Sunday, April 23, 2017

Central Banks Massive Incursion Into Buying Stocks / By: Bruce Wilds

One indication of just how messed up and flawed the global markets have become is reflected in the way central banks across the world are now buying stocks. This has become a part of their response to correcting the forces of past excesses. Their incursion into this bastion of the free markets signals we have entered the era where true price discovery no longer exist. The central banks are often viewed as price insensitive buyers so this incestuous influx of money is in some ways the ultimate distortion. This is especially true when the markets are not deep enough to accommodate the size of these purchases. Over the years global currency reserves have grown and this has increased pressure on central-bank managers to diversify them moving from being a liquidity manager to focusing on investment management but with this comes risk.

A recent article in the Wall Street Journal details the reason behind why central banks are buying stocks. There are several forces driving this. Part of it is a hunt for higher returns, because of negative rates, nearly $11 trillion, or roughly one-quarter, of global fixed-income assets yielded below zero at the end of 2016, according to Bank of America Merrill Lynch. This means some are investing a bigger share of their growing foreign-exchange reserves in equities, corporate bonds, and other riskier assets while others are doing so merely to prop up their stock market in an effort to create a wealth effect hoping it will cause consumers to feel better and go out and spend which will propel the economy forward. This should not be confused with buying  foreign currencies or with quantitative easing programs, under which central banks like the Federal Reserve have already bought trillions of dollars worth of assets to boost growth and inflation.

China Is Adding Huge Amounts Of Liquidity
While the QE programs of the European Central Bank, Bank of England and Bank of Japan have been involved in buying riskier assets each with the currency that they themselves print this it taking things to a new level. One thing I found telling is a statement in the article that many central banks are hiring outside managers to handle the nontraditional assets in their portfolios. It went on to claim this presented an opportunity to a financial industry struggling with stagnant revenue growth but this in not the job of central banks. I find this frightening because the stock market and financial sector has already far out preformed Main Street.

All this feeds into speculation or can even be interpreted as a confirmation the stock markets are indeed rigged and that any fall is merely a signal for them to rush in and buy more. Doing so accomplishes two things, it bolsters and supports current holdings while reinforcing the image markets are climbing higher because our economic future is getting brighter. All this comes at a price and leaves many economy watchers wondering where this leads. This was apparent in a comment made by a reader on another site who looked ahead and questioned the end game of this intervention. When the central banks own all or a majority of stocks will they begin to appoint new management working under their control?

Buying Both Stocks And Bonds Japan Masks Reality
One thing is clear, the central bank's large foray into stock ownership represents more than just a moral hazard and in many ways, it paves the way for a liquidity crisis in our future. Much like the negative interest rates of recent years this action takes us further down the path towards a "liquidity trap," a term that can be baffling and difficult to understand. This term has been used by Allen Greenspan and a few others, it represents a huge problem for the economy. It can have several components, but sooner or later all of them feedback into a loop that disrupts the flow of credit and impacts the real economy. 

The tip of the spear may turn out to be the currency markets where each day trillions of dollars slosh back and forth as traders fight for even a fractional move in their favor. Consider how destabilizing currency swings can be it is easy to see how they could obliterate the global economy. We must remember officials in less-developed nations where large currency reserves sit often use the printing press to buy foreign assets and at the same time cheapen their currency. Some developed central banks such as the Swiss National Bank often accumulate foreign reserves precisely because they want to keep their currency from getting too strong, which would harm exporters and weaken prices. This helps support my theory that for some time the big central bankers are busy manipulating currencies so they trade in a narrow range that will not rock the boat.

Over the years the central banks appear to have taken turns in rolling out injections into their economy's and each time their actions have spilled across porous financial borders carrying markets in one direction or another. This continues to desensitize markets to reality. This creation of stimulus in one form or other by major central banks is their answer to correcting past excesses, simply put they still are struggling to deflate credit bubbles they allowed to form in the past. Japan is viewed by many as trapped in such a situation following a massive credit bubble in the early 1990s they have attempted time and time again to shake off a hangover that has manifested itself in deflation and slow growth. By not addressing the real cause Japan's government and the BOJ now find they are forced to buy both bonds and stocks at an alarming rate just to reassure the Japanese people all is well.

