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Neoliberal Attacks on Social Security Casino Capitalism Unemployment Inflation vs. Deflation Coming Bond Squeeze Notes on 401K plans Vanguard
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John Kenneth Galbraith The Roads We Take Economics Bookshelf Who Rules America Financial Quotes Financial Humor Etc

“When the capital development of a country becomes a by-product
of the activities of a casino, the job is likely to be ill-done.”

John Maynard Keynes

Neoliberalism (aka casino capitalism) entered the state of decline after 2008. Now it is in zombies state and it is unclear how long it will say in this state. Much depends on the availability of "cheap oil" on which neoliberalism and related globalization are based. But the fact the this social system is down slope and on its way to the cliff means that financial calamities should became more not less frequent. Attempts to neo-colonize other states by the West became less and less successful and become close to XIX century colonial conquests with a lot of bloodshed. As always this is mainly the blood of locals, which are cheap. Libya and Ukraine are two recent examples. Both countries are now destroyed (which might be the plan). And there is no other way to expand markets but to try to colonize (or re-colonize) new countries. With shrinking markets stability of capitalism in general and neoliberalism in particular leave much to be desired.

Several researchers points to increased the importance of maintaining of the stability of the banking system Central banks now play. That's already a reversal of neoliberal dogma, which actually was from the very beginning was (and still is) mainly the product designed for export (aka Washington consensus).

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[Apr 14, 2015] The Message from the 22 Year Old Suicide at the Nation's Capitol

Apr 14, 2015 | Jesse's Café Américain

Suicide is a prohibited form of violence in my own belief, as are all other forms of murder. Therefore I would not hold this type of protest up as an example to anyone.

However, an even worse offense would be to completely ignore the message which this young man delivered, as most of the mainstream media has done in the US.

I did not even know what really happened until I read this article below from Wall Street On Parade today. The police and media referred to it as a 'social protest.'

Before he killed himself, the young man held up a sign that said "Tax the One Percent."

Perhaps an even more pointed message might be 'shut down the loopholes for the Top .01%.' Those who make their money from wages and ordinary income pay fairly significant taxes.

However, the uber-rich have so many loopholes and tax avoidance schemes that they often pay much lower percentage than even those in the lowest income levels. The top .01% use the upper middle class as shields for their antics.

You may read the entire article about this here.

Rather than one young light be extinguished and quickly overlooked by the powerful, perhaps it would be better if a million people were to march on the Capitol, and effective shut it down in protest this Summer. That might get their attention. Alas, the apathy in the people is pervasive, at least for now.

Wall Street On Parade

22-Year Old Commits Suicide at Capitol to Send Congress a Message

By Pam Martens: April 14, 2015

At approximately 1:07 p.m. on Saturday afternoon, April 11, during the annual Cherry Blossom Festival celebrating springtime in the Nation's Capitol, a 22-year old man took his own life with a gun on the Capitol grounds with a protest sign taped to his hand. According to the Washington Post, the sign read: "Tax the one percent."

Yesterday, the Metropolitan Police Department released the young man's name. He was Leo P. Thornton of Lincolnwood, Illinois. Based on what is currently known, the young man had traveled to Washington, D.C. for the express purpose of making a political statement with his sign and then ending his young life.

The Chicago Tribune reported that "Thornton's parents filed a missing persons report on the morning of April 11 after he never came home from work on April 10, Lincolnwood Deputy Police Chief John Walsh said."

Those are the tragic facts of the incident itself. But there is a broader tragedy: the vacuous handling of this story by corporate media. The Washington Post headlined the story with this: "Rhythms of Washington Return after Illinois Man's Suicide Outside Capitol." The message he delivered to his Congress – tax the one percent – has yet to be explored by any major news outlet in America in connection with this tragedy.

Was the message of Leo P. Thornton of Lincolnwood, Illinois a critical piece of information for this Congress to hear at this moment in American history. You're damn right it was. Outside of Wall Street's wealth transfer system, provisions in the U.S. tax code are the second biggest wealth transfer system to the one percent. Together, these two systems have created the greatest income and wealth inequality since the economic collapse in the Great Depression. They threaten a repeat of the 2008 financial collapse because the majority of Americans do not have the wages or savings to support the broader economy...

[Apr 10, 2015] Thursday Unemployment Claims

Doc Holiday, Wed, 4/8/2015 - 6:54 pm

Mr. Butter's Warns of Stupid Shit Ahead:

'Profit recession' looms ahead of U.S. first-quarter financial reports - The Globe and Mail

According to FactSet senior earnings analyst John Butters, just 16 companies in the S&P 500 have issued positive guidance prior to releasing their first-quarter results, and 85 firms have ratcheted down their estimates.

"If 16 is the final number of companies issuing positive EPS guidance for the quarter, it will mark the lowest number since Q1 2006," Mr. Butters said.

[Apr 07, 2015] Bernanke's True Legacy

The marginal cost of the 50 largest oil and gas producers globally increased to US $92/bbl in 2011
Apr 07, 2015 | Zero Hedge

... ... ...

THE END OF CHEAP OIL Global production of conventional oil will begin to decline sooner than most people think, probably within 10 years

Feb 14, 1998 |By Colin J. Campbell and Jean H. Laherrre

HOW HIGH OIL PRICES WILL PERMANENTLY CAP ECONOMIC GROWTH For most of the last century, cheap oil powered global economic growth. But in the last decade, the price of oil has quadrupled, and that shift will permanently shackle the growth potential of the world's economies.

BUT WE NEED HIGH OIL PRICES: The marginal cost of the 50 largest oil and gas producers globally increased to US $92/bbl in 2011, an increase of 11% y-o-y and in-line with historical average CAGR growth.

THE PERFECT STORM (see p. 59 onwards) The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy. But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel.

[Apr 05, 2015] Do not Underestimate the Power of Microfoundations

Apr 04, 2015 | Economist's View

Darryl FKA Ron -> pgl...

At the risk of oversimplifying might it not be as simple as stronger leanings towards IS-LM and kind are indicative of a bias towards full employment and stronger leanings towards DSGE, microfoundations, and kind are indicative of a bias towards low inflation?

IN general I consider over-simplification a fault, if and only if, it is a rigidly adhered to final position. This is to say that over-simplification is always a good starting point and never a good ending point. If in the end your problem was simple to begin with, then the simplified answer would not be OVER-simplified anyway. It is just as bad to over-complicate a simple problem as it is to over-simplify a complex problem. It is easier to build complexity on top of a simple foundation than it is to extract simplicity from a complex foundation.

