fined, and we all move on.

Virtual Currency?

What is exactly a “virtual currency” ?  Merriam-Webster defines “virtual” as:

very close to being something without actually being it

Ok so Bitcoin is not a virtual currency.  It could be a digital currency, as it’s purely electronic and not in physical form.  But of the Trillions created by the Fed during the QE program, still only $1.3 Trillion of M0 (physical cash & coin), as of July 2013, according to the New York Fed.

Note the green line, M2.  (M3 no longer being reported.)  But this chart will suffice to show the discrepancies between M0 and M3.  M0 is less than M1 (red line) by about $700 Billion.  The different between M2 and M1 is still about $8 Trillion.  That means at least $8 Trillion USD exist in digital form, electronically.  So does that imply the US Dollar is also a ‘digital’ or ‘virtual’ currency?  Or are the only ‘real’ US Dollars M0, physical notes?

Money does not exist

Mike Maloney has an excellent series about the differences between “money” and “currency.”  But let’s take things a step further, to divide our economy into 2 simple logical components, things that exist (real economy), and things that don’t (virtual economy).  

Things that DO exist:

  • Tools
  • Machines / Factories
  • Gold, Silver
  • People!
  • Buildings
  • Transportation systems

Things that DO NOT exist, except in our minds, as concepts:

  • Money or currency (it’s electronic entry in your bank account)
  • The markets (again, the markets themselves are virtual, although with commodity markets a virtual contract will result in the delivery of physical goods)
  • Derivatives
  • Law
  • Knowledge
  • Value, i.e. ‘asset prices’
  • Theories, concepts
  • Belief

Paper money exists, yes, but as they say it’s just paper.  If I write a $100 on a napkin even if I’m Ben Bernanke, it will not be accepted by anyone unless they believe they can take said napkin and use it for whatever they need to obtain in the real economy.  What makes physical notes accepted is the belief the US Dollar system, and the Fed, not the paper it’s printed on.

The fact is the US Dollar is not backed by the Fed, although the Fed is the primary emission, the “Prime Mover.”  The US Dollar is backed only by a belief system (as are all other currencies today).  The belief system is backed by the US military (stop believing in USD and bombs will fall shortly after, yes the villagers were right).  So money doesn’t exist, it’s all an illusion.  That is not to cast aspersions on illusions, as a matter of fact, the higher up you go on the Maslow pyramid the more ‘virtual’ things become.  Intelligence is non-tangible, as are many of the ideas we hold dear, philosophy, morality, etc.  Our financial system is virtual, it’s all a big video game (to use analogy) with money being the method of accounting (not the store of wealth!).  Money is a means of exchange, not a store of value.

Many lose sight of the fact that money doesn’t exist, they say they ‘need’ money or they ‘have’ money – how can you have something that doesn’t exist?  It must be a boomer concept, too much experimentation in the 60’s.  For those of you who have trouble grasping this, checkout Eric Fromm, “To Have or to Be.”  He explains that when you own things, or have things, they end up owning you!  We won’t get into the legal reality that when you have money in a bank account it’s actually their asset (deposits are not bailment).  Also, anyone who bothered to read the new account opening contracts when they open a forex account would have seen the clauses that state you are basically handing your money over to the broker and should consider yourself lucky if you get any back.

Bitcoin has emerged at an interesting time, at a time when the Fed has declared there’s ‘no limit’ to the amount of USD he will create.  At a time when few other currencies offer stable alternatives. It gives us good perspective to stand back, objectively, and examine the financial system for what it is; a construct, based on concepts, backed by ‘the real economy’ which is dying.

Maybe the conclusion is that the system is just outdated, and we are in a long generational transformation process to a new system, based on technology, not on fiat decree of our central banking lords.




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John F. Kennedy Helped Torpedo Canada Tories Under John Diefenbaker

John F. Kennedy Helped Torpedo Canada Tories Under John Diefenbaker.

WASHINGTON – John F. Kennedy’s personal pollster came to Canada with an assumed name, the blessing of the president and a secret objective: help defeat the Diefenbaker Tories.

Canadians might be surprised by the extent to which political events in this country were shaped by the charismatic U.S. leader, famously assassinated 50 years ago this week.

Helping to elect the Pearson Liberals, for starters, who would go on to introduce a new national flag, expand the welfare state and create medicare, the old-age pension system, and the royal commission on bilingualism.