Today China by all measurements is facing the mother of all credit bubbles and addressing it with the same failed policy's we have seen before. This is where I point out any false market can be viewed as a bubble that cannot survive. Simply put, at some point the return on loaning money to banks, governments, and others is simply not worth the risk! Bastardizing the stock market so that it no longer reflects true price discovery will eventually mean investors will begin to perceive it as just another false scheme that is held together only by promises made by a government they can no longer trust. Why do you want to invest or loan money if most likely you will never be repaid or repaid with something that is totally worthless? When this happens the only safe place to store wealth will be in "tangible assets" and the central banks will be left printing fiat money that nobody wants.

Thursday, April 20, 2017

Euthanasia Opens Path To A Dignified Death / By: Bruce Wilds

Few people paid attention when a recent change in the law made it easier to obtain a physician's help in ending your life in Canada and many of those who did take note voiced concern or even outrage. One of the most controversial issues and something that is seldom discussed today is the matter of people having the right to determine when they want to die. This includes both society not only respecting that right and allowing it to take place. Most people would prefer to live a long life, but not too long. In coming years do not be surprised to see more people embrace the attitude that there is nothing wrong with a dignified death after a long life. What is far beyond those markers is the right for total determination, possibly the reason the first idea is taboo could be it might open the floodgates and allow the idea of total determination to edge towards acceptance. 
Hospice Care Is Widely Accepted, Euthanasia Is Not!

Clearly, the mores of America and our culture are rapidly changing this can be seen by the capitulation of those who only a decade ago thought that gay marriage and gays in the military would never become accepted. Sadly ideas like euthanasia and even discrete breastfeeding in public still drive many Americans crazy. Weather you agree or disagree with the idea of euthanasia it is destined to become a major social issue in coming years. In part this is linked to the economics of extending the lives of the elderly and the great cost of doing so.

With people living longer and technologies ability to extend a person's life well beyond where they feel it has any "real quality" the issue of euthanasia will not go away. A big problem with the Universal Health Care model in the United States is that we have a much more death-averse and drug-centric mentality than any other nation working such a system. Americans, generally, expect to receive the latest advances in life extension therapies and life-enhancing drugs. A completely different ideology will have to be established in the relationship between our population and the medical community for this to function in a cost effective way. Accepting death as part of the natural order would go a long way in solving many of the problems. I contend that a person of reasonably sound mind should have the right to say, "I have had enough! End my life Now!"

In the United States, with its culture of optimism and its religiosity, many people want to postpone dying at any cost often including that of pain. Why religious people tend to feel this way is unclear. For some Christians, dying in pain is welcomed or at least endured because it makes them feel closer to Christ. Others believe that the decision as to when a person dies is reserved to God, this is the stated basis of the official Catholic position that sees suicide as a mortal sin. But not all Americans feel that way and many people who are suffering acutely, anticipating suffering acutely, or find themselves lonely or depressed may want to die. Watching an elderly loved one die in pain from an incurable illness or watching a life cut short without notice can bring many issues into focus. The last few grains in an hourglass always seem to rush by faster, we should never take for granted how many good years we have left.

Confronting our own mortality sooner rather than later is conducive to living a better and more balanced life, mortality influences our values and feelings about everyday life. Recent opinion polls show many people want laws changed to allow people to get medical help to die. The word "euthanasia" was first used in a medical context by Francis Bacon in the 17th century, it refers to a painless and peaceful death, during which it was a "physician's responsibility to alleviate the physical sufferings of the body." Physician-assisted suicide is now legal in Belgium, Colombia, Luxembourg, the Netherlands, Switzerland, and several U.S. states (Montana, Oregon, Vermont, and Washington). It is quasi-legal in France and tolerated in a number of countries in which it continues to be illegal. Where euthanasia is allowed checks and balances exist to protect against coercion and decisions make by a person depressed or not of sound mind.

Teaching and thinking about death without heavy religious connotations often sheds more insight onto life and strips away illusions of one's immortality. Current governments laws are in conflict with the changing views of many citizens. Some people who want to die commit suicide, but others do not out of fear that their attempt will fail and leave them even worse off than before, or because they lack confidence that they can kill themselves discreetly and painlessly. Suicide also carries a huge social stigma, because of the public character of a suicide one cannot dispose of one’s own corpse. People who want to die often shy away from committing suicide because of these issues. Even if one argues that by their inaction they actually are choosing to live many would be far better off if they could deal with their problems in an open way.