A lot of the Chicago School initiative into microfoundations and DSGE may have been motivated by a desire to bind Keynes in a NAIRU straight-jacket. Even though economic policy making is largely done just one step at a time then that is still one step too much if it might violate rentier interests.

Darryl FKA Ron -> Barry...

There are two possible (but unlikely) schools of (generously attributed to as) thought for which internal consistency might take precedence over external consistency. One such school wants to consider what would be best in a perfect world full of perfect people and then just assume that is best for the real world just to let the chips fall where they may according to the faults and imperfections of the real world. The second such school is the one whose eyes just glaze over mesmerized by how over their heads they are and remain affraid to ask any question lest they appear stupid.

A more probable school of thought is that this game was created as a con and a cover for the status quo capitalist establishment to indulge themselves in their hard money and liquidity fetishes, consequences be damned.

Richard H. Serlin

Consistency sounds so good, Oh, of course we want consistency, who wouldn't?! But consistent in what way? What exactly do you mean? Consistent with reality, or consistent with people all being superhumans? Which concept is usually more useful, or more useful for the task at hand?

Essentially, they want models that are consistent with only certain things, and often because this makes their preferred ideology look far better. They want models, typically, that are consistent with everyone in the world having perfect expertise in every subject there is, from finance to medicine to engineering, perfect public information, and perfect self-discipline, and usually on top, frictionless and perfectly complete markets, often perfectly competitive too.

But a big thing to note is that perfectly consistent people means a level of perfection in expertise, public information, self-discipline, and "rationality", that's extremely at odds with how people actually are. And as a result, this can make the model extremely misleading if it's interpreted very literally (as so often it is, especially by freshwater economists), or taken as The Truth, as Paul Krugman puts it.

You get things like the equity premium "puzzle", which involves why people don't invest more in stocks when the risk-adjusted return appears to usually be so abnormally good, and this "puzzle" can only be answered with "consistency", that people are all perfectly expert in finance, with perfect information, so they must have some mysterious hidden good reason. It can't be at all that it's because 65% of people answered incorrectly when asked how many reindeer would remain if Santa had to lay off 25% of his eight reindeer (

Yes, these perfect optimizer consistency models can give useful insights, and help to see what is best, what we can do better, and they can, in some cases, be good as approximations. But to say they should be used only, and interpreted literally, is, well, inconsistent with optimal, rational behavior -- of the economist using them.

Richard H. Serlin -> Richard H. Serlin...
Of course, unless the economist using them is doing so to mislead people into supporting his libertarian/plutocratic ideology.
Darryl FKA Ron -> Richard H. Serlin...
A big YEP to each the long and short of it.

dilbert dogbert

As an old broken down mech engineer, I wonder why all the pissing and moaning about micro foundations vs aggregation. In strength of materials equations that aggregate properties work quite well within the boundaries of the questions to be answered. We all know that at the level of crystals, materials have much complexity. Even within crystals there is deeper complexities down to the molecular levels. However, the addition of quantum mechanics adds no usable information about what materials to build a bridge with.

But, when working at the scale of the most advanced computer chips quantum mechanics is required. WTF! I guess in economics there is no quantum mechanics theories or even reliable aggregation theories.

Poor economists, doomed to argue, forever, over how many micro foundations can dance on the head of a pin.

RGC -> dilbert dogbert...

Endless discussions about how quantum effects aggregate to produce a material suitable for bridge building crowd out discussions about where and when to build bridges. And if plutocrats fund the endless discussions, we get the prominent economists we have today.

Darryl FKA Ron -> dilbert dogbert...

"...I guess in economics there is no quantum mechanics theories or even reliable aggregation theories..."

[I guess it depends upon what your acceptable confidence interval on reliability is. Most important difference that controls all the domain differences between physical science and economics is that underlying physical sciences there is a deterministic methodology for which probable error is merely a function of the inaccuracy in input metrics WHEREAS economics models are incomplete probabilistic estimating models with no ability to provide a complete system model in a full range of circumstances.

YOu can design and build a bridge to your load and span requirements with alternative models for various designs with confidence and highly effective accuracy repeatedly. No ecomomic theory, model, or combination of models and theories was ever intended to be used as the blueprint for building an economy from the foundation up.

With all the formal trappings of economics the only effective usage is to decide what should be done in a given set of predetermined circumstance to reach some modest desired effect. Even that modest goal is exposed to all kinds of risks inherent in assumptions, incomplete information, externalities, and so on that can produce errors of uncertain potential bounds.

Nonetheless, well done economics can greatly reduce the risks encountered in the random walk of economics policy making. So much so is this true, that the bigger questions in macro-economics policy making is what one is willing to risk and for whom.

The arguments over internal and external consistency of models is just a convenient misdirection from what policy makers are willing to risk and whose interests they are willing to risk policy decisions for.]

Darryl FKA Ron -> Peter K....

unless you have a model which maps the real world fairly closely like quantum mechanics.

[You set a bar too high. Macro models at best will tell you what to do to move the economy in the direction that you seek to go. They do not even ocme close to the notion of a theory of everything that you have in physics, even the theory of every little thing that is provided by quantum mechanics. Physics is an empty metaphor for economics. Step one is to forgo physics envy in pursuit of understanding suitable applications and domain constraints for economics models.

THe point is to reach a decision and to understand cause and effect directions. All precision is in the past and present. The future is both imprecise and all that there is that is available to change.

For the most part an ounce of common sense and some simple narrative models are all that are essential for making those policy decisions in and of themselves. HOWEVER, nation states are not ruled by economist philosopher kings and in the process of concensus decision making by (little r)republican governments then human language is a very imprecise vehicle for communicating logic and reason with respect to the management of complex systems. OTOH, mathematics has given us a universal language for communicating logic and reason that is understood the same by everyone that really understands that language at all. Hence mathematical models were born for the economists to write down their own thinking in clear precise terms and check their own work first and then share it with others so equipped to understand the language of mathematics. Krugman has said as much many times and so has any and every economist worth their salt.]

likbez -> Syaloch...

