In its October Fiscal Monitor Report, the International Monetary Fund (IMF) has quietly set the stage for what could eventually be a European, or perhaps even worldwide, "Supertax."
Think I'm kidding?
Here's what they had to say:
"The sharp deterioration of the public finances in many countries has revived interest in a 'capital levy' - a one-off tax on private wealth - as an exceptional measure to restore debt sustainability [emphasis added]. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and may be seen by some as fair)."
The report goes on:
"The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away."
Translation: We think we could pull this off, but we need to consider the alternatives: debt default, or inflation/hyperinflation.
Clearly, they're not going to go for debt default, as it would lead to a depression. No central banker in power today would ever get the leeway to try that. Besides, the 1930s were not much fun. Come to think of it, neither were the early 1940s.
Nor are they convinced that the current attempt - inflation through mega-printing as the path of least resistance - is going to work. But that certainly hasn't stopped them from trying harder and harder, especially Japan.
So like any good central planner, they've been hatching a backup plan - one that involves taking a serious chunk of your hard-earned assets.
Will this happen here? I honestly don't know
Tuesday, November 12, 2013
Austerity is coming and soon.
Curtailing government spending may become a necessity in the US as government tax receipts slow, yet government expenditures rise.
This tendency is also apparent in Europe:
Clearly, the income and spending ratios can no longer to sustained.
The cost of Obama's green power push.
Dina Cappiello and Matt AQpuzzo wrote a story entitled "The secret, dirty cost of Obama's green power push." It is a story carried by AP, but I saw it on BARCHART. It is another disaster story of the Obama regime's making.
The addition of ethanol to gasoline was supposed to reduce carbon dioxide emissions, supposedly to combat the phantom "global warming." As is common with most programs pushed by Progressives, it made matters worse. Experts who warned about the harmful effects of increasing ethanol production from corn were silenced. The Progressives plowed ahead. Five million acres of conservation land were plowed, resulting in increased soil erosion, loss of wild life habitat and increased run off into the Gulf of Mexico, where organic effluents kill the fish. Just as wind mills kill eagles in the West, the cost of "green" power must be measured in all its disasters. As with ObamaCare, Obama and his cohorts knew of the coming disasters but they lied about it.
Meanwhile, a golden opportunity to produce safe, cheap and clean power was once again scuttled. Thorium cycle power plants can not be used to produce fissionable material, recycle their waste and shut down automatically and safely if coolant power is interrupted. It is not important to combat carbon dioxide, but should we ever have to, thorium-cycle atomic power plants produce very little carbon dioxide.
The damage caused by this regime grows higher every day.
The addition of ethanol to gasoline was supposed to reduce carbon dioxide emissions, supposedly to combat the phantom "global warming." As is common with most programs pushed by Progressives, it made matters worse. Experts who warned about the harmful effects of increasing ethanol production from corn were silenced. The Progressives plowed ahead. Five million acres of conservation land were plowed, resulting in increased soil erosion, loss of wild life habitat and increased run off into the Gulf of Mexico, where organic effluents kill the fish. Just as wind mills kill eagles in the West, the cost of "green" power must be measured in all its disasters. As with ObamaCare, Obama and his cohorts knew of the coming disasters but they lied about it.
Meanwhile, a golden opportunity to produce safe, cheap and clean power was once again scuttled. Thorium cycle power plants can not be used to produce fissionable material, recycle their waste and shut down automatically and safely if coolant power is interrupted. It is not important to combat carbon dioxide, but should we ever have to, thorium-cycle atomic power plants produce very little carbon dioxide.
The damage caused by this regime grows higher every day.
Friday, November 8, 2013
If Iran goes nuclear.
Iran is chugging toward building nuclear weapons. And the Ayatollahs leave little room to doubt that their intentions are: to destroy 1. Israel and 2. the United States, using those weapons.
It is interesting to note how various governments react to this. The Russians (for some unfathomable reason that is not apparent to anyone) sort of support the idea. The Obama regime does what you would expect the regime to do: lie to the American people and root for Iran to succeed (to placate the anti-Semitic Left) and try to persuade Iran via sanctions (to placate the Jewish Left).
Israel blusters that it won't permit Iran to obtain nukes and will act unilaterally, but so far it is just talk.
