Reason to believe the next global economic crisis will start in the East and not the West
Posted on 19 May 2013
Mirror, mirror on the wall where are the biggest bubbles of all? That is the question to ask when looking for where the next global economic crisis is most likely to erupt. It’s been five long years since the last crisis and we are about due for another. The long gap between the Asian financial crisis of the late 90s and the subprime debacle was a bit of an anomaly.
Sure the Fed appears to have saved the US from economic collapse and the death of the eurozone was greatly exaggerated. But what about the bubbles inflating in Asia today and the nationalistic governments unable to call on the moderate federalism of the US or even the eurozone to solve these problems?
Japan’s money printing
Japan is inflating its money supply three times faster than the Fed’s QE program. It is weakening the yen as intended and exporting deflation to its customers, making them less competitive. The sugar-rush effect is reflected in a booming Japanese stock market as profits from abroad will also now be higher in yen.
However, devaluation in a highly indebted economy is fraught with danger. Why hold a currency like the yen that pays almost zero interest rates if it collapsing in value? Besides the increased profits are coming to companies whose product lines are out-dated and at the cost of a ballooning money supply and inflation down the pike.
It’s also very bad news for Japan’s main trading partner China, though the response by nationalistic Chinese politicians has been to whip up public fervor over some disputed and uninhabited islands. That put a dent in Japanese car sales last year.
Of course, the situation is much worse on the Korean peninsula where the lunatics are running the assylum in the North. These guys have their triggers on nuclear weapons and can only stay in power by taking an increasingly aggressive stance.
Chinese banking crisis?
Then again the biggest threat to Asia could well turn out to be the Chinese banking system. Hedge fund manager Carson Block whose Muddy Waters Research has uncovered a series of huge financial scandals in China in recent years is now warning that the risks within China’s banking system are more severe than those in Western financial institutions before the crisis.
He told the Sunday Telegraph: ‘Our view is that China is a massive asset bubble. This puts resource-based emerging market economies and Australia, Canada and New Zealand at direct risk. A China unwind will have significant knock-on effects in other developed markets too, likely implicating liquidity and asset prices. The severity of the effects in the rest of the developed world of course partly depend on the timing of the unwind.’
Timing is the tough call, all the same. Hedge fund billionaire Jim Chanos has been shorting China for a couple of years. Still if you want to spot the next global financial crisis perhaps you should be looking East and not West.
Statistics: Posted by yoda — Sun May 19, 2013 12:27 am
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The next Great Depression is already happening – it just hasn’t reached the United States yet. Things in Europe just continue to get worse and worse, and yet most people in the United States still don’t get it. All the time I have people ask me when the “economic collapse” is going to happen. Well, for ages I have been warning that the next major wave of the ongoing economic collapse would begin in Europe, and that is exactly what is happening. In fact, both Greece and Spain already have levels of unemployment that are greater than anything the U.S. experienced during the Great Depression of the 1930s. Pay close attention to what is happening over there, because it is coming here too. You see, the truth is that Europe is a lot like the United States. We are both drowning in unprecedented levels of debt, and we both have overleveraged banking systems that resemble a house of cards. The reason why the U.S. does not look like Europe yet is because we have thrown all caution to the wind. The Federal Reserve is printing money as if there is no tomorrow and the U.S. government is savagely destroying the future that our children and our grandchildren were supposed to have by stealing more than 100 million dollars from them every single hour of every single day. We have gone “all in” on kicking the can down the road even though it means destroying the future of America. But the alternative scares the living daylights out of our politicians. When nations such as Greece, Spain, Portugal and Italy tried to slow down the rate at which their debts were rising, the results were absolutely devastating. A full-blown economic depression is raging across southern Europe and it is rapidly spreading into northern Europe. Eventually it will spread to the rest of the globe as well.
The following are 20 signs that the next Great Depression has already started in Europe…
#2 Unemployment in the eurozone as a whole is sitting at an all-time record of 12 percent.
#3 Two years ago, Portugal’s unemployment rate was about 12 percent. Today, it is about 17 percent.
#4 The unemployment rate in Spain has set a new all-time record of 27 percent. Even during the Great Depression of the 1930s the United States never had unemployment that high.
#5 The unemployment rate among those under the age of 25 in Spain is an astounding 57.2 percent.
#6 The unemployment rate in Greece has set a new all-time record of 27.2 percent. Even during the Great Depression of the 1930s the United States never had unemployment that high.
#7 The unemployment rate among those under the age of 25 in Greece is a whopping 59.3 percent.
#8 French car sales in March were 16 percent lower than they were one year earlier.
#9 German car sales in March were 17 percent lower than they were one year earlier.
#10 In the Netherlands, consumer debt is now up to about 250 percent of available income.
#11 Industrial production in Italy has fallen by an astounding 25 percent over the past five years.
#12 The number of Spanish firms filing for bankruptcy is 45 percent higher than it was a year ago.
#13 Since 2007, the value of non-performing loans in Europe has increased by 150 percent.
#14 Bank withdrawals in Cyprus during the month of March were double what they were in February even though the banks were closed for half the month.
#15 Due to an absolutely crippling housing crash, there are approximately 3 million vacant homes in Spain today.
#16 Things have gotten so bad in Spain that entire apartment buildings are being overwhelmed by squatters…
A 285-unit apartment complex in Parla, less than half an hour’s drive from Madrid, should be an ideal target for investors seeking cheap property in Spain. Unfortunately, two thirds of the building generates zero revenue because it’s overrun by squatters.