Suicide Carries With It A Stigma And Possibility Of Failure
In the case of physician-assisted suicide, the "stigma cost" of suicide is reduced or disappears, because if a person who wants to die is allowed to chose a lawful form of medical “treatment,” this signals that suicide is acceptable at least when a physician oversees the act. The religious people whom I mentioned will not be assuaged; but religious people shouldn’t be permitted to impose their sectarian values on others, including both religious and non-religious people, who do not share the abhorrence that some religious people feel toward suicide.

The biography of distinguished federal court of appeals judge Henry Friendly reports that he committed suicide in his 80s because, suffering from a variety of ills that were not disabling and did not prevent him from doing his judicial work, he was afraid that he would become disabled and when that happened he would be unable to end his life though desperately eager to do so. If able to pre-arrange a painless physician-effected death to occur when he reached a specified stage of disability, he would not have killed himself when he did. I use this example because this man was not considered a "flake or unhinged" but what most of us would consider normal. One thing is clear and that is even where the decision to end your life is available it is limited and governed so that a person can't just walk into a clinic and end it all without some thought and while in a one-time deep state of depression.

In my opinion, we will sooner or later willingly or be pushed into excepting euthanasia partly because of the rising cost of caring for the elderly. Expect the debate to continue, however, allowing euthanasia and even physician-assisted suicide could improve many lives by reducing apprehension about the future and at the same time eliminating much of the fear and stigma surrounding it. Euthanasia is in many ways an option to how people can end their pain, torment, or loneliness and can be a less costly one than killing oneself unaided. To me this is a non-issue, the government should not enter this area of individual autonomy and freedom of choice. It is amazing almost incomprehensible that society accepts putting an animal to sleep as a humane way to end its pain but refuses the same to the more advanced animal said to possess the quality of self-determination that we know as man.

Footnote; Your comments are welcome and encouraged. It should be noted a similar version of this post appeared on my blog on December 17th, 2013. Below is an article that focuses on how the young will be burdened in the future by having to support the older Americans that have been promised so much. Do not be surprised if the young come to embrace euthanasia.

Footnote #2; It appears this issue is becoming more important in China according to the Bloomberg following article.

Footnote #3; In the "believe it or not" column I submit that even using the term, "euthanasia" on some sites will throw your comment into the "awaiting approval" area where it is then disallowed. I have found this to be true even on media that is supposedly open to different ideas such as the PBS Newshour.

Sunday, April 16, 2017

Trump Comes Across A Bit Too Clever For His Own Good / By: Bruce Wilds

Trump Often Comes Across As Too Clever By Half
Too clever by half is an old British saying, it refers to someone who is too confident of their own intelligence in a way that annoys other people. Often the reason a person gets labeled this way is because they come across as arrogant. The word braggadocios has been used to describe Donald Trump, synonyms for this word according to are blowhard, boaster, bragger, show-off, and windbag. None of these are very flattering and over time such behavior has a way of wearing on people which often results in a backlash accommodated with negative consequences.

The polls continue to show Trump lacks broad support and his favorability ratings can't seem to get out of the cellar. Ironically his recent bombing of a Syrian air base in reaction to a chemical attack that killed children did receive kudos, however, it was from never Trump people, neocons, and liberals who believe in intervention. In fact, many of the supporters that constitute his base were a bit down in the mouth. Another way to gauge how President Trump's base is reacting to his moods is how they react to the tweets he sends out at any time of the day or night. When he twitters the President is able to bypass the mainstream media but it often gets their attention and a fair amount of negative coverage. Still more important is the reactions to the messages he twitters can vary greatly among those who voted him into office.  

One thing many people find troubling is that after just a few months in office Trumps has brought America to the brink of war, and I don't mean with just one country or foe. You can flip a coin as to whether it is the Korean peninsula that will light up with a nuclear glow, Europe erupting into conflict with Russia, or we will awaken to find thousands of American troops being dispatched to the Middle East. Years ago an attorney cautioned me that when negotiating a deal I sometimes came across as a little coy, I have always questioned his terminology, however, admit that when young and leaning far into the wind I might have gone a little too far. My point is when you play fast and loose the potential that you may lose control of events increases dramatically.

