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Monthly Archives: January 2014
“Turmoil in emerging markets and a month of disappointing job growth at home are unlikely to deter the Federal Reserve from trimming its bond-buying stimulus on Wednesday, as Ben Bernanke wraps up his last policy meeting at the helm of the U.S. central bank.
Overall signs of improvement in the U.S. economy suggest Fed officials will stay on track to cut monthly purchases of Treasurys and mortgage-backed securities by $5 billion each, bringing the total of their monthly asset purchases to $65 billion.
Bernanke took the Fed far into uncharted territory during his eight years on the job, building a $4 trillion balance sheet and keeping interest rates near zero for more than five years to pull the economy from its worst downturn in decades.
With those efforts beginning to pay off — and concerns growing over possible harm from so much money printing — the Fed announced plans last month to phase out the bond buying by late this year unless the economy takes a decided turn for the worse.
It started by trimming its monthly purchases to $75 billion from $85 billion, and on Wednesday, the U.S. central bank is expected to shave another $10 billion.
“It’s clear the Fed wants to taper,” said Eric Stein, portfolio manager at Eaton Vance in Boston.
Even so, the Fed is nowhere near to making a decision to raise rates. Policymakers are expected to stick to their promise to keep rates near zero until well after the U.S. unemployment rate, now at 6.7 percent, falls to 6.5 percent. The Fed is set to announce its decision at 2 p.m. EST (1900 GMT).
A dismal employment report for December showing businesses added far fewer jobs than expected raised some doubts about the Fed’s commitment to keep tapering its stimulus.
But largely upbeat data in recent weeks, from consumer spending and confidence to industrial production, bolstered the view of an improving economy, which forecasters estimate grew at an above-trend annual rate of 3.2 percent in the fourth quarter after notching a 4.1 percent advance in the previous quarter.
The show of strength provides a welcome backdrop for Bernanke, who steps down on Friday after an unusually tumultuous and highly experimental stint atop the world’s most influential central bank.
Steep losses in emerging market assets over the past week led some to question whether the Fed might put plans to trim its bond buying on hold. Analysts said the prospect of less Fed stimulus had added to other worries, from signs of slower growth in China to political turmoil in countries from Turkey to Thailand, and helped spark investors’ flight….”
Capital controls are beginning to weigh heavy on investor sentiment.
Despite currency devaluation and central bank tinkering with over night rates in Turkey and as of this morning South Africa; the trust trying to be instilled is not working as a spike in futures last night have been promptly given the homo hammer.
Perhaps, investors would rather wait to see what America’s central bank will do with tapering, before embarking on the ship of speculation aka ship of fools.
Barclays estimates the Euro Zone will have the most to loose if emerging market volatility continues. Read up here
As far as capital controls getting worse, well the writing is on the wall with actions from prominent banks along with negative commentary from the IMF, Bundesbank, and the Fed.Comments »
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“Beginning by disavowing Mario Gabelli of any belief that rising stock prices help ‘most’ people (“Fed data suggests half the US population has seen a 40% drop in wealth since 2007“), Marc Faber discusses his increasingly imminent fears of the markets in this recent Barron’s interview.
Quoting Hussman as a caveat, “The problem with bubbles is that they force one to decide whether to look like an idiot before the peak, or an idiot after the peak. There’s no calling the top,” Faber warns there are a lot of questions about the quality of earnings (from buybacks to unfunded pensions) but “statistics show that company insiders are selling their shares like crazy.”
His first recommendation – short the Russell 2000, buy 10-year US Treasuries (“there will be no magnificent US recovery”), and miners and adds “own physical gold because the old system will implode. Those who own paper assets are doomed.”
Faber: This morning, I said most people don’t benefit from rising stock prices. This handsome young man on my left said I was incorrect. [Gabelli starts preening.] Yet, here are some statistics from Gallup’s annual economy and personal-finance survey on the percentage of U.S. adults invested in the market. The survey, whose results were published in May, asks whether respondents personally or jointly with a spouse have any money invested in the market, either in individual stock accounts, stock mutual funds, self-directed 401(k) retirement accounts, or individual retirement accounts. Only 52% responded positively.
Gabelli: They didn’t ask about company-sponsored 401(k)s, so it is a faulty question.
Faber: An analysis of Federal Reserve data suggests that half the U.S. population has seen a 40% decrease in wealth since 2007.