“This is happening all over the country,” said Jose Maria Fraile, the town’s mayor, who estimates only 100 apartments in the block built for the council have rental contracts, and not all of those tenants are paying either. “People lost their jobs, they can’t pay mortgages or rent so they lost their homes and this has produced a tide of squatters.”
#17 As I wrote about the other day, child hunger has become so rampant in Greece that teachers are reporting that hungry children are begging their classmates for food.
#18 The debt to GDP ratio in Italy is now up to 136 percent.
#19 25 percent of all banking assets in the UK are in banks that are leveraged at least 40 to 1.
#20 German banking giant Deutsche Bank has more than 55 trillion euros (which is more than 72 trillion dollars) of exposure to derivatives. But the GDP of Germany for an entire year is only about 2.7 trillion euros.
Yes, U.S. stocks have been doing great so far this year, but the truth is that the stock market has become completely and totally divorced from economic reality. When it does catch up with the economic fundamentals, it will probably happen very rapidly like we saw back in 2008.
Our politicians can try to kick the can down the road for as long as they can, but at some point the consequences of our foolish decisions will hunt us down and overtake us. The following is what Peter Schiff had to say about this coming crisis the other day…
“The crisis is imminent,” Schiff said. ”I don’t think Obama is going to finish his second term without the bottom dropping out. And stock market investors are oblivious to the problems.”
“We’re broke, Schiff added. ”We owe trillions. Look at our budget deficit; look at the debt to GDP ratio, the unfunded liabilities. If we were in the Eurozone, they would kick us out.”
Schiff points out that the market gains experienced recently, with the Dow first topping 14,000 on its way to setting record highs, are giving investors a false sense of security.
“It’s not that the stock market is gaining value… it’s that our money is losing value. And so if you have a debased currency… a devalued currency, the price of everything goes up. Stocks are no exception,” he said.
“The Fed knows that the U.S. economy is not recovering,” he noted. “It simply is being kept from collapse by artificially low interest rates and quantitative easing. As that support goes, the economy will implode.”
So please don’t think that we are any different from Europe.
If the United States government started only spending the money that it brings in, we would descend into an economic depression tomorrow.
The only way that we can continue to live out the economic fantasy that we see all around us is by financially abusing our children and our grandchildren.
The U.S. economy has become a miserable junkie that is completely and totally addicted to reckless money printing and gigantic mountains of debt.
If we stop printing money and going into unprecedented amounts of debt we are finished.
If we continue printing money and going into unprecedented amounts of debt we are finished.
Either way, this is all going to end very, very badly.
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Luxembourg Is Not The Next Cyprus, Not Yet, But….
FRIDAY, APRIL 26, 2013 AT 7:51PM
The Grand Duchy of Luxembourg, with a population of just over half a million, smaller even than the other speck in the Eurozone, the Republic of Cyprus, ranks in the top three worldwide in per-capita GDP. In a Eurozone wealth survey, it had the highest average household wealth – €710,100. Only Cyprus, a former off-shore banking center in the Eurozone, came close. Yet Luxembourg is threatened with ruin.
It has 141 banks – bank companies, not ATMs. One bank per 3,808 people. Most of them do private banking. The financial sector added 38% to GDP in 2010 and contributed 30% to the country’s tax revenues, according to the Luxembourg Bankers’ Association (ABBL). All due to bank secrecy and tax laws. But suddenly, after Cyprus had been massacred, Luxembourg buckled.
With the big German guns, and the smaller guns from other nations, swinging in its direction, Luxembourg agreed to participate in an international automatic data-sharing arrangement that would send banking data of foreign clients to their countries, starting in 2015. Prime Minister Jean-Claude Juncker, somewhat defensively, proclaimed that lifting bank secrecy wasn’t such a big deal, that Luxembourg didn’t live from tax evasion. For the banks, the “lights won’t go out in 2015,” he said.
During the entire Eurozone bailout debacle that he presided over until February as President of the Eurogroup, he’d proven to be time and again an inveterate optimist.
“It’s expected that only 60 to 70 banks will survive in the coming years,” declared Alain Steichen, a prominent Luxembourgian tax lawyer, at a conference about the consequences of the data-sharing agreement. He should know. Per his online profile, he “assisted Thomson in the merger acquisition of Reuters in order to form Thomson Reuters, with the group’s main holding location being Luxembourg.” He also “assisted Chase Manhattan in the merger acquisition of JP Morgan in order to form their main holding company in Luxembourg.” Yup, there are a lot of benefits to doing business through Luxembourg.
Combine bank secrecy with nominee corporations to get a particularly juicy cocktail. An entire industry of “fiduciaries” has formed around the banks for that purpose. These accounting, audit, and law firms set up and maintain tax-advantaged nominee corporations, the infamous mailbox companies, whose directors and top executives are principals of the fiduciary firm. The client and the source of money remain anonymous to the outside world. A perfect setup for money laundering. Because the bank is doing business with a Luxembourg mailbox company, not a foreigner, and because the signatories are pillars of Luxembourg’s society, the setup is impervious to the automatic data-sharing arrangement. But now mailbox companies too are under attack, not only in Europe, but also in the US Congress.
“I expect a serious change of the banking landscape because there will be customer withdrawals,” Alain Steichen explained. Some banks, he said, “would lose the critical mass needed to survive.”
The private banks he was talking about managed €300 billion in assets, generated €3.14 billion in revenues, and contributed €503 million in taxes, according to the ABBL. They employ over 10,000 people directly and indirectly. Of the assets under management, 19% are from Luxembourg, the rest from other countries. Half of that system would disappear; the survivors would have to shrink.