=== quote ===
I agree with Pgl and PeterK. Certain commenters like Darryl seem convinced that the Chicago School (if not all of econ) is driven by sinister, class-based motives to come up justifications for favoring the power elite over the masses. But based on what I've read, it seems pretty obvious that the microfoundation guys just got caught up in their fancy math and their desire to produce more elegant, internally consistent models and lost sight of the fact that their models didn't track reality.
== End of Quote ===
That's completely wrong line of thinking, IMHO.

Mathematical masturbations are just a smoke screen used to conceal a simple fact that those "economists" are simply banking oligarchy stooges. Hired for the specific purpose to provide a theoretical foundation for revanschism of financial oligarchy after New Deal run into problems. Revanschism that occurred in a form of installing neoliberal ideology in the USA in exactly the same role which Marxism was installed in the USSR.
With "iron hand in velvet gloves" type of repressive apparatus to enforce it on each and every university student and thus to ensure the continues, recurrent brainwashing much like with Marxism on the USSR universities.

To ensure continuation of power of "nomenklatura" in the first case and banking oligarchy in the second. Connections with reality be damned. Money does not smell.

Economic departments fifth column of neoliberal stooges is paid very good money for their service of promoting and sustaining this edifice of neoliberal propaganda. Just look at Greg Mankiw and Rubin's boys.

But the key problem with neoliberalism is that the cure is worse then disease. And here mathematical masturbations are very handy as a smoke screen to hide this simple fact.

likbez -> likbez...

Here is how Rubin's neoliberal boy Larry explained the situation to Elizabeth Warren:

"Larry [Summers] leaned back in his chair and offered me some advice. I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want.

But people on the inside don't listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: they don't criticize other insiders."

Elizabeth Warren, A Fighting Chance

Syaloch -> likbez...

Yeah, case in point.

[Apr 03, 2015] West is trying to buy allies of Russia

This is extremely strong move by the US diplomacy (EU vassals were just token players, extras in the play) which considerably weakens Russia political and economic position. It also shows that drop of oil prices was a well though out strategic move with several possible surprises in the sleeves.
Apr 03, 2015 |

How the lift sanctions against Iran will affect the position of Russia in the world

Lengthy negotiations the six world powers (Russia, USA, UK, France, Germany, China) in Lausanne ended with agreement on the lifting of restrictions against Iran. Foreign Minister of this country Mohammad Zarif called the historical results of the negotiations. Similar opinion is shared by U.S. President Barack Obama, who compared the agreements with agreements between the United States and the Soviet Union during the reign of Reagan and Nixon. The world market after the statements of the leaders of the six responded to a decrease in oil prices. But the question arise: will the economy of Russia suffer as a result of this shrewd move, and will Russia be able to maintain a trusting relationship with its ally in the Middle East or it will change camps.

The EU and the US sanctions against Iran seriously limited the foreign trade of Tehran. They were introduced under the pretext of preventing Iran's development of its own nuclear weapons. Iran argued that solely interested in building on their own territory of the nuclear power plants and is not intended to have weapons of mass destruction. But the official representatives of the West did not believe statements by Iran leadership, fearing that obtaining a nuclear weapon by Iran will seriously alter the geopolitical balance in the middle East.

In recent years tensions between Iran and the West only grew. This played against attempts to isolate Moscow, which, after the reunification of the Crimea with Russia was forced to start organizing the "anti-Western coalition." to counter Western sanctions. But Tehran clearly did not enjoyed its permanent status of a "rogue state" assigned by the USA, and the new President of Iran Hassan Rouhani began to hint that he might compromise and accept the demands of the West.

Concluded at Lausanne agreements, Iran accepted an obligation for 15 years not to build new facilities for uranium enrichment and not to enrich uranium to the level of over to 3.67%, while also reducing the number of centrifuges from the current 19 thousand to six thousand. In response to the Tehran gets the opportunity to export the energy to the West.

The appearance on the world market of oil and gas from a new player at the current moment of low energy prices might trigger further collapse in the price of "black gold" which will jeopardize the economy of Russia. At the same time, the removal of restrictions on the development of the Iranian nuclear program will enhance the ability of Russian companies to participate in construction of nuclear power plants. It also indirectly created a new prospects for cooperation in military-technical sphere.

It is possible that the West went to the lifting of sanctions, based on geopolitical considerations. Shiite Iran is supporting the rebels Houthis in Yemen and efforts of the coalition led by Saudi Arabia may not lead to success. This can threatens oil supplies to Europe and the USA. In addition, Iran has long expressed his desire to join the Shanghai cooperation organization, collective security Treaty organization and BRICS. Here West was forced to give Tehran a bone to block or slow down such moves.

The lifting of the sanctions on Iran may lead in the near future to the fall in oil prices. But this probably will be a short-term phenomenon caused by excessive speculation. In itself, the lifting of sanctions in the future for a few months will not affect the market, " said the Director of the Center for the study of world energy markets energy research Institute of Russian Academy of Sciences Vyacheslav Kulagin. No additional quantities of oil and gas on the market will be added to market immediately. But if the current economic situation in the world will stay then in the future the lifting of the sanctions on Iran will led to significant changes. Iran will obtain access to Western investments and technology. But again, in a short term the world energy market is not affected.

But if we talk about the future after 2020, Iran could become a leading exporter of oil and gas. Oil and gas production will increase. It is worth noting the value of the field "South Pars". Even before the sanctions, there were dozens of projects in this field, including some with the participation of Russian companies. If those projects will be revived, then they will have a serious impact. But this impact will be felt in 2020 or even 2030. In this timeframe Russia will get a serious competitor in the commodities market.

It is worth considering the geopolitical factor, in particular, the current situation in Yemen. Iran supports the Shiite population of this country, but does not yet have the financial capacity to significantly affect the situation. But in the future if the investment is going in Iran, such opportunities will appear. Accordingly, re-configuration of forces in the Middle East will be a bigger question than it is today.

[Apr 03, 2015] Sitting On Top Of the World

Apr 02, 2015 | Jesse's Café Américain

"Larry [Summers] leaned back in his chair and offered me some advice. I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want.

But people on the inside don't listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: they don't criticize other insiders."

Elizabeth Warren, A Fighting Chance

A favorite trick of perception management is to put out a good number, and revise it lower, even sharply so, in the next couple of months, thereby rolling over the material obtained to the more current month, whether it be jobs, or factory orders, or whatever is on display. We saw an example of this today with the Factory Orders.