In Reminiscences of a Stock Operator [a fictionalized account of the trader Jesse Livermore that has become a Wall Street classic], Livermore said, “It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight.” Here’s another thought from John Hussmann of the Hussmann Funds: “The problem with bubbles is that they force one to decide whether to look like an idiot before the peak, or an idiot after the peak. There’s no calling the top, and most of the signals that have been most historically useful for that purpose have been blaring red since late 2011.”
I am negative about U.S. stocks, and the Russell 2000 in particular. Regarding Abby’s energy recommendation, this is one of the few sectors with insider buying. In other sectors, statistics show that company insiders are selling their shares like crazy, and companies are buying like crazy.
Zulauf: These are the same people.
Faber: Precisely. Looking at 10-year annualized returns for U.S. stocks, the Value Line arithmetic index has risen 11% a year. The Standard & Poor’s 600 and the Nasdaq 100 have each risen 9.4% a year. In other words, the market hasn’t done badly. Sentiment figures are extremely bullish, and valuations are on the high side.
But there are a lot of questions about earnings, both because of stock buybacks and unfunded pension liabilities. How can companies have rising earnings, yet not provision sufficiently for their pension funds?
Good question. Where are you leading us with your musings?
Faber: What I recommend to clients and what I do with my own portfolio aren’t always the same. That said, my first recommendation is to short the Russell 2000. You can use the iShares Russell 2000 exchange-traded fund [IWM]. Small stocks have outperformed large stocks significantly in the past few years.
Next, I would buy 10-year Treasury notes, because I don’t believe in this magnificent U.S. economic recovery. The U.S. is going to turn down, and bond yields are going to fall. Abby just gave me a good idea. She is long the iShares MSCI Mexico Capped ETF, so I will go short.
What are you doing with your own money?
Faber: I have a lot of cash, and I bought Treasury bonds.
Faber: I have no faith in paper money, period. Next, insider buying is also high in gold shares. Gold has massively underperformed relative to the S&P 500 and the Russell 2000. Maybe the price will go down some from here, but individual investors and my fellow panelists and Barron’s editors ought to own some gold. About 20% of my net worth is in gold. I don’t even value it in my portfolio. What goes down, I don’t value.
Which stocks are you recommending?
Faber: I recommend the Market Vectors Junior Gold Miners ETF [GDXJ], although I don’t own it. I own physical gold because the old system will implode. Those who own paper assets are doomed.
Zulauf: Can you put the time frame on the implosion?
Faber: Let’s enjoy dinner tonight. Maybe it will happen tomorrow.
There is a colossal bubble in assets. When central banks print money, all assets go up. When they pull back, we could see deflation in asset prices but a pickup in consumer prices and the cost of living. ….”Comments »
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“Mr. Speaker, Mr. Vice President, members of Congress, fellow citizens:
This summer we will commemorate the 100th anniversary of the start of World War I.
This senseless, destructive war was started and championed by politicians who cared nothing for the 9 million people who lost their lives.
And in doing so, they began a century of warfare which continues to this day.
Our military industrial complex is larger than ever. We have nearly 2 million troops and national guardsmen, plus 3.5 million civilians employed in the defense sector.
With such awesome capabilities, we continue to resort to violence and death to exact political goals which benefit a tiny elite.
All of this has created a police state in the Land of the Free that is a far cry from the country we all grew up in.
Your government has spawned a culture of fear and intimidation. Nearly every federal agency, including the Fish and Wildlife Service, has its own gun-toting police force to pistol-whip citizens into submission.
And we’re stocking up. Your government has recently procured 1.6 BILLION rounds of hollow-point ammunition to supplement our existing supplies.
But frankly, we don’t need guns to harass citizens.
Our tax authorities have become more threatening than mafia warlords. The plunder is so severe that record numbers of Americans are renouncing their citizenship and leaving the country.
There are now dozens of federal, state, and local agencies and courts which have the power to confiscate your assets without any due process.
In addition to your house, your business, and your savings, we also have the authority to take your children away from you as if they are property of the state.
We are here to tell you what you can and cannot put in your own body, or whether you can collect rainwater that falls on own property.
In fact, on any given business day, the federal government issues hundreds of pages of new ‘rules’, proposed regulations, draft bills, executive orders, and/or regulatory notices.