A Growing Concern For Trump Supporters
In just the last few days a growing number of articles have surfaced on the subject of Trumps "flip flops," needless to say but this does not bode well for those seeking stability and wishing to go to bed at night wishing or thinking they will awaken to a world where little has changed. And let me be clear, we are not talking about what might be labeled as minor issues. We are focused on some of the key issues of the day such as whether China is and should be pursued as a currency manipulator or whether he will reappoint Janet Yellen to head the Federal Reserve. Even his stand on NATO which has a direct bearing on national security and the Export-Import Bank threw his support behind after opposing it during the campaign leaves many of us a bit puzzled.

The mainstream media is quick to point out Trump's shortcomings and makes a big deal over ever falling out he has with his staff he remains brash and bold and supremely confident. While he claims he's running a well-oiled machine others give the impression that a revolving door needs to be installed to accommodate those rapidly becoming disenchanted with the way things are being run. Inside the White House, a bubbling cauldron of different ideas are competing for power and the President's ear. With this in mind, everyone should remember it was a populist message of draining the swamp that resulted in his election and while often discounted as "common folk" these voters are not necessarily as simple minded as the pundits might lead you to believe. 

For many Americans supporting Trump was not easy or did not come naturally, however, they saw Hillary Clinton as even less acceptable. A series of recent flip-flops on positions are beginning to irritate and concern his base. If this continues they will begin to doubt what he is really about. If voters who supported Trump become convinced he is playing them for fools it is likely they will loudly voice their discontent. In some way we are looking at a choice of style, Trump has repeatedly said he likes to play cards that are unexpected to keep the opposition off balance, however, when you unsettle those who support you it has a way to come back and haunt you.

This article has been a while coming and setback several times to give Trump time to settle in but like many Americans, I viewed Trumps failure to move healthcare reform forward coupled with Republicans pathetic excuse for an answer to improve healthcare as far short of inspiring. This has raised a great deal of doubt about his ability to deliver on other issues and while Trump predicted that Democrats will own ObamaCare if it falls apart reality may not support his view. A recent poll from the Kaiser Family Foundation shows a majority of voters, 61 percent said they now blame Trump and Republicans for “future problems” with the healthcare law. Since the GOP is in control of the government “they are responsible for any problems with it moving forward.”

While some of this can be explained away as a strategy change or that he is evolving it has and should raise concern. Part of the problem is we were promised better than this, and not only better but quickly, we were promised we would win so much we would get tired of winning. To hear Trump talk at times you get the idea he thinks it is all about him. For example, Trump has both praised and blamed himself for the strong dollar. “I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me,” said Trump. This means whether he realizes it or not, by taking credit for things not directly flowing from his position he also opens and creates the situation where he may also be blamed and have criticism heaped upon him for things out of his control.

We must not underestimate just how polarized America is and because of that any event playing out poorly or a few bad news cycles can put Trump in a precarious position. A little humility on the part of Trump would go a long way towards defusing the anger that is beginning to smolder as his supporters witness a flip flop here and a flip there. With Trump detractors eagerly awaiting the day when he fails and receives his comeuppance Trump best remember who his friends are and that in Washington he has very few of them. There will be bad days, there always are, and before they erupt Trump would be wise to remember the message he put before the people if not the populist most likely unleash their wrath upon him.

Thursday, April 13, 2017

Housing Policy Heaps Misery On Private Sector Landlords

We as a society create trouble by trying to deny that many people go through life making their own difficulties and then allow the government to sidestep the issue by pawning the problem off on the private sector. To those who have ever been landlords they most likely have found out that evicting someone is both expensive and a massive headache. While you on occasion see an article on how renting out a house you own can create a source of extra money you seldom see pieces on how it can cause you massive grief. Failing to protect the rights of landlords and adding to their responsibilities has driven many providers of housing from the market.

Many New High Priced Housing Unit Are Being Built
A newly released article on Mises Wire titled, "Fannie and Freddie's New Bubble" details how the giant GSEs, placed in government conservatorship in September 2008, have now, virtually all by themselves, created another bubble, this time in the multifamily rental market. Not long ago, Fannie Mae crowed how they had provided $55.3 billion in financing and supported 724,000 units of multifamily housing in 2016, this is the highest volume in the history of its Delegated Underwriting and Servicing program. Fannie Mae and Freddie Mac still having housing blood on their hands from the 2008 financial crash and we should consider this proof the GSA simply doesn't get it.