“A large part of the clients of the Luxembourgian banks have undeclared money,” Steichen pointed out. They wouldn’t have a lot of options other than closing their accounts in Luxembourg, he said. They might repatriate their funds – and pay fees, taxes, and penalties – or transfer their funds to Singapore, Monaco, or other murky banking centers. Either way, these assets would leave Luxembourg. Their power to generate income, jobs, and tax revenues would evaporate.
This “undeclared money” has been called “black money” in the battle over Cyprus, much of it from Russians. Northern Europe revolted against bailing out mailbox companies and their black-money bank accounts. While they were at it, Northern Europe, including France in this case, shut down the whole offshore machine, crippled the Cypriot economy, smashed its largest source of income and wealth, and demolished its business model. Encouraged by success, Northern Europe, now including the UK, swiveled its guns in direction of Luxembourg.
Luxembourg was horrified. There were too many parallels between it and Cyprus – the mailbox companies, foreign black money, a bloated financial sector, high household wealth…. It was the era of austerity when pensions, wages, and social services were on the chopping block in other countries. Taxes were being jacked up, as in France, to an absurd degree. Belts were being tightened around the poor. So, tax evasion by the rich and not so rich has become an obvious target. Governments would crack down, not on their own tax dodgers, but more conveniently on countries whose business it was to help them.
With 38% of GDP depending on the financial sector, Luxembourg could not risk a sudden “transition” to a new business model, à la Cyprus. Some of the banks could collapse in the process. It would cause a depression and shred the country’s wealth. Instead, Luxembourg would cooperate, in return for a gradual transition, some loopholes, and a little wiggle room, knowing that the good times were over, and that on the other end of the spectrum, there’d be the Cypriot scenario.
Austerity in Spain succeeded in trimming the bloated government sector. But instead of picking up the slack, the private sector destroyed jobs almost four times faster! The hope is that this fiasco will finally reverse course, that something will click and start a virtuous cycle before the unspeakable happens. But so far, it has relentlessly gotten worse.
Statistics: Posted by yoda — Sat Apr 27, 2013 2:17 am
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Why did West, Texas, build homes and a school next to a ‘time bomb’?
The town of West, Texas, and the West Fertilizer Company grew and prospered together. But profit motives, a sense of civic trust and Catch-22 zoning laws failed to recognize the danger brought to light when the plant exploded this week with the force of a small nuclear bomb.
By Patrik Jonsson, Staff writer / April 20, 2013
Ron T. Ennis/The Fort Worth Star-Telegram/AP
Some residents of this small Texas town didn’t pay too much attention to an evening fire at the West Fertilizer Company, with some grilling hot dogs on a nice spring evening in a neighborhood just across the railroad tracks from the plant.
But others received panicked phone calls, including one that said: "Y’all need to get out of there – now!"
Minutes later, in the case of one resident who scrambled toward his truck, the plant blew up, killing at least 14 people – many of them first responders – injuring 200, and destroying some 80 homes. Residents stumbling around in the aftermath described a sickening war zone – houses afire, alarms shrieking, and neighbors bloodied and prone.
But what became striking to many Americans as the tragedy unfolded and the immense power of the blast came to be understood is why anyone allowed homes, a school and a nursing home to be built next to a plant that in large quantities stores derivatives of ammonia, one of the most explosive substances on the planet?
History certainly was no guide. After all, ammonia has been the key accelerant in some of the world’s largest industrial accidents, including an explosion that killed hundreds in Toulouse, France, in 2001, and a 1947 blast that killed nearly 600 people in Texas City, Texas. The bomb assembled and planted by Timothy McVeigh next to the Alfred P. Murrah Building in Oklahoma City in 1995 was fueled primarily by ammonium nitrate.
A 2008 report by the Center for American Progress called a Pasadena, Texas, fertilizer plant one of the most dangerous chemical plants in the country, since an accident there could make more than 3 million people vulnerable to a major gas release.
Against that backdrop, the question of why so close, at least in part, cuts to the heart of the civic pact of many American towns, both large and small, where industry and people forge a sort of mutualism that recognizes the symbiotic benefits of labor and profit, and fuels civic pride. After all, small towns from upstate New York to the Texas Panhandle have a similar motif, where a few industries, often near or in town, infuse economic vitality and give young people a reason to stay.
"There’s a close bond between employer and community and a level of acceptance that emerges over time, almost an assumption that, well, nothing has happened in the past, therefore everything should be okay," says Bob Bland, chairman of the Public Administration Department at the University of North Texas, in Denton. "[But] there’s also something more subtle … a social bond that occurs where the company, factory or plant to some extent defines the social fabric of the community. There’s a mutualism that goes beyond just the jobs the company creates."
In West’s case, the plant, owned by the local Adair family, was built in 1962 at the edge of a farming community settled in 1892 by emigrant Czechs. As the years went by, the town grew out, past, and around the plant, in a careful embrace underscored by a recognition among at least some in town that danger was ever-present.
One resident watching the fire said a plume of yellow smoke that suddenly erupted was a signal that the ammonium was about to go, an accurate prediction as it turned out. Meanwhile, the plant had been cited as late as 2010 for problems with ammonia venting and for the failure to have a complete emergency plan. Meanwhile, the US inspection protocol for such plants isn’t the most intensive, in part because states are primarily responsible for inspections: The US Occupational Health and Safety Administration, meanwhile, has inspected only six Texas fertilizer plants in the last five years.