The Liberals got tactical support, with state-of-the-art polling. Diplomatic rockets rained down on their opponents. And in the heat of an election campaign, the opposition leader was invited to the White House as an honoured guest.

The perceived interference became so acute that a fuming John Diefenbaker eventually took the extraordinary step of recalling Canada’s ambassador to the U.S.

That diplomatic riposte failed to stop the Diefenbaker Conservatives from disintegrating, through internal divisions and a non-confidence motion that focused specifically on relations with the U.S.

Did Kennedy play a determining role?

“I think he played a very major role in Canadian history,” John English, Pearson’s biographer and a one-time Liberal MP, said in an interview.

“He definitely influenced Canadian history through the 1962-63 election period. There’s no doubt that his animosity to Diefenbaker made his position very difficult not only with the broader public, but within his own party.”

The Kennedy-Diefenbaker relationship was born in a toxic swamp and never emerged.

Before their first meeting, the new president angered his interlocutor by twice mispronouncing his name as “Diefen-bawker.” Things didn’t get any sunnier with the conclusion of that first meeting, as Diefenbaker learned immediately afterward that his mother had died.

There were the pettiest slights. The two men, different in age, temperament, and world view, even managed to get under each other’s skin when comparing fishing stories. They had ‘son-of-a-something’ nicknames for each other, too.

Then there were the more substantive differences.

Kennedy was keen to draw Canada deeper into the American sphere. Diefenbaker, who held the more traditional attachment to Britain, balked at the invitation to join the Organization of American States.

So Kennedy went right over his head and spoke directly to the Canadian people.

Bolstered by the strength of his own personal popularity in Canada, Kennedy arm-twisted Diefenbaker in a speech to the House of Commons that is otherwise remembered for the line, “Geography has made us neighbours. History has made us friends.” Kennedy’s blunt public push came just one day after he’d been told by his host that the idea was a no-go.

Meanwhile, the president got along swimmingly with Pearson.

Jean Chretien, who was first elected as an MP in the Liberals’ victorious 1963 campaign, believes Pearson endeared himself to Kennedy with his encyclopedic knowledge of baseball.

But he’s skeptical the Kennedy relationship is what won the election. Chretien said he believes the Diefenbaker government was accumulating enough political damage on its own, without help from the neighbour to the south.

In an interview, the former prime minister said the move to oust the head of the Bank of Canada, James Coyne, harmed the Conservatives more than anything Kennedy did.

“I don’t think (Kennedy made the difference),” Chretien told The Canadian Press. “Mr. Diefenbaker had a lot of problems with his administration.”

However, as it turned out, the Diefenbaker Tories had enough life left in them to eke out a minority in the 1962 election, then hold the Liberals to a minority in the two that followed.

It was in the first of those three elections that Pearson received an almost inconceivably rare political gift for an opposition leader: he was invited, by a popular president, to appear at the White House during a campaign.

Weeks before the election call, the Canadian opposition leader was asked to attend a White House dinner for 49 Nobel Prize winners, with virtually all the others born in the U.S. or living there.

Not only was that invitation not rescinded upon the election call — Pearson wound up getting treated to a starring role. The president held a private 20-minute meeting with the visiting Canadian politician.

And in his speech to his distinguished guests, Kennedy referred specifically to only one of them — the baseball-loving native of Newtownbrook, Ont.

“I want to welcome you to the White House,” his speech began. “Mr. Lester Pearson informed me that a Canadian newspaperman said yesterday that this is the president’s ‘Easter egghead roll on the White House lawn.’ I want to deny that!”

Then, in the next breath: “I think this is the most extraordinary collection of talent, of human knowledge, that has ever been gathered together at the White House, with the possible exception of when Thomas Jefferson dined alone.”

The Tories lost nearly 100 seats a few weeks later. Their historic majority was whittled down to a 116-seat minority.

Relations soured further when Diefenbaker challenged Kennedy’s handling of the Cuban missile crisis. Finally, there was the Bomarc dispute, where Diefenbaker resisted plans to store nuclear warheads in Ontario and Quebec, under NORAD auspices.

The pressure on him was unrelenting. The retiring head of NATO came to Canada during his farewell tour and accused the Canadian government of shirking its responsibilities.

Diefenbaker later suggested he’d received private assurances from Kennedy that nuclear expansion would not be necessary. The response from the State Department was swift and devastating.