And if you are not compliant with these rules, you may be committing a crime. Whether you know it or not.
When this nation was founded, there were four federal crimes on the books. Today there are THOUSANDS. Plus we have millions of government employees at all levels to enforce the penalties.
All of this, of course, is financed by you the tax slave.
You (plus unborn generations) are the poor suckers charged with paying off the national debt we politicians have created.
Officially the debt is just north of $17 trillion. But if you include Social Security and pension shortfalls, the figure is several times higher.
You’ll never know for sure because we have become masters of deceit regarding official statistics, whether inflation, unemployment, or our liabilities.
But the situation is so dire that the Congressional Budget Office projects the Social Security Administration’s disability insurance trust fund to RUN OUT by 2017.
We get by year after year by increasing the debt. And at well over 100% of GDP, we have truly reached the point of no return.
We are now in a position where we must default. Either we must default on our national debt, or we must default on our obligations to you the citizens.
We may end up stealing your savings. Robbing your Social Security. Taxing you to death. Or simply inflating away the value of our debt.
Naturally, we’re going to screw you in the process somehow… so be prepared for that. Especially the inflationary tidal wave that’s coming.
Our central bank has expanded its balance sheet at an unprecedented pace, creating massive asset bubbles in its wake. These asset bubbles have disproportionately benefited the ultra-wealthy at the expense of everyone else.
Such wanton money printing has also been tremendously destructive to our credibility. Other nations worry about our reckless irresponsibility. That’s why we keep spying on them.
Make no mistake: the consequences of our actions are here. And the days of the United States as the world’s dominant superpower are finished…………”Comments »
“With continued chaos around the world and uncertainty in global markets, today KWN is publishing an incredibly powerful piece that was written by a 60-year market veteran. The Godfather of newsletter writers, Richard Russell, has issued a dire warning, saying that even though there will be rallies in the major markets, stocks are now headed into crash mode as the US government is using massive propaganda and lying to its people.
What we’re seeing now is the primary trend overpowering the Federal Reserve. We’re now seeing the resumption of the bear market that was interrupted at the 2009 lows. All bear markets are international in scope. Thus the primary bear trend that we’re now in will affect everything on the planet. Already we hear reports of a slump in China’s manufacturing. When new Fed Chairwoman Janet Yellen takes command, she will have to open the spigots wide in an effort to halt deleveraging and deflation.
Interestingly, fiat currencies around the world are sinking. There’s only one currency that represents safety, and that currency is gold. Which, by the way, is higher today. I expect to see further semi-crash action in the days ahead, as the primary bear market resumes. I think investors will remain hopeful as long as this decline remains this side of 10%. But if the decline surpasses 10%, I believe we will see panic action as investors realize that this is not a correction, but a bear market.
Over the past weeks I have instructed subscribers to stay on the sidelines and watch history unfold. My advice is to stay out of this bear market and hold only gold bullion and a limited supply of US dollars. I think we are watching history in the making, and it is far better to watch it than to be part of it.
Question: Russell, what about the further melt-up that you were talking about?
Answer: When the situation changes, I change, and I’ve changed my mind about a further melt-up. (Friday’s) market action was awful, and attention must be paid.
This is not a time for heroism. If it’s tradable, it’s going to head down. Most people today have never experienced a primary bear trend. Most professional writers today do not understand what is happening. What’s happening is a correction of all the inflation and hype since 1980. It’s not going to be pretty.
I’m taking a deep breath and telling you what I really think. I think the Fed and the US government are embarked on a campaign to tell the American people that the US economy is a lot better than the people think it is. This is a way of boosting Obama’s legacy.
I think that the US is fighting the forces of deleveraging and deflation, and I think the Fed is losing its battle against deflation. After spending trillions via quantitative easing, the Fed has still been unable to push inflation to its desired level of 2%.
I think the Fed’s QE has flowed to the rich 1%, sending tangible items at auction and collectibles through the roof. The Fed’s QE has ironically shifted the items that the middle class uses progressively higher — college tuition, food, insurance, energy, medical, etc. I think the middle class is suffering hugely and a fringe of the middle class has dropped into poverty.