An agency called the Pipeline and Hazardous Materials Safety Administration, however, did inspect and cite the West plant in 2011 for "not having a security plan." After the plant corrected the problems, a $10,100 fine was reduced to $5,250. Before that, the plant had received a $30 fine in 1985 in connection to how it stored anhydrous ammonia at the plant.
The federal Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is in the process of determining if there was foul play, but so far there’s no evidence of anything but an industrial accident.
Plant owner Donald Adair, who lives in West, lauded the community’s resilience and vowed to work with investigators to find the cause of the fire in a statement released Thursday.
"The selfless sacrifice of first responders who died trying to protect all of us is something I will never get over," he wrote. "I was devastated to learn that we lost one of our employees in the explosion. He bravely responded to the fire at the facility as a volunteer firefighter. I will never forget his bravery and his sacrifice, or that of his colleagues who rushed to the trouble."
In the aftermath, US Sen. Jon Cornyn (R) of Texas said the US may have to look at new regulations around the storage of ammonia products, and others called for stronger zoning laws that would mandate separating chemical storage sites and plants from people.
"[S]ometime soon, the state and federal governments will have to mandate a review of these decisions and others like them across rural America and take corrective action. We cannot have people living and going to school next to sub-nuclear ticking time bombs," writes Tod Robberson of the Dallas Morning News editorial board.
Paul Kucera lives close to the plant, but somehow his home was largely spared. Homes belonging to three other family members, however, were completely destroyed. But like most West residents, Kucera exhibited no animosity or anger toward the plant owner or town officials who allowed construction so close to an explosives storage site.
Instead, he saw the danger as a natural tradeoff of rural farming existence, where danger is always a factor amid killer tornadoes, whirring threshers, pipelines and gas storage facilities necessary to survive on America’s rural fringe. In the case of the West Fertilizer Plant, its very products boosted the fertility of both crops and the economy.
"That plant was part of our town and what happened is part of living in a farming town," Kucera says. "You accept a certain level of risk, just as people living in cities do."
But even if town planners in West (who do have a land use plan filed with the state) wanted to mandate a buffer around the West Fertilizer Company plant, they may not have been financially able to do so, suggests Mr. Bland at UNT.
Texas law, to be sure, gives local zoning authorities broad powers to set land use rules, but the US Supreme Court has also ruled that landowners can petition governments for remuneration if zoning decisions negative affect property values.
"So, in West, it would have made sense to zone [the land around the plant] as open space, but can a little town like West, never mind a big city like Atlanta, have the resources to pay landowners for their losses?" says Mr. Bland, at UNT.
Moreover, Bland says, zoning officials may have had to stand on their own if they wanted to mandate a buffer around the plant.
"Oftentimes the strongest opponents to zoning and land use control are local residents, who anticipate benefiting from investment in various types of land – it’s a no good deed goes unpunished kind of thing," he says. "All of that means it’s very difficult to put into place the sort of policies that will provide optimum level of protection, which in hindsight should have been done here."
Statistics: Posted by yoda — Sat Apr 20, 2013 10:32 am
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Recent Stunning Gold Plunge vs 1970s & What To Expect Next
CHECK OUT THE CHARTS WITH THIS ARTICLE THEY SHOW EXACTLY HOW SIMILAR THIS BULL MARKET IS TO THE ONE IN THE LATE 1970S AND EARLY 80S. GO TO:
http://kingworldnews.com/kingworldnews/ … _Next.html
Today top Citi analyst Tom Fitzpatrick’s team sent King World News two tremendous gold charts and important commentary comparing the recent plunge gold to what was seen in the 1970s. KWN is pleased to share this information with with our global readers as well as they expect next. Below is what top Citi analyst Fitzpatrick’s team had to say in their latest report, along with 2 powerful charts.
Fitzpatrick’s Team: “While we remain structurally bullish gold in the medium-term, there is no doubt that the price action of recent days has to be of concern. While we do not believe this is a ‘trend change,’ we need to respect the breaks seen and what they could suggest near-term.
There is a danger that even lower levels on gold than those seen in recent days could materialize in the days/weeks ahead.
Gold has clearly broken the (following):
*Base of the “consolidation” that had been in place since Sept 2011.
*Base of the channel in place since 2001.
*The 200 week moving average.
While we do not yet know if it will close the week below the 200 week moving average ($1,435), it is the first time it has traded below that support since January 2002. In addition, the present break could be construed as a double-top with the break below $1,526. The target for that break would be for a move towards $1,260. Such a move would equate to a high to low drop of about just over 34% (or $1,260)…
.“We have only once seen a drop of that magnitude in gold since the turn off the 1999-2001 lows. That was between March and October 2008 when gold fell just over 34%. Additional long term support (not shown on the chart below) is met at the 55 month moving average at $1,351.
Apart from the major turn in 1980 that saw gold fall from around $850 to a low of $253 in August 1999, the largest correction we have seen was in the 1970-1980 bull market. Between 1975 and 1976 as the equity market bounced sharply, gold had a high to low fall of about 44% before multiplying over 8 times in the following 3 1/2 years.
That period in 1976 was also the only period in that bull market (outside the turn after the 1980 peak) that saw gold retrace below its 55 month moving average. It traded 14% below that average in August 1976. 14% below the 55 month moving average today stands at $1,162, while a 44% fall off the peak would equate to $1,075.