In a 1963 news release, the U.S. government denied Diefenbaker’s version and, in one final indignity, it said the Canadians had failed to contribute a sufficient policy for North American defence.

Existing divisions in the Diefenbaker cabinet suddenly deepened. A handful of ministers began plotting a coup against the boss. The defence minister resigned and, after the Tories were defeated in a non-confidence vote, two of his colleagues followed.

A few weeks later, the Liberals went on to win their first of five straight elections.

Meanwhile, the Liberals had a secret ally, dating back to the previous year’s campaign. Kennedy’s personal pollster, Lou Harris, a trailblazer in his profession, hired 500 women to make phone calls in the most extensive public-opinion research operation ever seen at that point in Canadian politics.

“They showed the campaign committee how polling was done,” said Jim Coutts, who was a young campaign operative at the time and went on to serve in the Pearson-Trudeau PMOs.

“Not just (polls about) who was ahead, and who was leading… They showed us different ways to ask questions.”

The American visitor went by the name Lou Smith, his mother’s maiden name. Kennedy had previously forbidden his pollster from helping British Labour leader Harold Wilson. But to help Pearson — and harm Diefenbaker — he gave his consent.

Could any of this — the subterfuge, the public shaming, the diplomatic strong-arming — have been appropriate?

Even Diefenbaker’s opponents at the time thought the Kennedy administration had gone too far, with its 1963 media statement. The NDP’s Tommy Douglas quipped that the Americans were treating Canada like Guatemala or Cuba.

Diefenbaker, for his part, called it an “unprecedented” intrusion. As his government was going down to defeat, he told the House of Commons: “Canada is determined to remain a firm ally but that does not mean she should be a (U.S.) satellite.”

Pearson’s biographer agrees it was inappropriate.

“An American president should not interfere in Canadian elections,” English said. “And there’s no doubt that Kennedy did, and he did not treat a Canadian prime minister appropriately. I think even perhaps Lester Pearson would agree with that, in retrospect.”

But did it make a difference?

Two former Pearson aides said in interviews they probably could have won without Kennedy’s intervention. But those aides — Coutts and Dick O’Hagan, Pearson’ onetime press secretary — agreed it helped.

“It’s hard to say. It really is. Because all one is doing is sort of guessing, or making suppositions,” O’Hagan said. “I think it was helpful, but not a determinant.”

English cites his own family as evidence that it indeed swung votes.

He supported the Conservatives as a boy. His father had supported them his whole life, but those allegiances shifted during the spat with Kennedy on defence issues.

“I can speak personally and say it did affect votes, in my own family.”

Kennedy also impacted Canadian politics in other ways, he said.

Canadians had seen their prime minister, Diefenbaker, mocked in an unflattering Newsweek profile and were looking for more flamboyant leadership. Pierre Trudeau’s 1968 Liberal leadership win, he said, would “not have been possible without John Kennedy.”

In the end, perhaps Diefenbaker never stood much of a chance. His principal adversary had managed to get on Kennedy’s good side, even before he was president.

In 1959, Pearson had written a glowing piece in the Saturday Review about Kennedy’s book, “Profiles In Courage.”

“(And) nothing makes an author happier than a favourable review,” English said.

Dallas’ JFK Assassination Sites

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Iran sets ‘red lines’ for nuclear negotiators in Geneva – World – CBC News

Iran sets ‘red lines’ for nuclear negotiators in Geneva – World – CBC News.

President Francois Hollande believes comments by Iran’s supreme leader about Israel are “unacceptable” and complicate talks between world powers and the Islamic regime over its nuclear program, a spokeswoman says.

Najat Vallaud-Belkacem told reporters that Hollande’s cabinet discussed the Iran nuclear dossier just hours before negotiations between Iran and six world powers were set to resume in Geneva. She said, however, that France still hopes for a deal and its position has not changed in the talks.

Hollande was referring to comments attributed earlier to Ayatollah Ali Khamenei speaking to a gathering of the Basij force, which is controlled by Iran’s powerful Revolutionary Guard. In them, the Iranian leader referred to Israel — “the Zionist regime” — as “the rabid dog of the region.”

Khamenei said Wednesday Iran would not step back “one iota” from its nuclear rights on as talks over the country’s disputed nuclear program are set to resume in Geneva.

Speaking to tens of thousands of Basij militiamen in Tehran, Khamenei said his officials had his full support, but that Iran’s rights to a nuclear program must be safeguarded.