Many factors feed into the complicated market that provides a roof over the heads of the American people. Mary Salmonsen writes for states that cheap interest rates make for low Cap (capitalization) rates and nationwide, “Mid-/high-rise cap rates declined to 4.8%, and garden apartment cap rates to 5.6%, both historic lows,” she writes. This means developers can build, lease up and flip projects at sky-high valuations based on projections of ever higher rents in coming years. An article in Business Insider warns the US apartment market has become overdeveloped, with supply outpacing demand, especially in the most expensive segment of the market. Most likely if history is any indication many of the resulting loans from this construction will end in default and come back to haunt us in the coming years.

An article that appeared in my local paper detailed how after a dozen years after opening on the IPFW campus, a university funded by the state, student housing has not achieved full occupancy since the last of the buildings opened in 2010. Currently, the units are more than a quarter empty, exactly how much was not indicated. Stories that delve into what is happening in our communities are important, I consider them as "microeconomic" images of what is occurring in many places across America. The crux of the article after you got past all the positive spin was taxpayers will be carrying the burden of this government over-expansion for years but the problem was being managed, only by reading between the lines was it apparent the whole fiasco has not been a positive for the community.

Landlords Cannot Price In Risk From Nightmare Tenants
A story I was told by a property manager caused me to ponder just how much society has changed over the years and wonder how much of it was due to social policy. While attending the second phase of an eviction hearing yesterday an older couple asked her if she represented the landlord then told how their two rentals, something they planned for and viewed as a way to help them through retirement by producing a little income had become an albatross around their necks. Sitting in court, visibly shaken and holding a stack of pictures showing the damage caused by a tenant they said that dealing with renters was ruining their lives and they would do anything to just get out of the business. Sadly, many landlords in a similar situation still owe on their properties and cannot just walk away.

Over the years government in many areas of the country have bent over backward in an attempt to "protect the consumer" and in many ways, this is creating an army of irresponsible people who go through life exploiting loopholes in the system. This even goes as far as making it much harder to check the credit of someone wanting to rent in an effort to protect a person's privacy, cast aside is the fact those of us renting an expensive piece of property are putting themselves at great financial risk. Landlords find their claims are usually pursued and disputed in the small claims division of the court where getting an eviction or judgment against a bad tenant is both time consuming and expensive. Adding to this ugly reality are limits often in place that mean only a fraction of their loss will be covered, where I live the limit is generally $3,000. It is not difficult for unpaid rents and damages to greatly exceed this amount.

To give someone unfamiliar with the numbers a better idea of the cost we will use some figures that give an idea of what landlords face. Let us start with two months lost rent $2,300, unfortunately, it is not uncommon for a tenant who stays for several years slipping behind a little behind here and there without ever getting caught up to run up a hefty sum. The cost of filing with the courts generally ranges from $90 to as much as $400 and are often topped off by paying an official from the sheriff's office to serve the papers, to this we often have legal fees which can run from $250 to $5,000. In some areas, it can take as much as 180 days to finally get someone out of a property and when this is done it is not uncommon to spend $2,500 clearing out the property and getting it ready to lease. Starting from the position evicting a tenant is a losing proposition we should consider the fact many landlords never see the first penny of a judgment they are finally granted because many deadbeat tenants eventually declare bankruptcy or simply don't pay and such collections are difficult to pursue.

The government holds responsibility for much of our housing problems and even more so in low-income situations because government policy holds little penalty for those who are irresponsible. The chief reason many people are evicted is because they do not follow the rules, damage an apartment or not paying their rent. An eviction on someone's record usually means they become ineligible for government housing programs. By making them "ineligible" for certain programs the government shrewdly and cleverly sidesteps having to deal with these people. The brutal truth is that government housing cherry-picks the best of the low-income renters providing them with very low rents and nice apartments and dumps the rest on the private sector. The unintended consequences of government policy that sidesteps responsibility for the dysfunctional poor over time only add to America's housing woes by driving up the cost of renting.

Footnote; The article below sheds a bit of light on this issue.

Footnote #2; Another place government policy is leading to problems is when it comes to food stamps or the program known as SNAP.