So where does that leave us? During the correction in the 1970’s gold remained under pressure while the Equity market rally continued. However, once the Equity market corrected lower in 1976-1978, gold re-established its uptrend. At this point we are not necessarily convinced that the equity market continues to power higher from here, so a correction lower of that magnitude in gold does not look to be the base case scenario.
We are more focused on the fact that the double-top suggests a correction more in line with that seen in 2008 with its double-top targeting an almost identical move of just over 34% high-to-low. As a consequence, while we remain below the $1,520-$1,526 area, a move towards $1,260 cannot be ruled out. That potential would increase if we saw a weekly close below the 200 week moving average at $1,435.
In addition it is worth noting that we are seeing a number of markets (as well as economic data) follow a path very similar to this period in 2012. That period saw a sharp fall in gold from late February into the year’s low on May 16th, 2012. That became a platform for those losses off the 2012 high to be regained by October that year.
So while we remain below the important pivots mentioned above, the answer to our title seems to be … somewhere close to $1,260 by May (if not earlier) looks to be the “buy zone.”
King World News note – The key takeaway from this piece is just like Fitzpatrick’s team is pointing noting here, after gold ended its mid-cycle correction in the 1970s, the price of gold went up more than a staggering 8 times in price in just 3 1/2 years. As Jesses Livermore said, “Be right and sit tight.”
Statistics: Posted by DIGGER DAN — Wed Apr 17, 2013 12:20 am
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Urgent: Historic Gold Crash. What To Expect Next …
Larry Edelson | Monday, April 15, 2013 at 5:10 pm
I’ll get right to the point …
First, gold’s historic collapse — losing as much as $233 in just the last four trading days, a whopping 14.7 percent … and $565, or 29.44 percent since its high in 2011 — is NOT over.
Second, expect a bounce to soon occur, but don’t buy into it. If you do, you will likely lose a bundle of money as gold heads even lower.
The same advice applies to silver, to copper, to platinum, to palladium, to crude oil and more. Their interim-bear markets are not over, not by a long shot. Ditto for natural resource stocks.
For now, I’ll confine this update largely to gold. I want you to have the important system support levels for gold from my trading models. That way, you will have a road map.
I’ll cover these technical levels first, then I’ll briefly review the fundamental forces driving gold lower.
Gold’s major support levels now lay at …
— $1,380. Gold is currently below that level.
Each of the above levels should temporarily hold once they are hit. But the operative word is “temporarily.” Based on my system models, gold will likely not bottom until it hits major long-term support at $1,028.
As for overhead resistance, there is plenty. For any bounce that soon comes into play, expect resistance to form at the $1,380 … $1,412 … and $1,458 levels.
As for the fundamentals driving gold (and other commodities) lower, they are the same forces I’ve been telling you about for many months now …
First, central bank money-printing has lost its impact on the markets. Why? Very simply put, there’s too much bad debt floating around the globe and there’s simply no way central bank money-printing can offset it.
Second, austerity measures in Europe and the United States are also overpowering the inflationary impact of money-printing.
Third, and most importantly in my view, the Cyprus confiscation of uninsured depositor money has completely turned the world upside down. Money is no longer safe in a bank in Europe.
That, in turn, is causing hundreds of billions of dollars to essentially go into hiding. But not in gold, which is subject to confiscation, real or imagined.
Instead, capital is largely going into cash, which is also bullish for the U.S. dollar, since it’s still the world’s reserve currency.
Fourth, Japan’s new aggressive policy to devalue its currency is also not bullish for gold. Japanese investors are plowing their money instead into their own stock market, and my sources tell me loads of Japanese capital is also fleeing to our stock market.
In fact, much of the selling in gold originated in Japan. It was just a week ago that gold hit a record new high in yen terms, due to the depreciating Japanese currency.
But instead of lining up to buy gold, Japanese investors queued up at gold dealers around the country dumping every ounce of gold they could get their hands on, even melting down jewelry.
Why? Japanese investors don’t trust their own government, and if push comes to shove with North Korea, Japanese investors want their money liquid and mobile. That means cash, not gold.
In essence, we are seeing what I call “Money on the Run” and its momentum is picking up, in Europe and in Japan. Panicked capital is going into hiding, but in cash and equities in the U.S. and Japan, not in gold.
Later, when everyone realizes that Washington has many of the same problems that Europe and Japan has, all of the above fundamental forces will flip back to the bullish side for gold.
But that time is not here yet.
In my special Money and Markets issue of April 3, and in earlier columns, I suggested hedging any metals or mining shares you owned via purchases of the inverse ETFs, the ProShares UltraShort Gold ETF (GLL) and the Direxion Daily Gold Miners Bear 3x Shares (DUST).
I also recommended the ProShares UltraShort Silver ETF (ZSL) for a play on silver’s downside.
If you acted on any of those suggestions, you’re sitting pretty. Hold those positions and stay tuned for further updates.
Statistics: Posted by DIGGER DAN — Tue Apr 16, 2013 10:40 am
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The next domino: Australia doubles tax on retirement savings
by SIMON BLACK on APRIL 8, 2013
Though Australia’s national balance sheet is comparatively quite strong, the government has been running at a net deficit for years… and they’re under intense pressure to balance the budget.
The good news is that Australia now has a goodly number of investor-friendly immigration programs designed to bring productive foreigners into the country, similar to the trend we’re seeing across Europe.
On the flip side, though, the Australian government has just announced new rules which penalize citizens who have responsibly set aside savings for their own retirement.