“We do insist that we will not step back one iota from the rights of the Iranian nation,” he added.

The Basij militiamen chanted “Death to America, death to Israel” in response, one of the main rallying cries for supporters of the Islamic Republic.

Khamenei, the most powerful figure in Iran, added: “We do not intervene in the details of these talks. There are certain red lines and limits. These have to be observed. They are instructed to abide by those limits.”

Talks resume today

The Iranian leader also criticized France. Hollande assured Israel on Sunday that France would continue to oppose an easing of economic sanctions against Iran until it was convinced Tehran had given up any pursuit of nuclear weapons.

Delegates from the European Union and the United States gathered in Geneva on Wednesday for a further round of talks on Iran’s nuclear program with the hope that a preliminary deal can be reached in what have been politically charged talks.

The EU foreign policy chief Catherine Ashton and U.S. delegates including Under Secretary of State Wendy Sherman left the Intercontinental Hotel and arrived minutes later at the European Mission building where discussions were expected to continue.

Seeking to end a long stand-off and head off the risk of a wider Middle East war, the United States, Russia, China, France, Britain and Germany came close to winning concessions from Iran on its nuclear work in return for some sanctions relief at negotiations earlier this month.

Top policymakers from the six have since said that an interim accord on confidence-building steps could finally be within reach. But diplomats caution that differences remain and could still prevent an agreement.

Russia is hopeful that a preliminary deal will emerge this week, Foreign Minister Sergei Lavrov said.

‘Death to America’

“We hope the efforts that are being made will be crowned with success at the meeting that opens today in Geneva,” he  told a news conference on Wednesday.

Iranian Supreme Leader Ayatollah Ali Khamenei said Tehran would not step back from its nuclear rights and he had set “red lines” for his negotiators in Geneva. But Tehran wanted friendly ties with all countries, including the United States.

“We want to have friendly relations with all nations, even the United States,” he told an audience of Basij militiamen.

“Death to America,” the militiamen chanted in response, repeating one of the main rallying cries for supporters of the Islamic Republic.

The last meeting stumbled over Iran’s insistence that its “right” to enrich uranium be recognized, and disagreement over its work on a heavy-water reactor near Arak, which could yield plutonium for atomic bombs once it becomes operational.

No new components

Iranian Foreign Minister Mohammad Javad Zarif has since indicated a way around the first sticking point, saying Tehran has the right to refine uranium but is not insisting others recognize that right.

A UN report last week showed Iran had stopped expanding its enrichment of uranium and had not added major new components at Arak since August, when moderate Hassan Rouhani replaced hardliner Mahmoud Ahmadinejad as president.

Nuclear analyst Ali Vaez of the International Crisis Group think-tank said the “body language” showed that the sides were ready for a deal, pointing to Iran slowing its nuclear push and Washington refraining, so far, from imposing more sanctions.

“(They) have demonstrated that they are looking to transform stumbling blocks into stepping stones,” Vaez said.

Zarif, Tehran’s chief nuclear negotiator, said on the eve of the meeting there was “every possibility” of a successful conclusion provided there was good faith and the political will among all involved to resolve problems.

Tougher line urged

U.S. President Barack Obama sounded a more cautious note on Tuesday, saying it was unclear whether the world powers and Iran will be able to reach an agreement soon.

American lawmakers urged the Obama administration on Tuesday to take a tougher line with Iran.

The talks are expected to resume with a meeting between Zarif and Europe’s Ashton, who co-ordinates contacts with Iran on behalf of the powers.

Western governments suspect Iran has enriched uranium with the covert aim of developing the means to fuel nuclear weapons, which Tehran denies. Refined uranium can fuel nuclear power plants — Iran’s stated goal — but also provide the core of a nuclear bomb, if enriched further.

After years of confrontation, a shift towards meaningful diplomacy between Iran and the world powers began after the June election of Rouhani on a platform to relieve the Islamic Republic’s increasing international isolation and get sanctions strangling its oil-dependent economy lifted.

20% fissile purity

Rouhani wants to move quickly: Western sanctions have reduced Iran’s daily oil export revenue by 60 per cent since 2011 and caused its currency to collapse.

But diplomats say Iran has so far refused to meet all of the powers’ demands. They include suspending enrichment of uranium to 20 per cent fissile purity — a significant advance toward the threshold for bomb fuel — as well as limiting its enrichment capacity and mothballing the Arak reactor project.