Wednesday, April 12, 2017

Psychological Warfare And Propaganda Out Of Control / By: Bruce Wilds

Today Messages Are More Sophisticated
Anyone who doesn't believe that countries use psychological warfare and propaganda to sway the opinions of people both in and outside of their country should be considered naive. On the same note, those fixated on Russia and obsessed with it trying to influence our election may be a bit paranoid. The point is almost everyone attempts to throw their weight around and influence events that are about to unfold. If you remember prior to our election Mexico had nothing good to say about Donald Trump and could even have been accused of being in a full court press to discourage Latinos from voting for him.

Taking the idea of trying to influence a vote to even a higher level, just prior to Britain's vote on Brexit then sitting American President Obama visited the country and warned, or you might say even threatened, that a vote to exit the Euro-zone would result in moving Britain to the "back of the line" when it came to negotiating a new trade agreement with America. The fact that few Americans felt or indicated his statements were totally out of line added to the appearance that America is more than a little hypocritical considering our history of meddling in the affairs of other countries.

Currently, a propaganda war rages with many Americans hellbent on convincing the rest of us Putin is a thug and a bully. Putin is and has been the focus of those busy creating an enemy for America for without an enemy warmongers and fearmongers cannot thrive. Ironically when President Trump bombed Syria he garnered the praise of both the neocons and liberals who believe in intervention. It seems the group least impressed were those who actually put Trump in office hoping things would change and he would put to an end America's policy of constantly involving itself in conflict after conflict.

Yes, psychological warfare and propaganda are real weapons and have become as powerful as bombs. Psychological games which are related to the mental and emotional state of a person and geared to undermine or shape opinions. The problem is this sector of the government and economy has grown bigger and stronger and by its very nature it wants to take more control. We have every reason to be concerned and worried considering revelations of just how big the government intelligent agencies have grown since 9-11 and how unlimited their spying and surveillance operations have become. As an example look at the part of this apparatus is an agency known as the NGA.

New NGA Facility Under Construction In St. Louis
A recent news story on the NGA also known as the National Geospatial-Intelligence Agency recently announced plans for a new $1.75 billion facility to be located in St. Louis. It should be pointed out most Americans have never heard of this agency and would not be able to explain what it does or the name of the person at its helm. The NGA is the agency that acts as our "eyes in the sky" and is in control of both the pictures taken and the data generated from them, and it is big, which this PDF link delving into its mission and St. Louis expansion confirms.

Throughout history, spies have always drawn suspicion. Conspiracy theories and "false flags" are everywhere and we have good reason to be suspicious because governments across the world often aided by an easily manipulated bias mainstream media are full in when it comes to generating propaganda by spreading vague unproven speculation and quoting unnamed sources. The contemporary term false flag describes covert operations that are designed to deceive in such a way that activities appear as though they are being carried out by entities, groups, or nations other than those who actually planned and executed them.

The man responsible for bringing much of what we know about the size of what is sometimes referred to the "deep state" and for giving us an indication of what it does is Edward Snowden a former National Security Agency contractor. Snowden has become a polarizing figure, some Americans consider him a whistle-blower who sacrificed his career and freedom to inform the American people of government intrusion into their private lives, and others view Snowden’s motives as less than noble. Those in the former camp that, intentionally or not, his actions benefited the intelligence apparatus of adversary nations and that he should be tried as a traitor and suffer harsh consequences for has actions.

It is not unexpected that those running different divisions of this colossal spy network would be a little miffed at Snowden and want his head on a stick because articles then reported how the surge in CIA resources funded secret prisons, a controversial interrogation program, the deployment of lethal drones and a huge expansion of its counterterrorism center. One of the better places to get an idea on  what is being spent, and where, is to explore the top secret funding of the Black Budget operations in a site put out by the Washington Post. This is where you will find details of the $52.6 bn request for 2013 by America's 16 spy agencies.  Sadly, most of the information we have only looked at expenditures through 2013 when Snowden gave us a look into the size of this hidden empire.