They do it so regularly that is only remarkable that the mainstream commentators seem to fall for it every time. Thereby we obtain a rolling enthusiasm of improvement, while in the midst of a secular stagnation.

Yes there are certainly more jobs. We are coming off a calamitous decline in economic activity brought on by an asset bubble founded in regulatory capture and widespread financial fraud.

Unfortunately all the abundant monetary stimulus that has flowed from the Fed's Balance Sheet into the financial economy to create these 'jobs' is finding it almost impossible to reach sustainability through a revival in aggregate demand. Instead, it is being used to prop up the balance sheets of the zombie Banks.

This is shown in the unadorned GDP numbers year over year and the flagging velocity of money. Another enormous headwind is globalization that is creating unmanageable social and financial units, and the rise of corporate monopolies that span national borders.

The US may already have slipped into recession. There will most likely be no alarm raised, because the looting of the ship into the first class lifeboats continues, and it is easier if the lower decks remain unaware of the risk.

The rigging of the gold and silver markets is founded in this desire to manage perception. Oh, it is based on a more 'noble' desire to inspire confidence and not make people panic.

But at the same time, it has become an enduring illusion, while the disparities in economic health become increasingly pronounced. And so the looting by the nationless few continues, and justice is led down a hallway and strangled, draped in the national colors, to the sound of patriotic tunes. Such are times of currency war.

The self-serving policy errors of the Federal Reserve Bank are matched only by the horrendously destructive policy errors in political judgment by a Congress and an Executive that has been captured by the moneyed interests.

Who will dare even tell the truth, much less act on it, when the surrender of the truth for 'the story' is one's passport to the more favored classes, the insiders, with all that this implies in terms of comfort and security? The only resignation is to accept a permanent exile, to be without influence, without a voice, ignored.

One must go along to get along, to pay one's dues, extend and pretend, and never, ever, speak ill of the insiders and their schemes. Freedom, who needs it, when you can have security, comfort, and prestige.

So here we are, at peak illusion, just sitting on top of the world.

Have a pleasant evening.

On Secular Stagnation: A Response to Bernanke
Larry Summers responds to Ben Bernanke:
On Secular Stagnation: A Response to Bernanke, by Larry Summers: Ben Bernanke has inaugurated his blog with a set of thoughtful observations on the determinants of real interest rates (see his post here) and the secular stagnation hypothesis that I have invoked in an effort to understand recent macroeconomic developments. I agree with much of what Ben writes and would highlight in particular his recognition that the Fed is in a sense a follower rather than a leader with respect to real interest rates – since they are determined by broad factors bearing on the supply and demand for capital – and his recognition that equilibrium real rates appear to have been trending downward for quite some time. His challenges to the secular stagnation hypothesis have helped me clarify my thinking and provide an opportunity to address a number of points where I think there has been some confusion in the public debate. ...

His conclusion:

I would like nothing better than to be wrong as Alvin Hansen was with respect to secular stagnation. It may be that growth will soon take hold in the industrial world and allow interest rates and financial conditions to normalize. If so, those like Ben who judged slow recovery to be a reflection of temporary headwinds and misguided fiscal contractions will be vindicated and fears of secular stagnation will have been misplaced.

But throughout the industrial world the vast majority of the revisions in growth forecasts have been downwards for many years now. So, I continue to urge that it is worth taking seriously the possibility that we face a chronic problem of an excess of desired saving relative to investment.

If this is the case, monetary policy will not be able to normalize, there will be a continuing need for expanded public and private investment, and there will be a need for global coordination to assure an adequate level of demand and its appropriate distribution. Macroeconomists can contribute by moving beyond their traditional models of business cycles to contemplate the possibility of secular stagnation.

Bud Meyers:
"Saving relative to investment" -- Those at the are top hoarding cash; the money supply isn't being re-circulated to drive economic activity; instead it's perpetuating future generations of heirs.

To expand public and private investment would require changing the tax code and having better enforcement by the IRS (offshore accounts, etc.) An adequate level of demand and its appropriate distribution can be acquired by raising the federal minimum wage to $25 an hour -- all the things that the current congress is against.


"Those at the are top hoarding cash ..."

From the opposite viewpoint, there are few suitable (risk v. reward) investment opportunities. For the same reason, stock buy-backs are popular with corporations.

The real problem is and has always been a lack of demand. Without demand, there is no reason to invest. Just surplus savings. Excess reserves. Those at the top are simply doing the best they can with them.

reed hundt

Gentle economists: a global or even national project to rebuild the energy platform on sustainable and much more affordable grounds would eliminate all vestiges of stagnation. Taxing GHG is only one part, and not an absolutely necessary part, of that project. This is the infrastructure plan par excellence. I might add that the avoided costs are, well, er, mind bogglingly large.

I predict absolutely no one will comment on what I've posted; no one paid any attention to the same prediction made in or about 1994 by the FCC chairman with respect to the rebuilding of the communications platform. Who was that guy?


I think we have two distinguishable problems:

1. Effective demand is inadequate and the private sector is extremely unlikely to provide it any time soon. As mentioned, corporations are swimming in cash and are buying back their stock - meaning they don't see good investment opportunities in their marketplace. If the federal government doesn't spend for infrastructure and other things we are likely stuck.

2. The FIRE sector is sucking an ever-increasing amount of income out of the real economy. The average consumers' money is going to pay interest on debt rather than goods and services. The Fire sector uses their income to make more loans and thus collect even more interest or they speculate in the price of existing assets. Thus the real economy continues to shrink.

If fundamental changes re fiscal policy and the treatment of returns to finance versus returns to productive investment are not made, we are screwed.

The Rage said in reply to RGC

"Effective demand" is irrelevant with a strong "FIRE" sector. It is credit expansion and financing of that credit expansion that drive the economy.

So people say "effective demand" is not good enough, but the economy keeps on expanding and expanding as commercial paper surges despite "effective" demand not rising.

This is why I say there was no recession in the early 2000's. Businesses overreacted to the digital booms end and over cut production while commercial paper was booming. Then they had to snap back over 2003 to reflect reality of condition. It is a different economy and one not built on industrial production or consumer savings. The "real" economy is the FIRE sector.