Any income over A$100,000 drawn from a superannuation fund (the equivalent of an IRA in the United States) will now be taxed at 15%. Previously, all such income was tax-free.
The really offensive part about this is that the government is going to tax people’s savings ‘on both ends,’ meaning that people are taxed on money they move INTO the retirement fund, and now they can be taxed again when they pull money out.
The Cyprus debacle drew a line in the sand– fleecing people with assets, or income, in excess of 100,000 dollars, euros, etc. is now acceptable. This is the definition of ‘rich’ in the sole discretion of governments.
And make no mistake– if it can happen in Australia, which still has reasonable debt levels despite years of deficit spending, it can happen in bankrupt, insolvent nations like the US.
As you may know, US tax code allows for several different types of retirement accounts… and there has been a lot of talk lately about a ‘Roth conversion’.
This is to say that a US taxpayer can convert his/her traditional IRA to a Roth IRA. And the implications are enormous.
A traditional IRA is not taxed on the way in, but it’s taxed on the way out. So if you contribute $3,000 annually to your IRA, you won’t pay income tax on that $3,000. But the accumulated retirement savings is taxed in the future when you withdraw the funds at retirement.
Conversely, contributions to a Roth IRA are taxed each year with the rest of your income. But the accumulated savings are NOT taxed when you withdraw the funds at retirement.
A few years ago, Congress inked a deal to allow US taxpayers to CONVERT their traditional IRA to a Roth IRA. In doing so, Americans were allowed to pay tax on the accumulated gains in their traditional IRA up through that point, then switch to a Roth.
Congress was essentially saying, “We promise that we will only tax you now in exchange for not taxing you later.”
It certainly begs the question: How much do you trust your government?
Can we really expect the country that has racked up more debt than any other in the history of the world to keep its word? Can we really expect that 5 or 10 years from now, they won’t make another grab for cash?
If the Australian government can unilaterally change the rules and start double-taxing retirement accounts, so can the US. And the trillions of dollars in retirement savings in the Land of the Free is far too irresistible for them to ignore.
Statistics: Posted by DIGGER DAN — Mon Apr 08, 2013 6:55 pm
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Dodd–Frank Act, FDIC, One world government
Is U.S. and U.K. the next Cyprus?
- Marinka Peschmann
Saturday, March 30, 2013
While you were sleeping, leaders of the so-called “free world” have been actively transforming their financial systems and now it appears that everybody’s bank account is fair game.
Could the U.S. and the U.K. become the next Cyprus where private bank deposits are seized to recapitalize failed banks? According to a report written by the Federal Deposit Insurance Corporation (FDIC) and the Bank of England called: “Resolving Globally Active, Systemically Important, Financial Institutions,” the answer is yes.
The 15-page report, dated December 10, 2012, was written, according to its executive summary, to address: “the importance of an orderly resolution process for globally active, systemically important, financial institutions (G-SIFIs),” after the 2007 financial crisis. Since then the United States and the United Kingdom have been working together to develop resolution strategies that could be applied to their respective largest financial institutions.
The following comes from page 3, Section 12 and 13 of the report:
12. Under the strategies currently being developed by the U.S. and the U.K., the resolution authority could intervene at the top of the group. Culpable senior management of the parent and operating businesses would be removed, and losses would be apportioned to shareholders and unsecured creditors. In all likelihood, shareholders would lose all value and unsecured creditors should thus expect that their claims would be written down to reflect any losses that shareholders did not cover.
Under both the U.S. and U.K. approaches, legal safeguards ensure that creditors recover no less than they would under insolvency.
13. An efficient path for returning the sound operations of the G-SIFI to the private sector would be provided by exchanging or converting a sufficient amount of the unsecured debt from the original creditors of the failed company into equity. In the U.S., the new equity would become capital in one or more newly formed operating entities. In the U.K., the same approach could be used, or the equity could be used to recapitalize the failing financial company itself thus, the highest layer of surviving bailed –in creditors would become the owners of the resolved firm. In either country, the new equity holders would take on the corresponding risk of being shareholders in a financial institution. Throughout, subsidiaries (domestic and foreign) carrying out critical activities would be kept open and operating, thereby limiting contagion effects. Such a resolution strategy would ensure market discipline and maintain financial stability without cost to taxpayers.
In the event of a bank failure, if taxpayer money is not used to bail the bank out, and the bank is not allowed to fail, then like what happened to Cyprus depositors, U.S. and U.K. bank deposits (unsecured debt, the new shareholders) could be seized to re-capitalize the bank.
How could what happened to Cyprus be allowed to possibly happen in the U.S.? The credit goes to the Dodd-Frank Wall Street Reform and Consumer Protection Act that President Barack Obama signed into federal law on July 21, 2010.
Sponsored by former Financial Services Committee Chairman Barney Frank (D-Mass) and in the Senate Banking Committee by former Chairman Chris Dodd (D-Conn.), the 2000-page bill that “fundamentally reshaped the financial system” was passed with six Republican votes.
As the Resolving Globally Active, Systemically Important, Financial Institutions report explains on pages 3-4 Section 14 and 15:
Legislative frameworks for implementing the strategy
14. It should be stressed that the application of such a strategy can be achieved only within a legislative framework that provides authorities with key resolution powers. The FSB (Financial Stability Board) Key Attributes have established a crucial framework for the implementation of an effective set of resolution powers and practices into national regimes. In the U.S., these powers had already become available under the Dodd – Frank Act In the U.K., the additional powers needed to enhance the existing resolution framework established under the Banking Act 2009 (the Banking Act) are expected to be fully provided by the European Commission’s proposals for a European Union Recovery and Resolution Directive (RRD) and through the domestic reforms that implement the recommendations of the U.K. Independent Commission on Banking (ICB), enhancing the existing resolution framework established under the Banking Act. The development of effective resolution strategies is being carried out in anticipation of such legislation.