Still, the overriding question is, when have we gone too far? While we are constantly reassured the main goal of these clowns is our protection it is difficult to forget the words of Lord Acton who back in 1887 wrote, Power tends to corrupt and absolute power tend to corrupt absolutely. This tends to made it difficult for those of us who have grown distrustful of those in power to think they always do the right thing or that false flags have not become a common weapon in trying to embarrass your enemies. With this in mind and the warnings of writer George Orwell lingering in our minds about the ability of governments to morph into police states, we should be aware of the potential of abuse and that we may all be well on our way to becoming no more than slaves to those we have empowered to serve us.

Footnote; We all know in life on occasion a need for secrecy exist. In an attempt to be humorous I find I want to add one final thought, a little more accountability would be nice, however, if they told us more they might have to kill us. A few of the articles from the archives related to this post can be seen below.

Monday, April 10, 2017

Expect Slow Growth Coupled With Stagflation Ahead / By: Bruce Wilds
Slow Economic Growth And Stagflation Ahead
It may be time to dust off the term "the new normal" a reference created after the 2008 financial crisis to describe an economy mired in slow growth. The term has not been used much lately but has become the reality we face. Many people are beginning to realize that central banks can only do so much through printing money and lowering interest rates. These actions carry with them some very strong and nasty side effects that have taken hold in our economy. This includes capital being poorly allocated and markets being distorted by money flowing into risky assets in search of higher yields. The puzzle we now face is how this will play out going forward and what constitutes a reasonable expectation for future growth.

Over the last few years, we have continued to see many companies cut their workforce or rotate and replace higher paid workers with lower paid employees. We have also witnessed production continuing to be outsourced to offshore factories in an effort to increase profits. Many companies have seen profits grow as sales have remained relatively flat. In some cases where margins have been squeezed stock buybacks and cost cutting have been the only driver of higher profits. This has occurred at a time where sales have been propelled forward by cheap money rather than by real or pent up demand. Few people have realized that record government deficits and a shift to more healthcare spending by consumers facing soaring insurance premiums as a result of Obamacare are also inflating and driving the GDP higher but not in a good way that reflects quality growth.

Slow Growth And Growing Debt!
We are back to the reality that going forward we face slow economic growth for as far as the eye can see, with our future resting on job growth it could be argued that the so-called recovery is nothing to brag about. Many of the jobs being created are not "quality" jobs and to make matters worse an army of robots are being designed and built to take even those jobs away. Details of the last job report touted as proof of an economic resurgence indicate the job market weaker than many economists thought. The expected number of jobs missed the Econoday consensus estimate of 175,000 and also the ADP forecast of 263,000. with the BLS reporting an increase of only 98,000 jobs and downgrading the last two months. While the average weekly hours of all private employees held steady at 34.4 hours and wages did increase as expected again it is important to remember many of the jobs added were part-time.

We should figure the deflationary effects of lower interest rates, increased oil supplies, and falling commodities are largely behind us. This means grinding stagflation is on the horizon. While oversupply in the auto sector pressures sales margins and provides lower prices to consumers it will be more than offset by rising health cost and other increases throughout the economy. This means going forward we should expect very slow growth as QE comes to an end and the government at some point becomes forced to deal with runaway spending. The reality is our America's future cannot be sustained forever on just the exports of Boeing aircraft, the sale of phones and computer tablets we manufacture overseas, or increased internet usage. We need to look at more substantial and broader based benchmarks. At the same time, it is not realistic to think the American consumer can continue to support exporting countries like China and Japan by racking up a 600 billion trade deficit year after year. 

A strong case can be made that the economy is about to stall under strong headwinds as the burden of past debts and future promises made to those retiring and unable to find good jobs begins to weigh heavily upon society.  Tensions have become elevated in many parts of the world as ISIS continues wreaking havoc and a flood of refugees flee war-torn areas. Protest and political unrest in countries like Brazil, Turkey, Pakistan. and throughout the Euro-zone may be about to get worse. In addition, we cannot rule out the possibility of conflict with North Korea or a major war breaking out, it is clear the world is rapidly changing and nobody has a crystal ball that will predict how this will all play out, but one thing is certain, and that is storm clouds do exist. This leaves the possibility at any time the markets could morph into a "realizing market" that grinds slowly downward or that at some point the wisdom of buying every pullback changes and the market simply drops like a stone.