To unbuild that, would require a medium nobody wants to go through.

djb said...

i am glad to see someone blaming hansen, not keynes for the idea that secular stagnation is best we can do

keynes is often attributed to having said this in the general theory, but NEVER said such a thing

he defined several scenarios where it could occur,

believing a true general theory should be able to explain reality

but NEVER said that the scenarios were unsolvable

"But we must not conclude that the mean position thus determined by "natural" tendencies, namely, by those tendencies which are likely to persist, failing measures expressly designed to correct them, is, therefore, established by laws of necessity.

The unimpeded rule of the above conditions is a fact of observation concerning the world as it is or has been, and not a necessary principle which cannot be changed."

thats from the end of chapter 18, the general theory

Fred C. Dobbs said...

Bottom line, the Bernankes
& Yellens can only do so much.
Monetary policy won't get it all done.

That's where Tim Cook & Elon Musk
come in, to do the rest.


Long Depression 2.0?

The Rage said in reply to Min...

Been going on since the early 80's.

anne said in reply to anne...

I too come down on the side of Lawrence Summers. The problem in Europe is domestic demand and that could have and should have been handled by a Keynesian spending approach from 2008 on:

August 4, 2014

Real per capita Gross Domestic Product for United Kingdom, Germany, France and Netherlands, 2007-2013

(Percent change)

August 4, 2014

Real per capita Gross Domestic Product for United Kingdom, Germany, France and Netherlands, 2007-2013

(Indexed to 2007)


[Apr 01, 2015] Liquidity Traps, Local and Global (Somewhat Wonkish) By Paul Krugman

Apr 01, 2015 |

There's been a really interesting back and forth between Ben Bernanke * and Larry Summers ** over secular stagnation. I agree with most of what both have to say. But there's a substantive difference in views, in which Bernanke correctly, I'd argue, criticizes Summers for insufficient attention to international capital flows – but then argues that once you do allow for international capital movement it obviates many of the secular stagnation concerns, which I believe is wrong.

As it happens, the role of capital flows in the logic of liquidity traps is an issue I tackled right at the beginning, back in 1998; and I've been trying to work out how it plays into the discussion of secular stagnation, which is basically the claim that countries can face very persistent, quasi-permanent liquidity traps. So I think I may have something useful to add here.

Start with Bernanke's critique of Summers. The most persuasive evidence that the US may face secular stagnation comes from the lackluster recovery of 2001-2007. We experienced the mother of all housing bubbles, fueled by a huge, unsustainable rise in household debt – yet all we got was a fairly unimpressive expansion by historical standards, and little if any inflationary overheating. This would seem to point to fundamental weakness in private demand. But one reason for the sluggish growth in demand for U.S.-produced goods and services was a huge trade deficit, the counterpart of huge reserve accumulation in China and other emerging markets. So Bernanke argues that what Summers sees as evidence of secular stagnation actually reflects the global savings glut.

That's a good point. But Bernanke then goes on, as I understand him, to argue that international capital flows should solve the problem of secular stagnation unless if affects the world as a whole, because capital can seek higher returns abroad; he also argues that the global savings glut is mainly a thing of the past, and that in any case such problems can be addressed mainly by putting pressure on foreign governments to open their capital accounts and stop pursuing policies that promote excessive current account surpluses. And in these assertions, I'd suggest, he goes somewhat astray.

Let's first ask whether the possibility of investing abroad obviates the problem of liquidity traps in general (as opposed to secular stagnation.) To do this, consider the analysis I laid out a couple of months ago when I was trying to think about the dollar and U.S. recovery, but run it in reverse. Suppose that a country or currency area – let's call it Europe — suffers a decline in aggregate demand. And suppose that this threatens to push the Wicksellian natural rate of interest – the rate of interest at which desired savings and investment would be equal at full employment — below zero. Can this happen if there are positive-return investments outside of Europe?

You might think not: as long as there are positive-return investments abroad, capital will flow out. This will drive down the value of the euro, increasing net exports, and raising the Wicksellian natural rate. So you might think that you can't have a liquidity trap in just one country, as long as capital is mobile.

But this isn't right if the weakness in European demand is perceived as temporary (where that could mean a number of years). For in that case the weakness of the euro will also be seen as temporary: the further it falls, the faster investors will expect it to rise back to a "normal" level in the future. And this expected appreciation back toward normality will equalize expected returns after a decline in the euro that is well short of being enough to raise the natural rate of interest all the way to its level abroad. International capital mobility makes a liquidity trap in just one country less likely, but it by no means rules that possibility out.

Still, secular stagnation – as opposed to liquidity-trap analysis in general – is concerned with excess saving that lasts a very long time, that's quasi-permanent. So in that case wouldn't we expect capital mobility to be decisive? Shouldn't it be impossible to have secular stagnation in just one country?

When I first approached this issue, that's what I thought. But I immediately ran up against a big real-world counterexample: Japan. Japan has effectively been at the zero lower bound since the 1990s, and it wasn't until the end of 2008 that the rest of the advanced world joined it there. So why didn't capital flood out of Japan in search of higher returns, driving the yen down and boosting Japan out of its trap?

The answer is that real returns in Japan weren't exceptionally low – they were, in fact, more or less equal to those abroad. But this equalization of real rates didn't occur through an equalization of Wicksellian natural rates. Instead, what happened was that persistent deflation in Japan, combined with the zero lower bound, kept the actual real interest rate well above the Wicksellian rate. Here's the data from 1996 to 2008, with inflation measured by the GDP deflator and interest rates measured by 6-month Libor:


OK, it's not full equalization. but not too far off — despite being at the zero lower bound for many years, Japan ended up offering more or less competitive real returns.

The moral of the Japanese example is that if other countries are managing to achieve a moderately positive rate of inflation, but you have let yourself slip into deflation or even into "lowflation", you can indeed manage to find yourself in secular stagnation even if the rest of the world offers positive-return investment opportunities.

Which brings me to the future of the global savings glut.

As Bernanke notes, as far as big current account surpluses go, Germany is the new China. However, he argues that the large current account surplus of the euro area as a whole is a temporary phenomenon driven by cyclical weakness in the euro periphery, and therefore not likely to be a source of persistent trouble.

But look at what bond markets are saying! German interest rates – presumably an indicator of perceived euro safe rates – are negative out to seven years; the 10-year rate is only 16 basis points. This is telling us that markets expect the euro area economy to be depressed, and ECB rates very low, for many years to come. In effect, European bond markets are flashing a secular stagnation warning.