15. The framework provided by the Dodd–Frank Act in the U.S. greatly enhances the ability of regulators to address the problems of large, complex financial institutions in any future crisis …
While Canadians demand answers from their leaders (see Judi McLeod’s Is Canada the next Cyprus?), now Americans and the British must also demand answers from theirs. If explanations are not forthcoming is it safe to say that the warnings in the scriptures (Rev. 13) are coming true, and we are on the verge of entering the era of one world government? If so, prepare accordingly. You have been warned.
Statistics: Posted by yoda — Sat Mar 30, 2013 12:11 pm
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Is anyone in Ottawa doing anything to protect Canadian sovereignty and resources from elected tyrants?
Is Canada the next Cyprus?
- Judi McLeod Friday, March 29, 2013
It’s Good Friday and a government holiday in Ottawa.
No point trying to reach Canadian Finance Minister Jim Flaherty today. So rather than wait until Monday, Canada Free Press (CFP) is posing this cliff-hanger question:
“Is that a Cyprus-style “Bail In” proposed in the newly-minted 2013 budget?”
That’s what economic gunslingers on both sides of the border and dozens of letters to the editor are charging.
What began as a rumble is growing into an ear-splitting cacophony—and the Canadian government should post a truthful, detailed and in-plain-English explanation on its website.
If Canada is going the same direction as Cyprus and the European Union, we need to know as soon as possible.
The concept of a Canada taking money from unknowing bank depositors is not just within the realm of hysteria and hype.
Not when Page 144 of the 2013 Canadian budget states: “The Government also recognizes the need to manage the risks associated with systemically important banks—those banks whose distress or failure could cause a disruption to the financial system and, in turn, negative impacts on the economy. This requires strong prudential oversight and a robust set of options for resolving these institutions without the use of taxpayer funds, in the unlikely event that one becomes non-viable.
Translated, Without the use of taxpayer funds means via depositor funds???’ asks one CFP letter to the editor writer.
A fair question In a world where western governments are now stealing and coveting the money of small bank depositors.
Back to the budget and the meat of the provision on Page 145: “The Government proposes to implement a bail-in regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital.
“This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada.
“Implementation timelines will allow for a smooth transition for affected institutions, investors and other marked participants…”
Readers can view in full detail the bail-in provision in Canada’s 2013 budget on pages 144, 145.
Mr. Flaherty, all need to know how the Canadian bank ‘bail-in’ regime differs from what is happening in Cyprus and being contemplated in the Euro region which some see as a blueprint for the United States of America.
And as untold numbers of people with money in Canadian banks are now asking: “Are my bank deposits really safe?”
The Canadian Government owes the answer to Canadians and depositors from any number of other countries.
While we’re in question mode, Mr. Flaherty, shouldn’t government accountability include warnings to the populace that if the United States of America economy fails, it will pull Canada down with it?
Too many forget that when Barack Obama nationalized General Motors, Ottawa and Ontario contributed $13.7 billion to help bail out North American automakers GM and Chrysler in 2009, and combined own about 9 percent of GM’s common shares.
Canada lives next door to a country whose president promises to fundamentally transform. Now that Obama publicly is operating unconstitutionally and getting away with it, is anyone in Ottawa doing anything to protect Canadian sovereignty and resources from elected tyrants?
No one, including the Republicans, is stopping Obama from systemically destroying America.
Are we in line for the same fate in Canada?
Waiting respectfully for your answers, Mr. Flaherty.
Statistics: Posted by yoda — Fri Mar 29, 2013 9:54 am
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The Robot Reality: Service Jobs Are Next to Go
Published: Tuesday, 26 Mar 2013 | 12:39 PM ET
By: Blaire Briody, The Fiscal Times
If you meet Baxter, the latest humanoid robot from Rethink Robotics – you should get comfortable with him, because you’ll likely be seeing more of him soon.
Rethink Robotics released Baxter last fall and received an overwhelming response from the manufacturing industry, selling out of their production capacity through April. He’s cheap to buy ($22,000), easy to train, and can safely work side-by-side with humans. He’s just what factories need to make their assembly lines more efficient – and yes, to replace costly human workers.
But manufacturing is only the beginning.
This April, Rethink will launch a software platform that will allow Baxter to do a more complex sequencing of tasks – for example, picking up a part, holding it in front of an inspection station and receiving a signal to place it in a "good" or "not good" pile. The company is also releasing a software development kit soon that will allow third parties – like university robotics researchers – to create applications for Baxter.
These third parties "are going to do all sorts of stuff we haven’t envisioned," says Scott Eckert, CEO of Rethink Robotics. He envisions something similar to Apple’s app store happening for Baxter. A spiffed-up version of the robot could soon be seen flipping burgers at McDonalds, folding t-shirts at Gap, or pouring coffee at Starbucks.
"Could [Baxter] be a barista?" asks Eckert. "It’s not a target market, but it’s something that’s pretty repeatable. Put a cup in, push a button, espresso comes out, etc. There are simple repeatable service tasks that Baxter could do over time."