I think inflation of the daily items that the middle class depends on is really running near 10%. I think the Fed’s and the US government’s efforts to defame gold have been a disaster. While the Fed and the US are bad-mouthing gold and driving it lower, their anti-gold campaign has been a boon for China. While the US denigrates gold, China, which understands gold, is accumulating all it can. I think that the US does not have the gold that it pretends to have.
I think China is intent on making its yuan the world’s reserve currency. I think we will see a powerful gold-backed convertible yuan become the world’s new reserve currency. I see China’s Communist leaders literally begging its populace to accumulate gold. I see the Federal reserve intent on making its fiat currency the only accepted money, while gold, its competition, is scorned….”
“Citizens of the U.S. and the world are heading into a future that few have prepared for. It will also turn out to be much worse than most realize as it will be unlike anything we have witnessed in the past.
Part of the reason we are in such a bad fix has to do with the compartmentalization and specialization of our modern educational and economic system. There are many intelligent people in the market doing smart things; however, they often have no clue on what the hell is going on in other industries or professions.
And then we have individuals who specialize in “Technical Analysis.” Many who have read my posts and articles realize that I believe that technical analysis is worthless in a rigged market. I also believe the big price moves in the gold and silver are more fundamental in nature than technical.
I explained this in detail in several recent articles by comparing the price movement of oil to that of gold and silver. I have republished two charts below that show how the price of gold and silver moved in parallel with the price of oil in the 1971-1980 time period:
Here we can see that silver and gold moved in tandem with the price of oil. Many investors still regurgitate the notion that the Hunt Brothers were solely responsible for pushing the price of silver to record highs in 1979.
If that was true, then who was pushing up the price of gold? Or, how about oil… who was responsible for increasing the price of oil by a factor of 10, from $3.29 in 1973 to $36.83 in 1980? If I were to ask these questions of someone who blurted out that the Hunt Brothers cornered the silver market… they would get a blank stare back from me, because they have no clue.
My articles get around the Internet. Someone on another blog made the comment, “comparing the price of silver to oil was silly”. They said it makes just as much sense to compare the price of silver to the price of potatoes.
Everyone is free to have their own opinion, but the fact is that energy is the key that drives the global economy. Energy allows silver to be mined, refined, transported, minted, traded and consumed. I happen to believe the price of energy controls the price of silver, and other commodities as well, for that matter.
Let me see if I can provide another example that may win over the worst skeptics. If we look at the price movement of copper from 1971-1980, we see an interesting correlation to the price of oil:
Well… look at that. It is perhaps just another coincidence, the price of copper had a similar trend to the price of oil. As the price of oil shot up in 1979… so did the price of copper. Hell, the 1979 and 1980 copper-oil price lines are almost identical.
Copper didn’t enjoy the same percentage gains as gold or silver as it isn’t a sought after monetary metal. However, who was trying to corner the copper market in 1979-80 to push it up to new record highs? Do you ever hear anyone asking that question?
I bring up this subject so investors realize that the big price moves of gold and silver parallel the price movement of oil and are not due to technical analysis.
The long-term technical analysis chart of silver below is suggesting that cycles and waves may predict the future price of silver. I say throw-away the damn chart and follow the price of oil… it’s a much better indicator.
Why? Because, if you were to overlay the price of oil on this chart, you would find a similar trend-line. That being said, the price of oil is only a basic guideline to gauge the market price of gold and silver.
Due to the Financialization of the market by manufacturing hundreds of trillions of dollars worth of derivatives, fiat currency has been siphoned away from the physical market and into worthless paper garbage. We have no idea what the prices and costs of goods, services and commodities would be if the majority of fiat currency was invested directly into the physical markets rather than the $trillions in leveraged paper claims.
I would like to touch on one more subject as it pertains to technical analysis before I get into the wonderful subject of economic collapse.
In a recent article, “Silver – The Power of Thought Will Ultimately Prevail” the author Michael Noonan stated the following:
We keep moving away from discussing fundamentals because the fundamentals have not been reliable indicators in the supply/demand equation that normally determines price. Yet, almost every single article focuses on the record sales of numbers of coins offered to the public, charts showing overwhelmingly favorable statistics that favor higher silver prices, cost factors for mine production, decreasing supply relative to increasing demand.
How many times, and in how many ways can the same information be presented over the past year, and yet the price of silver languishes near recent lows?People have an appetite for this kind of information. It serves as a crutch to bolster flagging belief that silver and gold will rally any time soon.