The Iranian assets that would be unfrozen as part of any deal this week would amount to less than $10 billion, U.S. national security adviser Susan Rice told CNN.

Western diplomats have kept much of the details of the proposed deal under wraps but said Iran would not win relief from the most painful sanctions on oil trade and banking that many believe finally forced into serious negotiations.

Under an initial deal the OPEC producer is likely to regain access to precious metals markets and trade in petrochemicals, an important source of export income, and could see the release of some of its oil revenues frozen in oversees accounts.

West wary of critics

If an agreement is struck in the coming days, it is intended to be the first step on the road towards a broader settlement that would avert the threat a new Middle East war.

In crafting a deal, Western governments are wary of critics across the Middle East, especially in Israel and Saudi Arabia, who view Iran as a deadly threat, and of hawks in the U.S. Congress who want stiffer sanctions and terms for Tehran.

Obama warned Congress on Tuesday that Iran would make progress towards nuclear arms status if there were no deal to halt or roll back its nuclear program and urged lawmakers to hold off on tightening sanctions while talks continue.

Prime Minister Benjamin Netanyahu warned Washington, Israel’s main ally, to avoid making a “historical mistake” when negotiators appeared close to a deal this month. Israel wants Iran to scrap its entire nuclear energy infrastructure.

Israel, widely assumed to be the only nuclear power in the Middle East, has warned it may bomb Iranian nuclear facilities if it deems diplomacy futile in reining in Tehran before it attains nuclear “breakout” capability.








With files from The Associated Press

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Joe Oliver takes oilsands fight to Europe’s financial heart – Politics – CBC News

Joe Oliver takes oilsands fight to Europe’s financial heart – Politics – CBC News.

Natural Resources Minister Joe OliverNatural Resources Minister Joe Oliver spoke to more than 125 energy executives in London, England Tuesday, in his bid to get the European Union to change its proposed plan to label Alberta bitumen as dirtier than other sources of oil. (Canadian Press)

Joe Oliver brought new evidence against a plan to label Alberta’s bitumen dirtier than other oil to the financial heart of Europe.

Canada’s minister of natural resources told an audience of more than 125 energy executives at the Canada Europe Energy summit in London that the European Union’s proposed Fuel Quality Directive is a “bad policy.”

“As currently drafted, the FQD is unscientific, discriminatory, opaque and will discourage and harm the European refinery industry,” he said.

For the past couple of years Canada has been fighting plans by the EUto bring in the directive as part of the EU’s efforts to reduce emissions from transportation.

The FQD assigns values to three types of oil — bitumen, shale oil and conventional oil — based on emissions created during production.

The Canadian government disputes the value assigned to conventional oil, saying it’s too low.

Oliver’s department released a study last week by ICF International, a company that previously provided expert advice on energy to the European Commission. It looked at how Europe calculates the emissions from the oil it uses now and concluded the EU’s math is wrong.

The report points out the EU assigned average values for oil now used in Europe.

But, it concludes, that average doesn’t take into account that conventional oil has different emissions depending on where it comes from and how much flaring — or burning off of gas — occurs during production.

Oliver argues that makes conventional oil appear cleaner that it really is.

“This is basic energy science,” Oliver said “But the FQD doesn’t reflect it.”

Oliver wants the EU to create a new system of values for conventional oil.

Concern over effect in U.S., too

Canada recently signed a free trade with Europe and sees it as huge new customer for its petroleum. But a higher number attached to Canadian oil sands bitumen under the proposed Fuel Quality Directive would discourage EU members from using it.

Oliver warns the FQD could also give Alberta bitumen a black eye in the U.S.

The Obama administration is still mulling over a decision about the controversial Keystone XL pipeline.

“It could stigmatize the oil from Canada and impact on our access to some markets, Oliver told reporters. “I don’t see a direct tie-in with Keystone but it clearly would not be helpful,” he added.

As Oliver spoke protesters dressed in white hazmat suits outside London’s Canada House unveiled a mock oil spill clean up. The work, by artist Lucy Sparrow, showed geese, seals and other wildlife made of felt covered in oil as workers “mopped” up the spill around them.

“Joe Oliver has just sort of revamped his campaign to water down the Fuel Quality Directive to try and stop progressive EU climate legislation,” said Suzanne Dhaliwal from the UK Tar Sands Network.