(More From The Fiscal Times: The Rise of Robots and Decline of Jobs)
Companies might not need to wait for a more advanced version of Baxter – MIT already has a BakeBot that can read recipes, whip together cookie dough and place it in the oven. The University of California at Berkeley has a robot that can do laundry and fold T-shirts. Robot servers have started waiting tables at restaurants in Japan, South Korea, China and Thailand – and just last week, a robot served Passover matzah to President Obama during his trip to Israel.
"Every year, machines are getting more capable of doing low-level tasks," says Professor Seth Teller, a robotics researcher at MIT’s Computer Science and Artificial Intelligence Lab.
The Great Job Transformation
Many experts worry about what robots in the service sector could do to employment. The national unemployment rate remains at 7.7 percent – not remotely close to the 4.7 percent unemployment in 2007 before the recession. Job growth isn’t expected to return to pre-recession levels until 2017, and the recent sequestration could easily derail it. Manufacturing has already shed nearly 6 million jobs since 2000.
"When machines and robots start taking over service sector jobs, that’s when we’ll really start to notice," says Martin Ford, robotics expert and author of The Lights In the Tunnel: Automation, Accelerating Technology and the Economy of the Future. "If you’re making hamburgers or Starbucks drinks, that’s really just high manufacturing."
(More From The Fiscal Times: The Robot Revolution: Your Job May Be Next)
What’s worrisome to Ford is that these jobs have been offering a huge safety net to the middle class. They’re jobs he calls "the jobs of last resort." When someone can’t find a salaried job, they look for lower-paying service jobs to get by – and because the jobs typically have a high turnover rate, they’re more likely to be available. Think of all the college graduates who take jobs as cashiers or baristas before they find salaried work. If those jobs were to vanish, those workers would be forced to file for unemployment instead."
Retail and service industries are the largest employers in the U.S., accounting for nearly 20 percent of total employment in 2011, according to the latest data available from the BLS. The retail sector employs nearly 14.8 million people, with Walmart employing 10 percent of them. On top of that, one in five retail workers are the sole income earners in their household. The U.S. restaurant industry employs 9.5 million people, and nearly 50 percent of all adults have worked in the restaurant industry at some point in their life, according to a 2012 report from the Workforce Strategies Initiative at the Aspen Institute. Compare these numbers to the tech job "boom" at companies like Facebook, Apple, Amazon and Google – and you get a mere 190,000 people.
Restaurant work also supports aging boomers as they transition out of the workforce – 12 percent of restaurant workers are 55 and older. "Many older Americans have fallen back on jobs in the restaurant industry, as they seek to transition to a new career or are simply unable to find other work," write the authors of the Aspen Institute report.
Robot Lifeguard to Debut on Connecticut Beach
This summer, lifeguards at one Connecticut beach will be getting an assist from a robot known as Emily, which can reach a troubled swimmer far faster than a lifeguard. Ryan Hanrahan reports.
Teller at MIT argues that economic disruption from technology is nothing new – we’ve seen it before with inventions like the cotton gin, the automobile, and the personal computer. "One way to frame this is robots are taking human jobs away, but technology has, throughout history, transformed the nature of human jobs," he says. "As machines get more capable, they take on functions that were previously performed by people. There’s a displacement, certainly, but we’re still seeing this transformation play out, so you just don’t know whether there’s going to be a net gain or a loss [of jobs]."
According to Teller, Baxter and other robots could create jobs in new industries we haven’t even envisioned yet. The PC, for example, eliminated plenty of jobs while creating millions of others. And he has a point – Baxter is creating some jobs. Rethink Robotics employs 85 people at their Boston headquarters that would’ve never existed without Baxter – though most are high-level engineers, designers and salespeople.
(More From The Fiscal Times: Ten Jobs That Won’t Be Taken By Robots…Yet)
At the factories that are buying Baxter, employers now create robot "managers" to oversee Baxter. Baxter is also made in the U.S., and Rethink employs some 100 people in factories and distributors – though in an ironic twist, they’re already planning to use Baxter to help build Baxter.
As robots move into other sectors and the home, Teller says the job opportunities are abundant. Robot IT and maintenance personnel, designers and salespeople for robot accessories, software, and apps, and robot security developers are just a few examples. "If personal robots are the next thing and everyone wants one in their house, doing the laundry and unloading the dishwasher, we’re talking about another decade of massive economic activity," says Teller.
The PC, however, also created a decade of economic wealth – but the wealth has largely stayed at the top. Facebook, Apple, Amazon and Google don’t employ many people, relatively speaking, but they have about 6.25 percent of the market cap of all U.S. companies. Yes, PCs have created IT jobs and software developers, but the tech industry is small compared to retail and restaurant industries. Computer and mathematical jobs make up about 3 percent of the labor force, according to the BLS, and require advanced degrees and years of training. Will the U.S.’s higher education system be prepared for massive retraining? Will service employees have the time and resources to learn new skills? Will enough high-skill jobs be available for them? No one is quite sure where they’ll go when robots like Baxter push them out.
Erik Brynjolfsson, director of the MIT Center for Digital Business and co-author of Rise Against the Machine, has been warning economists about the coming job disruption for years. "Technology doesn’t automatically lift the fortunes of all people," Brynjolfsson said recently to a crowd at Wharton University in San Francisco. "Profits [in the U.S.] have never been higher, innovation is roaring along, GDP is high, but job creation is lagging terribly, and the share of profits going to labor is at a 60-year low. This is one of the most important issues facing our society."
Statistics: Posted by yoda — Tue Mar 26, 2013 12:50 pm
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