Fundamentals are real. We are not being dismissive of their importance. Instead, we see the perception of their impact as being misplaced, for now. Ultimately, they will prevail, but the greater area of focus of a failed fiat financial system deserves center stage.
I disagree with Mr. Noonan on his current assessment of the fundamentals. While I don’t want to get into a TIT for TAT debate with Mr. Noonan on why I disagree, I believe it’s important to understand the difference between the two ideologies.
Mr. Noonan doesn’t focus on the fundamentals because they are, according to his analysis, “unreliable indicators.” Instead, he seems to suggest or imply that technical charts offer a better indicator. Now, I may be guilty of putting words in his mouth as he did not directly say that, but if you read his articles, you will find technical charts rather than fundamental analysis.
I believe that the fundamentals are everything in a rigged market…. even when the paper price doesn’t reflect it. It is more important to understand the energy fundamentals than it is to focus the on technical charts of silver. As I explained above, oil has been the major indicator in driving the price of gold and silver (and yes… copper).
Also, when investors understand the fundamentals of the energy-cost structure in the precious metal industry, they will be able to see there is a floor for the price of gold and silver. I still get investors emailing me stating that silver can go to $5.00 because it’s so cheap to mine.
In addition, technical analysis in a rigged market cannot grasp the serious problems looming in the energy industry. I just got off the phone with energy analyst Bill Powers of PowerEnergyInvestor.com… and I have to say the information he shared about the U.S. Shale gas industry is alarming. I will publish an article on this subject next week.
Let’s just say the price of natural gas in the United States is heading much higher. This will not be because of technical analysis, but rather in response to important fundamental causes, forces and data.
If you are an individual who believes the garbage forecasts put out by the Large Bloated Worthless Banks and Brokerage Houses claiming 20 years of growing natural gas production at low prices of $4.00 Mcf here in the U.S., get ready for a rude awakening.
This is the reason Mr. Noonan’s opinion on the fundamentals are wrong. While I agree with Mr. Noonan that the “Failed Fiat System” deserves focus, peak oil is the reason the Fiat Monetary System is headed for certain death.
Again… technical analysis is worthless in understanding the ramifications of peak oil and its impact on the United States and the world going forward.
The Coming Economic Collapse Will Be Much Worse Than Most Realize…”Comments »
“The trend for the stock market is going to be lower and lower so long as the Federal Reserve continues with its asset-tapering strategy, according to Charles Biderman, chairman of TrimTabs Investment Research.
Equity prices are dependent on the Fed, and not on the value of the companies that make up the market, Biderman told Yahoo.
“The bull market is solely due in my opinion to the Fed pumping money . . . more money chasing fewer shares. And the more money has come from the Fed.”
Biderman was surprised that very little new money has flowed into equities in January via mutual funds and exchange-traded funds. He said investors may have decided the economy is not growing that strongly and that ripple effects from declining emerging markets are taking effect.
But he suggested the fact the Fed has commenced cutting back its monthly asset purchases is definitely playing an outsized role. “If the Fed keeps tapering, the market will keep going down. If they stop the tapering and start printing again, then we’ll see a huge rally.” …”
“Backdrops conductive to crises can drag on for so long – sometimes seemingly forever – as if they’re moving in ultra-slow motion. Invariably, they lull most to sleep. Better yet, such environments even work to embolden the optimists. This is especially the case when policy measures are aggressively employed along the way, repeatedly holding the forces of crisis at bay. In the face of mounting risk, heightened risk-taking and leveraging often work only to exacerbate underlying fragilities. But eventually a critical juncture arrives where newfound momentum has things unwinding at a more frenetic pace. It is the nature of such things that most everyone gets caught totally unprepared.
Virtually the entire EM “complex” has been enveloped in protracted destabilizing financial and economic Bubbles. In particular, for five years now unprecedented “developed” world central bank-induced liquidity has spurred unsound economic and financial booms. The massive investment and “hot money” flows are illustrated by the multi-trillion growth of EM central bank international reserve holdings. There have of course been disparate resulting impacts on EM financial and economic systems. But I believe in all cases this tsunami of liquidity and speculation has had deleterious consequences, certainly including fomenting systemic dependencies to foreign-sourced flows. In seemingly all cases, protracted Bubbles have inflated societal expectations.