“We wanted to bring this oil spill here today to show that animals are being destroyed, communities are being destroyed and ecosystems are being destroyed. And we wanted them to think about that when they go into these meetings today.”


Fake Employment Numbers – And 5 More Massive Economic Lies The Government Is Telling You

Fake Employment Numbers – And 5 More Massive Economic Lies The Government Is Telling You.

Lies - Photo by Rob Koster

According to a whistleblower that has recently come forward, Census employees have been faking and manipulating U.S. employment numbers for years.  In fact, it is being alleged that this manipulation was a significant reason for why the official unemployment rate dipped sharply just before the last presidential election.  What you are about to read is incredibly disturbing.  The numbers that the American people depend upon to make important decisions are being faked.  But should we be surprised by this?  After all, Barack Obama has been caught telling dozens of major lies over the past five years.  At this point it is incredible that there are any Americans that still trust anything that comes out of his mouth.  And of course it is not just Obama that has been lying to us.  Corruption and deception are rampant throughout the entire federal government, and this has been the case for years.  Now that some light is being shed on this, hopefully the American people will respond with overwhelming outrage and disgust.

The whistleblower that I mentioned above has been speaking to John Crudele of the New York Post.  In his new article entitled “Census ‘faked’ 2012 election jobs report“, he says that the huge decline in the unemployment rate in September 2012 was “manipulated”…

In the home stretch of the 2012 presidential campaign, from August to September, the unemployment rate fell sharply — raising eyebrows from Wall Street to Washington.

The decline — from 8.1 percent in August to 7.8 percent in September — might not have been all it seemed. The numbers, according to a reliable source, were manipulated.

Two years earlier, the Census had actually caught an employee “fabricating data”, but according to this whistleblower the corruption at the Census Bureau goes much deeper than that

And a knowledgeable source says the deception went beyond that one employee — that it escalated at the time President Obama was seeking reelection in 2012 and continues today.

“He’s not the only one,” said the source, who asked to remain anonymous for now but is willing to talk with the Labor Department and Congress if asked.

The Census employee caught faking the results is Julius Buckmon, according to confidential Census documents obtained by The Post. Buckmon told me in an interview this past weekend that he was told to make up information by higher-ups at Census.

Well, is it really such a big deal that some of the unemployment numbers were faked?

After all, hasn’t the unemployment rate been consistently going down anyway?

Unfortunately, as you will see below, that is simply not the case.  The following are five massive economic lies that the government has been telling  you…

“The Unemployment Rate Has Been Steadily Going Down”

According to the official government numbers, the U.S. unemployment rate has fallen all the way down to 7.3 percent.

That sounds really good, and it would seem to imply that a higher percentage of the American people are now working.

Sadly, that is not the truth at all.

Posted below is one of my favorite charts.  The employment-population ratio measures the percentage of the working age population that actually has a job.  As you can see, this number fell dramatically during the last recession and since the end of 2009 it has remained remarkably flat.  In fact, it has stayed between 58 and 59 percent for 50 months in a row…

Employment-Population Ratio November 2013

At the moment, the employment-population ratio is just one-tenth of one percent above the lowest level that it has been throughout this entire crisis.

So are we in an “employment recovery”?

Absolutely not, and anyone that tries to tell you that is lying to you.

So how is the government getting the unemployment rate to go down?

Well, they are accomplishing this by pretending that millions upon millions of unemployed Americans have disappeared from the labor force.

According to the government, the percentage of Americans that want to work is now supposedly at a 35 year low…

Labor Force Participation Rate

If the labor force participation rate was still exactly where it was at when Barack Obama was first elected in 2008, the official unemployment rate would be about 11 percent right now.  People would be running around going crazy and wondering when the “economic depression” would finally end.

But when people hear “7.3 percent”, that doesn’t sound so bad.  It makes people feel better.

Of course if you are currently unemployed and looking for a job that doesn’t exactly help you.  At this point there is intense competition even for minimum wage jobs in America.  For example, according toBusiness Insider you actually have a better statistical chance of getting into Harvard than you do of being hired at a new Wal-Mart that is opening up in the Washington D.C. area…

The store is currently combing through more than 23,000 applications for 600 available positions,reports NBC Washington.

That means that Wal-Mart will be able to hire one person for every 38 applications it receives — i.e., just 2.6% of applicants will walk out with a job.