And this makes sense: the case for secular stagnation in Europe is considerably stronger than it is for the U.S.. Working-age population is declining, Japan-style; the euro system, with a shared currency but no fiscal integration, arguably imparts a strong contractionary bias to fiscal policy; and core inflation is already down to just 0.6 percent.

By the logic I've already laid out, this should imply a persistently very weak euro and a persistently large European current account surplus, as Europe in effect tries to export its secular stagnation – a process limited only by the way low inflation or deflation interact with the zero lower bound to keep interest rates from falling to their Wicksellian equilibrium rate.

Sure enough, if we try to figure out the market's implied prediction for the euro, it seems to imply persistent weakness. The euro/dollar rate is down around 30 percent from its level before Europe began running such large surpluses. Meanwhile, German 10-year real interest rates are around -1, while U.S. real rates are slightly positive; this implies that markets expect the euro to recover only a third or so of its recent decline over the next decade.

What this in turn implies is that even if you downplay domestic U.S. weakness and focus on the export of capital from other countries, especially Germany, there's no good reason to believe that this new version of the global savings glut will end any time soon.

Which brings me to the policy debate. Bernanke seems to be saying that if there is a problem, it can be solved by cracking down on currency manipulation:

"The US and the international community should continue to oppose national policies that promote large, persistent current account surpluses and to work toward an international system that delivers better balance in trade and capital flows."

If my analysis of the European problem is right, however, this is pretty much irrelevant: Europe's trade and capital imbalances are the result of fundamental weakness of domestic demand, which is then exported to the rest of us, who aren't that strong either. If true, this says that we have a problem that must be solved with policies that boost demand. So on the policy debate, I come down firmly on the Summers side.



[Apr 01, 2015] Links 3-30-15

Apr 01, 2015 | naked capitalism

Jim Haygood, March 30, 2015 at 8:47 am

So does our dear Uncle Ben (Bernanke):

When I was chairman, more than one legislator accused me and my colleagues on the Fed's policy-setting Federal Open Market Committee of "throwing seniors under the bus" (to use the words of one senator) by keeping interest rates low. The legislators were concerned about retirees living off their savings and able to obtain only very low rates of return on those savings.

I was concerned about those seniors as well.

To paraphrase an old joke from engineering school, 'Four years ago, I couldn't even spell seniur. Now I are one!'

Ben's screed sounds oh-so-plausible, until one focuses on what it doesn't say. It doesn't disclose that a steeply-sloped yield curve, with its lower end anchored at zero, is a direct, unlegislated subsidy to banks who borrow short and lend long.

Of course, borrowing short and lending long is risky. But as the events of 2008 proved, banks that blow themselves up with stupid, risky behavior will get bailed out with public funds if necessary, then subsidized for years afterward with ZIRP. Hey, it's a bank cartel. When foxes guard the hen house, the dinner menu never varies: chicken!

craazyboy, March 30, 2015 at 9:58 am

More desperate Econ 101 verbiage, disconnected from any reality, attempting to validate the notion that Fed short term policy rates ( a bankers "cost" – not selling price) has any benefit to the economy*. Ok, we know Volker was able to break the economy with 15% short rates. So we are to believe that all you need to do is the opposite of Volker, and voila!, vibrant healthy economy. Yeah, binary brains rejoice!

No mention of securitization and the role it plays in modern banking. You can be interest rate insensitive when you are on the "fee model" and can sell off all your risks – after obfuscating the risks to make a prettier package for yield starved "investors". "CDS with that", they will offer for default risk. You might be able to hedge long term inflation/interest rate risk – but your total return probably goes back to zero. Anything to prop up housing prices beyond what the consumer can afford. But maybe the Fed doesn't know that is going on and Ben is still unaware. hahahahaha. I'm just kidding. Ben isn't an idiot…oh wait, we're doing it again???

He was concerned about "seniors" – THEN he threw them under the bus. 'Course no mention of that growing pre-senior bracket – when you are permanently out of the job market for whatever reason, but have many years to go prior to being eligible for SS.

Then no mention of time frame. Isn't 6 years and counting long enough to see if you are getting these so called positive effects he claims? Anything weird happening to challenge your theoretical world view? Is a stock bubble a good thing or a bad thing? Is a bubble a store of value? hahahaha Stay tuned if you're not sure yet.

* About the only "good" effect you can put your finger on is maybe some people and orgs can re-finance at lower rates. But this usually applies to someone that has good credit and not teetering on bankruptcy already. Then typically, to really get the good lower rate you need to get around going thru a bank. So the biggest beneficiaries would be large financially stable corporations with direct access to the bond market. Then this effect may warrant low rates for perhaps a year or so, at which point they all should have done it and be done. By now we have seen what they've done with the money, and it generally wasn't hiring.


March 30, 2015 at 3:57 pm

cb, maybe you've seen the conglomerate (in the geology sense) behind the "Dismal Science" (sic) link above, How much additional evidence of the bankruptcy of competence (measured by decency and comity and mitigation of pain and such meaningless metrics, or even by the patent failure of economics to meet any of the tests of what constitutes a "scientific discipline") amongst all the "economists" is needed to nail down an indictment?

Shoot, it is too much for me, at least, to gird myself to pick out the most horrific, all-too-human, and insufficiently humane (from my own "loser's" perspective, of course), riffs and bits from that March 14–15, 2015, conference, "What's Wrong with the Economy—and with Economics?" Which convocation seems a little like asking a bunch of bird colonels and 1-star generals and think-tankers and CEOs of post-national corporate thingies like Lockheed "We never Forget who we are Working For" Martin at a gathering at the War College to discuss "What (If Anything) Is Wrong With The Military-Industrial-Congressional-Petro-Financial Complex?"

I won't pretend to know the CVs and bona fides of the participants (though I don't see Noam Chomsky and those sorts represented at all), but it looks, reads and sounds like every one of the fat, dumb and happy folks in attendance are all feeding at the same trough. "Oh, our models just need tweaking!" and keep those political-economists at a very long distance, they might inject the notion that human pain is present and inherent, and so very distastefully so, in all their policies, but don't let that get in the way of a lot of genteel comradery among those admitted to the club… Besides, the "right people" are doing very well indeed, thank you very much. And we need a little time to wrap some bland and dense formulae and definitional constraints around potentially combustible non-scientific notions like equity and morality and honor and decency.