For a while, central bank willingness to use reserves to support individual currencies bolsters market confidence in a country’s currency, bonds and financial system more generally. But at some point a central bank begins losing the battle to accelerating outflows. A tough decision is made to back away from market intervention to safeguard increasingly precious reserve holdings. Immediately, the marketplace must then contend with a faltering currency, surging yields, unstable financial markets and rapidly waning liquidity generally. Things unravel quickly.
The issue of EM sovereign and corporate borrowings in dollar (and euro and yen) denominated debt has speedily become a critical “macro” issue. More than five years of unprecedented global dollar liquidity excess spurred a historic boom in dollar-denominated borrowings. The marketplace assumed ongoing dollar devaluation/EM currency appreciation. There became essentially insatiable market demand for higher-yielding EM debt, replete with all the distortions in risk perceptions, market mispricing and associated maladjustment one should expect from years of unlimited cheap finance. As was the case with U.S. subprime, it’s always the riskiest borrowers that most intensively feast at the trough of easy “money.”
So, too many high-risk borrowers – from vulnerable economies and Credit systems – accumulated debt denominated in U.S. and other foreign currencies – for too long. Now, currencies are faltering, “hot money” is exiting, Credit conditions are tightening and economic conditions are rapidly deteriorating. It’s a problematic confluence that will find scores of borrowers challenged to service untenable debt loads, especially for borrowings denominated in appreciating non-domestic currencies. This tightening of finance then becomes a pressing economic issue, further pressuring EM currencies and financial systems – the brutal downside of a protracted globalized Credit and speculative cycle.
In many cases, this was all part of a colossal “global reflation trade.” Today, many EM economies confront the exact opposite: mounting disinflationary forces for things sold into global markets. Falling prices, especially throughout the commodities complex, have pressured domestic currencies. This became a major systemic risk after huge speculative flows arrived in anticipation of buoyant currencies, attractive securities markets, and enticing business opportunities. The commodities boom was to fuel general and sustained economic booms. EM was to finally play catchup to “developed.”
Now, Bubbles are faltering right and left – and fearful “money” is heading for the (closing?) exits. And, as the global pool of speculative finance reverses course, the scale of economic maladjustment and financial system impairment begins to come into clearer focus. It’s time for the marketplace to remove the beer goggles.
No less important is the historic – and ongoing – boom in manufacturing capacity in China and throughout Asia. This has created excess capacity and increasing pricing pressure for too many manufactured things, a situation only worsened by Japan’s aggressive currency devaluation. This dilemma, with parallels to the commodity economies, becomes especially problematic because of the enormous debt buildup over recent years. While this is a serious issue for the entire region, it has become a major pressing problem in China.
This week the markets seemed to begin taking the unfolding Chinese Credit crisis more seriously. There was talk early in the week of concerted efforts to save the troubled $496 million (“Credit Equals Gold No. 1”) trust product from a possible end-of-month default.
Savers, investors and speculators will indeed learn painful lessons in China Credit – and it’s difficult for me to envisage this learning process going smoothly. “Credit Equals Gold No.1” is the proverbial tip of the Iceberg for a Credit system today suffering from a historic gulf between saver perceptions of “moneyness” and the poor and deteriorating quality of much of underlying system Credit. Incredible quantities of finance have flowed freely into risky Credit vehicles with the expectation that the banks and governments (local and central) will not allow losses nor ever tolerate a crisis. This is precisely the recipe for Credit accidents and even disaster.
Now officials confront a dangerous situation: Acute fragility in segments of its “shadow” financing of corporate and local government debt festers concurrently with ongoing “terminal phase” excess throughout housing finance…..”Comments »
“It seems the “dollar is a reserve currency for ever and ever” propaganda has not reached Africa, also known as Southern China as explained heretwo years ago, where moments ago the Central Bank of Nigeria issued the following surprise announcement:
- CENTRAL BANK OF NIGERIA TO SELL DOLLARS TO DIVERSIFY RESERVES
- NIGERIA CENTRAL BANK TO RAISE SHARE OF YUAN TO 7% FROM 2%…”
“The CEO of BitInstant, a Bitcoin exchange, has been arrested at JFK airport and charged with money laundering.
Charlie Shrem, along with a co-conspirator, is accused of selling over $1 million in bitcoins to Silk Road users, who would then use them to buy drugs and other illicit items.