That’s more difficult than getting into Harvard. The Ivy League university accepts 6.1% of applicants.

“Inflation Is Low”

This is another lie that government officials love to tell.  In particular, the boys and girls over at the Federal Reserve love to try to convince all of us that inflation is super low because it gives them an excuse to recklessly print lots more money.

But anyone that goes to the grocery store or pays bills on a regular basis knows that there is plenty of inflation in the economy.  And if we were being given honest numbers, they would show that.

According to John Williams of shadowstats.com, if the U.S. inflation rate was still calculated the exact same way that it was back when Jimmy Carter was president, the official rate of inflation would be somewherebetween 8 and 10 percent today.

But the Federal Reserve certainly doesn’t want everyone running around talking about “Jimmy Carter” and “stagflation” because then people would really start pressuring them to end their wild money printing schemes.

And without a doubt, what the Fed is doing is absolutely insane.  The chart posted below shows that the M1 money supply has nearly doubled since the beginning of 2008…

M1 Money Supply 2013

“Quantitative Easing Is Economic Stimulus”

How many times have you heard the mainstream media tell you something along these lines…

“The Federal Reserve decided today that the economic stimulus must continue.”

There is just one thing wrong with that statement.

As I showed in a previous article, it is a total hoax.

In fact, a former Federal Reserve official that helped manage the Federal Reserve’s quantitative easing program during 2009 and 2010 ispublicly apologizing to the rest of the country for being involved in “the greatest backdoor Wall Street bailout of all time”…

I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.

Yes, quantitative easing has most certainly helped Wall Street (at least temporarily).

Meanwhile, median household income in the U.S. has fallen for five years in a row.

Meanwhile, the federal government is now spending nearly a trillion dollars a year on welfare.

Meanwhile, 1.2 million students that attend public schools in America are now homeless.  In fact, that number has risen by 72 percent since the start of the last recession.

“Obamacare Is Going To Be Good For Middle Class Americans”

There were three giant promises that were used to sell Obamacare to the American people…

#1 We would all be able to keep our current health insurance plans.

#2 Millions more Americans were going to be covered by health insurance.

#3 Most Americans would be paying lower health insurance premiums.

Well, it turns out that all of them were lies.

At this point, approximately 4 million Americans have already had their health insurance plans canceled due to Obamacare, and according to Forbes that number could ultimately reach 93 million.

And so far only about 100,000 Americans have actually signed up for Obamacare, so that means that the number of Americans with health insurance has dropped by about 3.9 million since the beginning of October.

Good job Obama.

Meanwhile, Americans all over the country are being hit with a massive case of sticker shock as they start to realize what Obamacare is going to do to their wallets.

According to one study, health insurance premiums for men are going to go up by an average of 99 percent under Obamacare and health insurance premiums for women are going to go up by an average of 62 percent under Obamacare.

And if you are a young man, you are going to get hit particularly hard.  At this point, it is being projected that health insurance premiums for healthy 30-year-old men will rise by an average of 260 percent.

But you don’t have to be young to pay higher premiums.  As I mentionedthe other day, one couple down in Texas was recently hit with a 539 percent rate increase.

“The U.S. National Debt Is Under Control”

The mainstream media would have us believe that the budget deficit is now under control and the U.S. national debt is not a significant problem any longer.

But that is not the truth.

The truth is that we are on pace to accumulate more new debt under the 8 years of the Obama administration than we did under all of the other presidents in all of U.S. history combined.

Every single hour of every single day, our politicians are stealing about $100,000,000 from future generations of Americans.  It is a crime so vast that it is hard to put into words, and it is literally destroying the economic future of this country.

Over the last 13 and a half months, the U.S. national debt has increasedby more than 1.12 trillion dollars.

If you were alive when Jesus Christ was born and you had spent a million dollars every single day since then, you still would not have spent that much money by now.

And most Americans don’t realize this, but the U.S. government must borrow far more than a trillion dollars each year.  Trillions more in existing debt must be “rolled over” just to keep the game going.

For example, the U.S. government rolled over more than 7.5 trillion dollars of existing debt in fiscal 2013.

So what is going to happen someday when the rest of the world pulls out and stops lending us trillions of dollars at ridiculously low interest rates that are way below the real rate of inflation?