"Burn it all down!" is gaining some steam, folks. Economists and their leash-holders can pretend all they want that they have nomenclature and handles and plans and contingencies for all this overlay of pseudo-scientific Ruler-serving complexity they have created in service to the Elite. The Crowd can be chivvied just so far, and then there's a stampede.

I can hardly wait, out here in entertainment-space, to see how the fops and courtiers and courtesans and peacekeepers in "The Capital" fare in the last installment of "Hunger Games: Mockingjay II." The word from the Districts: "President Snow! If we burn, you burn with us!"

Of course, maybe this conference and other such gatherings are really an arch subversive plot to undermine the minions of the "science" wing of the economist brand, and blow a little lift under the pinions of the "political" wing…

Reply ↓


March 30, 2015 at 6:46 pm

Who knows what may happen when you get a bunch of proctologists together for a navel gazing convention.

[Apr 01, 2015]  Chris Hedges America is a Tinderbox

Apr 01, 2015  |  naked capitalism

Well, I don't find most people vicious. But you are right if you mean by that they admire and respect strength. The Montgomery Bus Boycott was a powerful symbol of the strength of a community. Most Americans have contempt for the left because it is weak. It wilts, always, under pressure. I am old enough to remember when that wasn't the case.

I don't blame the American people because they have been subject to the most sophisticated mind-control regime ever known–people who are literally under dozens of magic spells, half-hypnotized and half-awake. Yes, they succumbed to the sly manipulations that used the unconscious as a playing field without hardly anyone knowing.

jake chase

Sophisticated mind control my ass. Plutocrat right wing horseshit sells because it makes people who buy it feel somehow respectable and virtuous, without challenging in any way the mean, puerile selfishness by which they steer their own ship of life. Just about every man at least has somebody he can push around, thrash if he feels like it, all the while telling himself how manly this makes him. Want to see what the working class is like? Spend a few hours in one of their bars.

The only thing 90% of the population wants is for their own worthless lives to become marginally more luxurious. I saw this vividly during the Seventies, on the North Fork of Long Island, where every union screw turning warm mongering putz had his little plot of grass, his motorboat, his garden tools that made the neighborhood sound like Armageddon. Archie Bunker was a sanitized version of these bastards, who liked nothing better than thrashing some long haired student or idealistic protestor and waiving the flag for Richard Nixon.

Of course, none of them had served anywhere. They had fallen into the between the wars age group, and their idea of military service was a John Wayne movie.


Sure, many working class assholes were and are assholes. But many are not that way and I hung out in some bars then and I must say I knew some nice guys too.

As for mind-control–I've studied it and the ruling elites certainly set out on the project willfully and left a paper trail and it worked. Stage magic works as does manipulating the unconscious of people who don't believe they can be manipulated.


Response to "tongograd"'s quotation of Mark Ames

Will you listen to this from a white male point of view? As the end of the first paragraph makes clear, the people that Ames is calling not just stupid but cowardly, nearly the worst insult you can give to a human being, are not really so much Americans in general, that is Latinos, African Americans, Native Americans, Asians, or women of any ethnicity, but specifically white males. Really them alone. Then, again, as usual, following the string of insults, Ames and the Left he putatively represents have the nerve to wonder just what they have to do to attract the white male vote. "Well, we can't do anything about it. They're not just benighted and otherwise disgusting, but really they're chicken-shirt. If they ever decide to grow a pair they'll come to us." Really? You think so?

What other ethnic group on the face of the earth is it not just considered acceptable by the Left, but de rigeur, to openly despise, to compete in order to creatively criticize and put down. "Hey", says Ames, "Everyone calls them stupid. No one ever thinks to call them cowards, the whole group of white, male American Fox News watchers. I'll make my name today!" ANY other ethnic group, you'd better watch yourself when you reference. You'd better make sure that nothing you say can be taken to even imply any criticism of them as a group. Man, I don't think I'm exaggerating here. But white males, especially if they're American, whether working or managerial class, have, since the Civil Rights Era, been the scapegoats of the left, classical-like scapegoats, openly, until now it's not even questioned. The Left puzzles and puzzles about why the American white male distrusts them, but never even brings up this perfectly obvious question. I don't know. My discussion of it right now will probably be considered racist by some just for defending them. It seems as though the practical definition of racism is advocating in any way for the interests of whites or, especially, white males. Nothing they have or do is considered legitimate.

"We the spiteful." Please! That's just funny.

You, we (and man, I do it too, now I think of it), the Left, need to stop pretending to wonder why the white males in the US don't want to travel with us. If we're really interested in winning the economic war with the "oligarchs", we're going to have to drop the identity politics and return to class. But maybe it's useful, psychologically or competivitively necessary to continue scapegoating them and this economic struggle is really a smokescreen for something else. I don't know.


The problem, Hugh, is that your 99% does not agree with your view of the world. They believe that the poor are lazy and they are more resentful of the poor than the Koch brothers. Leftists have to face this fact.

Yes, they have to face it, but they don't have to accept it. To build a mass movement these people need to be engaged in dialogue and persuaded that there is another way (I deliberately avoid the condescending term "educated"). Many people seem to think this is next to impossible and not worth trying, but from where I'm standing it's the only way. And I don't think it's that hard, because our agenda is emminently in their self interest, and at bottom people invariably have a very firm grasp of their own self interest, even if it has been clouded by "wedge issues" and "culture wars".

Bottom line is that racial resentment and nationalism are all good and fine, but when your stomach is empty they don't amount to a hill of beans. Neoliberalism is remorselessly proleteriatizing the American worker and one consequence is that peoples' priorities become a lot clearer.

I can only site the most egregious example and that is the Daily Kos blog which is an example of where faux-leftists dominate the discussion and ban real discussion when it gets beyond Party orthodoxy.

Daily Kos is the unofficial house organ of the Democratic Party, not in any way legitimately a progressive site. Markos has never been very good at concealing his ambition of becoming a player in the Democratic establishment by leveraging the site's potential to mobilize the base. Back in the day when we could pretend that progressives and Democrats were largely on the same team lots of people were willing to overlook that. Seems like a lifetime ago now.

The left is dead right now–stone cold dead. Occupy was a last stab by anarchists to wake it up–it failed utterly in doing that though I think it may have revived anarchism a bit which is always a good thing.