According to the criminal complaint, Shrem himself bought drugs on Silk Road.
“Hiding behind their computers, both defendants are charged with knowingly contributing to and facilitating anonymous drug sales, earning substantial profits along the way,” DEA agent James Hunt said in a release.
Shrem is a vice chairman at the Bitcoin Foundation. He is listed as a speaker at a Bitcoin conference in Miami that ended Sunday.
Shrem is believed to own a substantial amount of bitcoins.
The arrest comes on the eve of a two-day state hearing about the future of Bitcoin in New York….”Comments »
“James Rickards, a top adviser for the Pentagon and CIA, is sounding the alarm that America is on the brink of a global “financial war.”
“Rival nations and terrorist organizations are developing capabilities in unconventional warfare,” Rickards commented in a Newsmax interview. “Things like cyber warfare, biological or chemical warfare, and now, financial weapons of mass destruction.”
And this “financial war” is a battle America isn’t prepared to win.
Rickards believes that as this conflict escalates, it will “cause oil to skyrocket above $190 a barrel, gold to surge to $3,000 an ounce, and, in its aftermath, it could completely decimate the wealth of millions.”
Rickards’ assessment is not one to be taken lightly. The first two “financial wars” he refers to in the interview led to World War II and the economic stagflation of the late 1970s.
And unfortunately, Rickards isn’t alone in his assessment.
MSN Money commented, “The end game for all this . . . is higher inflation combined with economic stagnation,” and The Financial Times reported that “Japan may have fired the first shot.”
The Voice of Russia warned, “Russia is getting ready to defend itself in the global financial war which is going to break out in the near future.”
So What Exactly Is This ‘Financial War?’
It’s a battle over money . . . also known as a “Currency War.”
In an ironic twist, political figures of each country are trying to depreciate their own currency. In theory, this strategy will give a short-term boost to their own economy, while handicapping foreign countries.
REPORT: Currency War Leads China to Secretly Stockpile Gold
But there are several flaws in this line of thinking.
“The problem is that everybody can’t play the depreciation game at the same time: One country’s advantage is the others’ disadvantage,” according to US News & World Report.
Essentially, currencies around the world — dollars, yen, and pounds — are losing their purchasing power.
We all know this as inflation. In normal times, inflation runs around 3%. But if a currency war erupts, it could easily run at 10% to 50% per year.
Should You Be Worried?
When a country intentionally tries to devalue its own currency, the very money in one’s bank account loses purchasing power.
Gas prices soar. Groceries get more expensive. And utility bills climb higher every month. ….”Comments »
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“In a first, working-age people now make up the majority in U.S. households that rely on food stamps — a switch from a few years ago, when children and the elderly were the main recipients.
Some of the change is due to demographics, such as the trend toward having fewer children. But a slow economic recovery with high unemployment, stagnant wages and an increasing gulf between low-wage and high-skill jobs also plays a big role. It suggests that government spending on the $80 billion-a-year food stamp program — twice what it cost five years ago — may not subside significantly anytime soon.
Food stamp participation since 1980 has grown the fastest among workers with some college training, a sign that the safety net has stretched further to cover America’s former middle class, according to an analysis of government data for The Associated Press by economists at the University of Kentucky. Formally called Supplemental Nutrition Assistance, or SNAP, the program now covers 1 in 7 Americans.
Editor’s Note: Secret ‘250% Calendar’ Exposed — Free Video
The findings coincide with the latest economic data showing workers’ wages and salaries growing at the lowest rate relative to corporate profits in U.S. history.
President Barack Obama’s State of the Union address Tuesday night is expected to focus in part on reducing income inequality, such as by raising the federal minimum wage. Congress, meanwhile, is debating cuts to food stamps, with Republicans including House Majority Leader Eric Cantor, R-Va., wanting a $4 billion-a-year reduction to an anti-poverty program that they say promotes dependency and abuse.
Economists say having a job may no longer be enough for self-sufficiency in today’s economy.
“A low-wage job supplemented with food stamps is becoming more common for the working poor,” said Timothy Smeeding, an economics professor at the University of Wisconsin-Madison who specializes in income inequality. “Many of the U.S. jobs now being created are low- or minimum-wage — part-time or in areas such as retail or fast food — which means food stamp use will stay high for some time, even after unemployment improves.”