What is more interesting in a macabre way is the position of Saudi Arabia. It is reported that the Saudis have an agreement with Pakistan to obtain missiles and nukes if Iran gets the bomb:
http://www.bbc.co.uk/news/world-middle-east-24823846
For the Saudis, the drive for the bomb is but an extension of the Shia-Sunni rivalry and animosity. While for Westerners it is difficult to understand the depth of animosity based on differences in religion that to us appear minor, the religious wars between Catholics and Protestants in the Middle ages were just as unfathomable to outsiders.
The Obama regime appears as incompetent fixing the situation in the Middle East, as it is incompetent in fixing ObamaCare.
It is interesting to note how various governments react to this. The Russians (for some unfathomable reason that is not apparent to anyone) sort of support the idea. The Obama regime does what you would expect the regime to do: lie to the American people and root for Iran to succeed (to placate the anti-Semitic Left) and try to persuade Iran via sanctions (to placate the Jewish Left).
Israel blusters that it won't permit Iran to obtain nukes and will act unilaterally, but so far it is just talk.
What is more interesting in a macabre way is the position of Saudi Arabia. It is reported that the Saudis have an agreement with Pakistan to obtain missiles and nukes if Iran gets the bomb:
http://www.bbc.co.uk/news/world-middle-east-24823846
For the Saudis, the drive for the bomb is but an extension of the Shia-Sunni rivalry and animosity. While for Westerners it is difficult to understand the depth of animosity based on differences in religion that to us appear minor, the religious wars between Catholics and Protestants in the Middle ages were just as unfathomable to outsiders.
The Obama regime appears as incompetent fixing the situation in the Middle East, as it is incompetent in fixing ObamaCare.
Thursday, November 7, 2013
Why the FED can not taper.
Some people believe that the "taper talk" from the FED is designed to add to the downward pressure on gold prices. That in reality, we are in a recession and that reducing the stimulus by the FED would put us into a Depression. Here is a short explanation of why this is so:
"
That’s the real headline, by the way.
But what you have from the BEA is this:
And here’s why not.
The Fed is “creating” $85 billion a month in “QE”, injecting it into the economy. These funds are immediately spent and thus “count” in GDP (all goods and services sold, remember?)
So the actual amount of economic activity for which trade occurs must have the QE amount subtracted back out.
The BEA’s GDP tables tell us that the gross change in GDP from 2Q -> 3Q was $196.6 billion. But the Fed’s QE program injected $255 billion, so in fact the economy shrank during the 3rd quarter.
When people tell you that they believe the economy is in a recession, as a recent survey said was commonly believed – they’re right.
- See more at: http://www.libertynews.com/2013/11/uncooking-the-books-3q-gdp-decreased-58-4-billion/#sthash.huSEoh0o.dpuf
"
Uncooking The Books – 3Q GDP DECREASED $58.4 Billion
That’s the real headline, by the way.
But what you have from the BEA is this:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.8 percent in the third quarter of 2013 (that is, from the second quarter to the third quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.5 percent.Nope.
And here’s why not.
So the actual amount of economic activity for which trade occurs must have the QE amount subtracted back out.
The BEA’s GDP tables tell us that the gross change in GDP from 2Q -> 3Q was $196.6 billion. But the Fed’s QE program injected $255 billion, so in fact the economy shrank during the 3rd quarter.
When people tell you that they believe the economy is in a recession, as a recent survey said was commonly believed – they’re right.
- See more at: http://www.libertynews.com/2013/11/uncooking-the-books-3q-gdp-decreased-58-4-billion/#sthash.huSEoh0o.dpuf
Tuesday, November 5, 2013
Richard Russell: financial system destroyed.
1. Really? What does he mean?
a. Russell cites the lack of effect of QE. He believes that the FED under Janet Yellen will increase QE to stop deflation. The biggest effect of this will be on stock prices which will take off in a third and speculative wave.
b. Larry Edelson forecasts the same thing but he puts a number to his forecast: DOW 32,000.
c. Russel also notes that gold and silver are acting as if they were forming the bottom. (Lower lows. Any drop below 1,300 is greeted with massive buy orders of physical gold).