Speculation based on mere hope is not a solution to our complex problems and today long-term planning is in short supply. Silly talk about the fact that the deficit is beginning to shrink is like saying it is now safe for someone who can't swim to jump into the water because in is no longer as deep ignores reality, the drop is small and the depth still great. Even with today's low-interest rates, we are adding to the deficit at near record numbers never witnessed except during major wars. How America and countries across the world react to the stress that comes from slow economic growth and how it will affect our budget and culture as the long-term cost burden of carrying the unemployed builds has yet to be determined. It is becoming increasingly clear that the logic and motives of those forecasting a bright and robust economy need to be scrutinized.

Footnote; A post I wrote some time ago remain strongly tied to the message of just how large our debt has grown the link can be found below. Other more recent articles can be found in my blog archive, thanks for reading, comments are encouraged,

Saturday, April 8, 2017

Show Me The Money! I Want Proof Not More Promises / By: Bruce Wilds

As I flip through positive story after story and positive article after article it seems the big issue is whether we actually believe things are really getting better. An example is a Project Syndicate piece that starts out. "After nine dreary years of downgrading their GDP forecasts, macroeconomic policymakers around the world are shaking their heads in disbelief: Despite a populist-propelled wave of political tumult, global growth is actually set to outperform expectations in 2017." It continues and goes on to announce, if I may paraphrase, "green shoots" have appeared and better times are just around the corner unless the bad people kill them off.

The people referred to in the Project Syndicate article that could derail economic growth are of course the populist and those who are unenthusiastic about globalism. Sadly, we have been hearing for years the promise the global economy is about to turn the corner. While such enthusiasm and faith are supposed to be uplifting if the reader does not feel it in their bones this just begins to come across as more hope being dished out as today's special. During the last eight years, we have watched hope change and die many times so please forgive those of us who hold back their excitement until we see tangible proof that things are really getting better.

We Have Grown Tired Of Promises, Show Us The Money!
Show me the money! Now here is a phrase that gets our attention. Years ago it was etched in our minds when used in the 1996 hit movie, Jerry Maguire. Whether it is the promise of better government or that a company like Tesla that lives on the government tit and burning through cash can really make money, I grow weary and more dubious that positive change is just around the corner.

Many of the experts, pundits, and academic know-it-alls continue to spew out how it is the fault of the populist and other backward thinkers with little faith. The same article referenced earlier goes on to state, "The threat to globalism seems to have waned in Europe, with populist candidates having lost elections in Austria, the Netherlands, and now Germany. But a populist turn in upcoming elections in either France or Italy could still tear apart the European Union, causing massive collateral damage to the rest of the world." Simply put, it is the fault of the people and not the unholy alliance of the Federal Reserve, the government, and the too big to fail banks that have left so many of us trapped in our current plight.

It could be argued the Fed and those in Washington have been both complicit and superbly entrepreneurial when it comes to the Ponzi schemes or pseudo-economics hocus-pocus that has allowed the current situation to simply roll along. The misdirected actions of Central Banks and governments across the word since 2008 have not been driven by the people but rather by those within the Government Financial Complex. Years ago President Eisenhower warned the American people about the Industrial Military complex, but nobody warned us of an even more evil alliance that exists today, that of the "Financial-Political Complex."

We desperately need changes to our economy that will foster an environment of growth but the results have not been forthcoming. It is far easier to make a promise than keep it. We see this occurring at the local level as well as in Washington, where I live several times a year announcements are made of glorious projects and in their unveiling, the swaggering presenters even go as far as giving details and timetables for completion. It is only when years or even decades later when we stumble upon an old article that we are reminded of all the hoopla that resulted in nothing. A line from an old Jerry Seinfeld  episode states, "it is easier to make a reservation than to keep it."

Thanks to globalism at times it has appeared America's biggest export has been its jobs.Year after year America imports around five hundred billion dollars more from other countries than they export.  This means we have a giant trade deficit, when we add this to our enormous government deficit it is easy to see that we are living far beyond our means. A good example of a recent promise in "limbo" and unfulfilled is the rapid repeal and replacement of Obamacare with something much better. Sadly, my friends your chances of survival most likely will be greatly improved if you don't hold your breath until the promises of better times arrive. The time for more proof and fewer promises is long past due.

Footnote; The Fed must at some point begin to ponder a real exit strategy and end the massive and corrosive stimulus that the economy has come to expect. The article below asks you to tell me again how things are getting better!