The newer food stamp recipients include Maggie Barcellano, 25, of Austin, Texas. A high school graduate, she enrolled in college but didn’t complete her nursing degree after she could no longer afford the tuition.
Hoping to boost her credentials, she went through emergency medical technician training with the Army National Guard last year but was unable to find work as a paramedic because of the additional certification and fees required. Barcellano, now the mother of a 3-year-old daughter, finally took a job as a home health aide, working six days a week at $10 an hour. Struggling with the low income, she recently applied for food stamps with the help of the nonprofit Any Baby Can, to help save up for paramedic training.
“It’s devastating,” Barcellano said. “When I left for the Army I was so motivated, thinking I was creating a situation where I could give my daughter what I know she deserves. But when I came back and basically found myself in the same situation, it was like it was all for naught.”
Since 2009, more than 50 percent of U.S. households receiving food stamps have been adults ages 18 to 59, according to the Census Bureau’s Current Population Survey. The food stamp program defines non-elderly adults as anyone younger than 60.
As recently as 1998, the working-age share of food stamp households was at a low of 44 percent, before the dot-com bust and subsequent recessions in 2001 and 2007 pushed new enrollees into the program, according to the analysis by James Ziliak, director of the Center for Poverty Research at the University of Kentucky…..”Comments »
[youtube://http://www.youtube.com/watch?v=0VD33jRpeMM#t=290 450 300]Comments »
“This time, the Federal Reserve has created a truly global problem. A big chunk of the trillions of dollars that it pumped into the financial system over the past several years has flowed into emerging markets. But now that the Fed has decided to begin “the taper”, investors see it as a sign to pull the “hot money” out of emerging markets as rapidly as possible. This is causing currencies to collapse and interest rates to soar all over the planet. Argentina, Turkey, South Africa, Ukraine, Chile, Indonesia, Venezuela, India, Brazil, Taiwan and Malaysia are just some of the emerging markets that have been hit hard so far.
In fact, last week, emerging market currencies experienced the biggest decline that we have seen since the financial crisis of 2008. And all of this chaos in emerging markets is seriously spooking Wall Street as well. The Dow has fallen nearly 500 points over the last two trading sessions alone. If the Federal Reserve opts to taper even more in the coming days, this currency crisis could rapidly turn into a complete and total currency collapse.
A lot of Americans have always assumed that the U.S. dollar would be the first currency to collapse when the next great financial crisis happens. But actually, right now just the opposite is happening and it is causing chaos all over the planet.
For instance, just check out what is happening in Turkey according to a recent report in the New York Times…
Turkey’s currency fell to a record low against the dollar on Friday, a drop that will hit the purchasing power of everyone in the country.
On a street corner in Istanbul, Yilmaz Gok, 51, said, “I’m a retiree making ends meet on a small pension and all I care about is a possible increase in prices.”
“I will need to cut further,” he said. “Maybe I should use my natural gas heater less.”
And this is not just limited to a few countries. What we are watching right now is truly a global phenomenon…”
“In what is sure to be met with cries of derision across the European Union, in line with what the IMF had previously recommended (and we had previously warned as inevitable), the Bundesbank said on Monday that countries about to go bankrupt should draw on the private wealth of their citizens through a one-off capital levy before asking other states for help. As Reuters reports, the Bundesbank states, “(A capital levy) corresponds to the principle of national responsibility, according to which tax payers are responsible for their government’s obligations before solidarity of other states is required.” However, they note that they will not support an implementation of a recurrent wealth tax in Germany, saying it would harm growth. We await the refutation (or Draghi’s jawbone solution to this line in the sand.)
Germany’s Bundesbank said on Monday that countries about to go bankrupt should draw on the private wealth of their citizens through a one-off capital levy before asking other states for help.
The Bundesbank’s tough stance comes after years of euro zone crisis that saw five government bailouts. There have also bond market interventions by the European Central Bank in, for example, Italy where households’ average net wealth is higher than in Germany.
“(A capital levy) corresponds to the principle of national responsibility, according to which tax payers are responsible for their government’s obligations before solidarity of other states is required,” the Bundesbank said in its monthly report.
It warned that such a levy carried significant risks and its implementation would not be easy, adding it should only be considered in absolute exceptional cases, for example to avert a looming sovereign insolvency…..”