2. What are the expected consequences?
a. Russell believes that China is accumulating gold to have the Yuan become the world's reserve currency. He even reminds us that he who has the gold makes the rules.
b. I believe this will happen, because the rest of the world will not accept the idea that America live off of cheapening the value of their earnings. This will bring on financial collapse of the US. We will not be able to service our debt if the world cuts up our credit card.
c. The Obama regime counts the days until the collapse comes and it can establish a Marxist dictatorship. Ever wonder why Homeland Security has bought a billion bullets and now wants a quarter million pepper sprays?
a. Russell cites the lack of effect of QE. He believes that the FED under Janet Yellen will increase QE to stop deflation. The biggest effect of this will be on stock prices which will take off in a third and speculative wave.
b. Larry Edelson forecasts the same thing but he puts a number to his forecast: DOW 32,000.
c. Russel also notes that gold and silver are acting as if they were forming the bottom. (Lower lows. Any drop below 1,300 is greeted with massive buy orders of physical gold).
2. What are the expected consequences?
a. Russell believes that China is accumulating gold to have the Yuan become the world's reserve currency. He even reminds us that he who has the gold makes the rules.
b. I believe this will happen, because the rest of the world will not accept the idea that America live off of cheapening the value of their earnings. This will bring on financial collapse of the US. We will not be able to service our debt if the world cuts up our credit card.
c. The Obama regime counts the days until the collapse comes and it can establish a Marxist dictatorship. Ever wonder why Homeland Security has bought a billion bullets and now wants a quarter million pepper sprays?
Monday, November 4, 2013
Puerto Rico; the next domino.
From Bob Adelman
It is tempting to compare Puerto Rico to Detroit, but the headwinds facing Puerto Rico makes Detroit’s problems seem almost not worth mentioning. Detroit’s bankruptcy filing in July was for $18 billion. Puerto Rico’s debt is nearly four times larger.
A partial listing of those headwinds include:
• Moody’s downgrade of PR debt on October 3 to just above junk, with its outlook changed from stable to negative;
• The recent settlement by UBS bank’s Puerto Rican branch with the Securities and Exchange Commission over hiding the country’s faltering financial condition and artificially supporting bond prices;
• The necessity by Puerto Rico treasury officials to borrow in the private market because the bond market is essentially closed to them;
• The U.S.-enforced minimum wage in Puerto Rico, which makes it too expensive for business owners to hire workers, impacting the island’s already high unemployment rate — a rate that is nearly twice that in the United States;
• National debt that is greater than any American state, except California (population of 38 million) and New York (population of 20 million) — Puerto Rico has a population of just 3.6 million;
• A ratio of debt to personal income (which in the United States averages 3.4 percent) is an eye-popping 89 percent;
• A labor force participation rate of just 41 percent, compared to 63 percent in the United States;
• The sharp increase in income taxes by President Alejandro Padilla in his attempt to balance the government’s budget by 2016;
• Overly generous welfare and disability income programs, which discourage employment and encourage dependency;
• Bloated government, where one in five workers are employed by the government;
• The country’s pension plan, which is only 7 percent funded;
• The government’s cash flow, which has been negative for the past 13 years, and
• Its 2012 Comprehensive Annual Financial Statement, due months ago, has yet to be filed.
As a territory of the United States (more accurately, the relationship between the United States and Puerto Rico is that of a suzerainty), Puerto Rico therefore suffers from the welfare state mentality of its northern neighbor. The country has subsisted on handouts, special incentives (such as a tax code that, until 2006, allowed U.S. corporations with offices in Puerto Rico to send their earnings to their parent without paying corporate income tax), and triple tax exemptions that allowed the government to continue to borrow at artificially attractive rates from American investors who assumed that their investments were safe. For those investors it was the best of all worlds: In a low interest-rate environment, they were able to generate excellent real rates of return without risk to their capital.
Until now.
Most of Puerto Rico’s borrowings have been absorbed by municipal bond funds run by big names such as Franklin, Fidelity, and Oppenheimer. According to MorningStar, the mutual fund tracking service, 180 mutual funds in the United States hold at least five percent of their portfolios in PR municipal bonds. Some of them, such as the Franklin Double Tax-Free Income fund, has a 60 percent exposure to Puerto Rico and has seen its value drop a harrowing 15.7 percent in just the last five months. In other words, investors in that fund have seen their capital shrink by three percent per month just since May, losing one-sixth of their initial investment.
One mutual fund manager, affiliated with UBS bank, has seen its two primary Puerto Rico funds — the UBS Puerto Rico Tax-Free Target Maturity Fund and the UBS Puerto Rico Tax-Free Target Maturity Fund II — lose an astounding 88.9 percent and 83.5 percent of their value, respectively.