Our financial system is far more vulnerable than we are being told.  We are in the terminal phase of the greatest debt bubble in the history of the planet, and when this bubble bursts it is going to be an absolutely spectacular disaster.

Please don’t believe the mainstream media or the politicians when they promise you that everything is going to be okay.


Venezuela’s president granted wide powers – Americas – Al Jazeera English

Venezuela’s president granted wide powers – Americas – Al Jazeera English.

Venezuela’s National Assembly has granted President Nicolas Maduro wide-ranging special powers to rule by decree for one year so that he can fix the economy.

Tuesday’s vote over the Enabling Law is the latest move by the elected Venezuelan leader, a protégé of the late President Hugo Chavez, to strengthen his hand as he faces an important political test in municipal elections next month.

The decree will essentially allow Maduro to create laws without parliamentary approval. 

He says he needs greater personal power to stamp out opponents who are waging “economic warfare against his government” as the country struggles with soaring inflation and shortages of basic goods.

“Maduro has to tackle an economy in free fall,” Al Jazeera’s Andy Gallacher, reporting from the Venezuelan capital Caracas, said.

“People are really struggling to buy normal household goods.”

Over the weekend, Maduro used his existing authority to make retail appliance stores slash prices, sending troops to keep order among the crowds that quickly formed.

The Venezuelan unit of General Motors was fined the equivalent of $85,000 on Tuesdsay for allegedly overcharging and practising “usury” in the sale of car parts to local concessionaires.

The government also asked Twitter to take down accounts of users posting the illegal black market exchange rate for the country’s bolivar currency, which is trading at about one-tenth of the official value.

These measures have rallied Maduro’s working-class base and even won approval from some government opponents who have joined the long lines outside appliance stores nationwide for the past 10 days in search of deep discounts on TV sets and refrigerators.

Currency shortage

The deep discounts of as much as 60 percent – which Maduro has said would be extended to toys, cars and clothing  – come as workers cash their year-end pay bonuses, allowing them to make purchases that might otherwise have been out of reach.

The country has been repeatedly battered by a 54 percent inflation rate, a shortage of hard currency and basic goods.

Critics, however, blame Venezuela’s economic hardship on the government-imposed fixed exchange rate and price controls which they say have led to a shortage of basic goods such as rice and meat. 

The vote to approve the so-called Enabling Law had been widely expected after Maduro garnered the two-thirds support he needed, or 99 votes, during a preliminary debate last week.

The move added to the opposition’s speculation that this was a thinly veiled power grab.

After Tuesday’s vote, Diosdado Cabello, the National Assembly president, led a march of more than 2,000 supporters from the legislature to the presidential palace to deliver the text of the decree law to Maduro.

Addressing a crowd smaller than the ones Chavez was accustomed to drawing, Maduro reiterated a pledge to use his expanded powers to keep prices low across industries and limit profit margins to 30 percent.

He also pledgegd to start 2014 with a frontal attack on corruption.

“They underestimated me; they said Maduro was an amateur,” he told the crowd. But “what you’ve seen is little compared to what we’re going to do”.

The legislative process leading up to Tuesday’s vote was marred by controversy after an opposition congresswoman was stripped of her immunity from prosecution over corruption charges, allowing for her substitution by a pro-government legislator who gave Maduro the crucial 99th vote needed to prevail.


Interest Rate Swaps Hit Record High As China Warns “Big Chance Of Bank Failures” | Zero Hedge

Interest Rate Swaps Hit Record High As China Warns “Big Chance Of Bank Failures” | Zero Hedge.

Overnight repo rates are spiking once again in early trading as the typically smaller banks that are more desperate bid aggressively for whetever liquidity they can find. 5Y Chinese swap rates have also reached a record high as the Yuan reaches its highest since Feb 2005. Chinese authorities are clearly stepping up the rhetoric:


The gambit between the PBOC’s liqudity provision and the growing dependence on their “spice” is clear – the question is, of course, will banks send a message (via the markets) to the PBOC or will they self-select (on first-mover’s advantage) eradicating the weakest.


5Y Chinese Interest Rate Swaps have reached a record high (implying expectations priced into the market of rising interest rates)…


and short-term liquidity is problematic again as overnight repo jumps to 5.00% in early trading..


What everyone is wondering is – with the failure of 1 or 2 banks seemingly guaranteed – how will the contagion be contained? How will the interbank market respond when no one knows who is it? We know what happened in the US in 2008…


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