The impact on borrowing costs ripple out far beyond that of a small island in the Caribbean. It is estimated that the entire municipal bond market in the United States exceeds $4 trillion. If the situation in Puerto Rico continues to unravel, interest rates are likely to rise significantly across the board, raising borrowing costs for every municipality from Dubuque to Portland.
This is the end game of government interference, subsidies, wage laws, special incentives — the end game, in other words, of the welfare state itself. In a microcosm, Puerto Rico is not Detroit, or Greece, or Spain. It is the United States itself.
Puerto Rico, Detroit and California share some traits that do matter: 1. a large minority population prone to elect Leftists (i.e. Democrats) and 2. State interference in economics.
It is tempting to compare Puerto Rico to Detroit, but the headwinds facing Puerto Rico makes Detroit’s problems seem almost not worth mentioning. Detroit’s bankruptcy filing in July was for $18 billion. Puerto Rico’s debt is nearly four times larger.
A partial listing of those headwinds include:
• Moody’s downgrade of PR debt on October 3 to just above junk, with its outlook changed from stable to negative;
• The recent settlement by UBS bank’s Puerto Rican branch with the Securities and Exchange Commission over hiding the country’s faltering financial condition and artificially supporting bond prices;
• The necessity by Puerto Rico treasury officials to borrow in the private market because the bond market is essentially closed to them;
• The U.S.-enforced minimum wage in Puerto Rico, which makes it too expensive for business owners to hire workers, impacting the island’s already high unemployment rate — a rate that is nearly twice that in the United States;
• National debt that is greater than any American state, except California (population of 38 million) and New York (population of 20 million) — Puerto Rico has a population of just 3.6 million;
• A ratio of debt to personal income (which in the United States averages 3.4 percent) is an eye-popping 89 percent;
• A labor force participation rate of just 41 percent, compared to 63 percent in the United States;
• The sharp increase in income taxes by President Alejandro Padilla in his attempt to balance the government’s budget by 2016;
• Overly generous welfare and disability income programs, which discourage employment and encourage dependency;
• Bloated government, where one in five workers are employed by the government;
• The country’s pension plan, which is only 7 percent funded;
• The government’s cash flow, which has been negative for the past 13 years, and
• Its 2012 Comprehensive Annual Financial Statement, due months ago, has yet to be filed.
As a territory of the United States (more accurately, the relationship between the United States and Puerto Rico is that of a suzerainty), Puerto Rico therefore suffers from the welfare state mentality of its northern neighbor. The country has subsisted on handouts, special incentives (such as a tax code that, until 2006, allowed U.S. corporations with offices in Puerto Rico to send their earnings to their parent without paying corporate income tax), and triple tax exemptions that allowed the government to continue to borrow at artificially attractive rates from American investors who assumed that their investments were safe. For those investors it was the best of all worlds: In a low interest-rate environment, they were able to generate excellent real rates of return without risk to their capital.
Until now.
Most of Puerto Rico’s borrowings have been absorbed by municipal bond funds run by big names such as Franklin, Fidelity, and Oppenheimer. According to MorningStar, the mutual fund tracking service, 180 mutual funds in the United States hold at least five percent of their portfolios in PR municipal bonds. Some of them, such as the Franklin Double Tax-Free Income fund, has a 60 percent exposure to Puerto Rico and has seen its value drop a harrowing 15.7 percent in just the last five months. In other words, investors in that fund have seen their capital shrink by three percent per month just since May, losing one-sixth of their initial investment.
One mutual fund manager, affiliated with UBS bank, has seen its two primary Puerto Rico funds — the UBS Puerto Rico Tax-Free Target Maturity Fund and the UBS Puerto Rico Tax-Free Target Maturity Fund II — lose an astounding 88.9 percent and 83.5 percent of their value, respectively.
The impact on borrowing costs ripple out far beyond that of a small island in the Caribbean. It is estimated that the entire municipal bond market in the United States exceeds $4 trillion. If the situation in Puerto Rico continues to unravel, interest rates are likely to rise significantly across the board, raising borrowing costs for every municipality from Dubuque to Portland.
This is the end game of government interference, subsidies, wage laws, special incentives — the end game, in other words, of the welfare state itself. In a microcosm, Puerto Rico is not Detroit, or Greece, or Spain. It is the United States itself.
Puerto Rico, Detroit and California share some traits that do matter: 1. a large minority population prone to elect Leftists (i.e. Democrats) and 2. State interference in economics.
Sunday, November 3, 2013
The coming default of the LBMA.
1. How gold price is suppressed.
In several posts, I have discussed HOW the bouillon market was being manipulated and why. Basically, an avalanche of SALE orders submitted in quiet trading hours, that's how.
2. I have also posted various people's conjectures as to WHY. Basically, to keep gold going down and thus camouflage the real (price) inflation that is occurring because of the monetary inflation.
3. The cost of manipulating the gold price.
Have you heard about the GOLDEN RULE? The rule says HE WHO HAS THE GOLD, MAKES THE RULES. And the reason why nations hold gold is to guarantee to their trading partners that their currency is backed by something solid - something that has been regarded as of universal value for ages.
So where is our gold?
a) There is the anecdotal evidence of the soldier who asked for live ammo while guarding Fort Knox. His Sergeant told him to forget it, THERE WAS NOTHING TO GUARD.
b) Then there is the strange refusal of the FED to audit the amount of gold in its vaults. Would you trust a bank that refused to audit its holdings?
c) Germany is supposed to have 2,400 tons of gold, of which 2/3 is in the US. Germany has asked for its gold. The fed is willing to return 300 tons in 10 years. Let's remember that after WWII the US had 24,000 tons of gold. By the time of Pres Nixon, this had decreased to 12,000 tons. The last figure we had was 8,000 tons. It should be easy to return 2/3 of 2,400 (1,600 tons) right away. But it is not being done.
d) There is other evidence that the suppression of the gold price required the use of Western gold:
1) Sweden has 120 tons of gold. On paper at least. The Swedes admit that 88% of that gold is not at home and much of it has been 'traded.'
2) Finland has 96% of its gold out of the country and admits that 1/2 has been traded.
3) France and Austria admit that their gold has been traded.
What does this all add up to? What this means that a lot of the gold the West claims it has been sold and is no longer in the possession of the LBMA (London Bouillon Bank Association). As the actual value of the US Dollar decreases, these countries will demand their gold back. But, some people calculate that there are 100 claims for every ounce of gold in the possession of Western banks. And if the LBMA is required to turn over gold, it won't be able to do so. And that is the definition of default.
Here is the latest on the US Dollar. A timely intervention drove it up - for now. The drop in value of the USD continued. Will it go lower?
In several posts, I have discussed HOW the bouillon market was being manipulated and why. Basically, an avalanche of SALE orders submitted in quiet trading hours, that's how.
2. I have also posted various people's conjectures as to WHY. Basically, to keep gold going down and thus camouflage the real (price) inflation that is occurring because of the monetary inflation.
3. The cost of manipulating the gold price.
Have you heard about the GOLDEN RULE? The rule says HE WHO HAS THE GOLD, MAKES THE RULES. And the reason why nations hold gold is to guarantee to their trading partners that their currency is backed by something solid - something that has been regarded as of universal value for ages.
So where is our gold?
a) There is the anecdotal evidence of the soldier who asked for live ammo while guarding Fort Knox. His Sergeant told him to forget it, THERE WAS NOTHING TO GUARD.
b) Then there is the strange refusal of the FED to audit the amount of gold in its vaults. Would you trust a bank that refused to audit its holdings?
c) Germany is supposed to have 2,400 tons of gold, of which 2/3 is in the US. Germany has asked for its gold. The fed is willing to return 300 tons in 10 years. Let's remember that after WWII the US had 24,000 tons of gold. By the time of Pres Nixon, this had decreased to 12,000 tons. The last figure we had was 8,000 tons. It should be easy to return 2/3 of 2,400 (1,600 tons) right away. But it is not being done.
d) There is other evidence that the suppression of the gold price required the use of Western gold:
1) Sweden has 120 tons of gold. On paper at least. The Swedes admit that 88% of that gold is not at home and much of it has been 'traded.'
2) Finland has 96% of its gold out of the country and admits that 1/2 has been traded.
3) France and Austria admit that their gold has been traded.
What does this all add up to? What this means that a lot of the gold the West claims it has been sold and is no longer in the possession of the LBMA (London Bouillon Bank Association). As the actual value of the US Dollar decreases, these countries will demand their gold back. But, some people calculate that there are 100 claims for every ounce of gold in the possession of Western banks. And if the LBMA is required to turn over gold, it won't be able to do so. And that is the definition of default.
Here is the latest on the US Dollar. A timely intervention drove it up - for now. The drop in value of the USD continued. Will it go lower?
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