I honestly don't know what people expected from Occupy. Did the Montgomery bus boycott end racial segregation in the south? Did the Ludlow Massacre crystalize broad suppport for workers rights? Occupy was an opening skirmish in what will be, at best, a very long and drawn out war of attrition against very powerful and deeply entrenched interests. Perhaps our society's obsession with instant gratification has blinded people to exactly what this will entail.


I agree with you. We need to talk to all Americans, citizen to citizen, equal to equal. We must ask not just for their ideas and support but their full participation.

A bad idea (what we have now) can be overturned by a good idea (what we can build together). But we don't have to just appeal to self interest. Ordinary people, we of the 99%, have shown for hundreds of years that we were willing to fight and even die for something bigger than ourselves. That impulse has not disappeared. We just need to give people something to believe in, and make sure that it is worthy of their belief.

jake chase

Ordinary people have shown they are sheep willing to be led into slaughter, too fearful of censure by neighbors to even stand up for their own lives. There is nothing they have 'died for' in the past three hundred years that was worth a fart in a hailstorm. If you think otherwise you better spend more time reading history.


Really, Jake? The sides in the US Civil War & WWII were indistinguishable, and one side was not somewhat gooder guys than the other? (Need I say that that side was imho the one with the evil Northern capitalists & later the US military-industrial imperialist complex & Joe Stalin too?)

The slaves in Haiti 200 years ago were not fighting for something "worth a fart in a hailstorm"?


The Montgomery Bus Boycott did much to change things at the time–it built momentum for a movement by showing the determination of citizens to see the project to the end. It was a dramatic show of strength by a community that had felt marginalized and despised by the majority of citizens.

Occupy was nothing of the kind. It was studiously not organized and it achieved little momentum because, beyond the participants and part of the intellectual class it did not win much respect from the population as a whole. Again, it aided the cause of anarchism and I think showed the left an interesting direction to follow.


I'm tired of criticisms of Occupy for not being organized, if the point of the criticism is they didn't have a leader, and proper heirarchy etc.. The fact that there was an assassination attempt on Occupies "leaders" (and the assassination attempt had unintended humor – the keystone cops want to assassinate leaders of an anarchist group!), shows just how dangerous organizing in a traditional hierarchy would have been. Leaders = Targets for Assassination. That's the murder elite we are dealing with. Perhaps the anarchist know a great deal more about fighting a guerilla war than their liberal critics.


Occupy was a sign more than a movement. By not organizing, of course, it avoided decapitation and populated the imagination more than the streets. It's taken me awhile to understand it as a harbinger of a new political age. Since it is new I do not understand it yet. But I recognize that politics cannot change without a profound change in consciousness in all of us left, right, center and outsider (my current political alignment).

But, as a political movement, it failed completely. Lack of coherence did not inspire the confidence of people sitting on the fence. That's not the fault of Occupy it's just the way we are now.


The Montgomery Bus Boycott came after a decade of seemingly fruitless work in the 1950s, and even earlier setbacks in the 1940s.

I have debated in these pages whether we are in the equivalent of the "1950s" phase or the "1940s" phase. We certainly aren't anywhere near the 1960s phase; some people have to age out and others have to grow up.


I don't agree with the presumption that the 99% in this country can't agree on anything we actually agree on a lot when the real message is delivered. The real problem is that every movement that gains momentum is co-opted by the real power in this country. Nixon's cointel has become the policy of the elite to protect itself. Haven't you ever turned on current TV. On my cable system, the sound is awful, I have to turn the volume way up to hear it, turn on one of the MSM stations and the sound is relatively incredible. They make it hard for everyone to organize, they give you candidates that only differ on the most divisive issues( i.e. reproductive rights ) and won't address the actual causes of everyone's malaise.

They promote chaos among us all, by not actually bailing out the country, they keep everyone on edge being one paycheck away from bankruptcy or one medical condition from ruin, some of their tools are racism and classism. The game is rigged and we are the suckers.


As for "more resentful of the poor than the Koch brothers". I get into debates where a subject of never ending interst is whether or not people deserve their economic fate.

Gah, with all that is wrong with the world (so so much) why is this topic even so endlessly interesting to people? The truth seems obvious and boring to me: while there is sometimes things individuals can do to effect their economic situation one way or other we don't live in some world that magically metes out justice in monetary reward. Duh. Furthermore an economic system that doesn't allow second and third and forth etc. chances before condemning people to poverty is cruel. And I'm not even talking about second chances for murders or any type of moral offense – I mean for making dumb economic decisions! Even some platonic ideal of a Perfect economic Meritocracy – if it all depended on an economic decisions you made at 19 and could never be changed after that point is *inhuman* – it does meet a basic human requirement of human life for growth over the lifespan. Life has consequences by it's very nature, but punishment to poverty is a consequence purely of social systems.

So really why is the question of whether people deserve their economic fate even so interesting to poeple? We are the 99%.

Lambert Strether

Gramsci wrote from one of Mussolini's jails. A lot of his language is neutral for that reason.


Mr Strether;
Obama as a modern American Mussolini! Now that's an image! The Tea Party stooges got it wrong in portraying 'O' as a Hitler type. He's a 'kinder gentler' Mussolini type authoritarian! (Somehow this strikes me as an insult to the memory of Mussolini. Go figure.)

from Mexico

I agree that no change will take place without organizational politics.

Peter Skerry does an outstanding analysis of the three types of politics — organizational, protest and elite-network — in Mexican Americans: The Ambivialent Minority.

Organizational politics has always been the only effective way to advance the interests of the lower socio-economic orders. Elite-network has of course always been the domain of elites, folks like Obama. Protest politics can swing both ways, but as a stand-alone tactic it is inadequate. Remember that behind the Civil Rights Movment stood an elaborate organization: the Black church.


Protest politics creates awareness of the issues and mobilizes people behind them. It is therefore complimentary to organizational politics rather than an alternative to it.

You are absolutely right to point out that the church was indespensable in organizing the civil rights movement, including providing most of the leadership. But it was the sight of thousands of blacks in the streets demanding their rights that moved public discourse on civil rights by giving urgency and momentum to their agenda.



I love your writing…but English language is "abstract", meaning specifically, (the
"act" portion) that it enables words-concepts to be presented, while lacking in
direct ACTion…English is a poor language for DIRECT ACTion, therefore direct thought consideration-in comparison, an Asian pictogram is a direct picture of an action-leads away from "abstraction"…

..what I intend, therefore, is to take specific actions into consideration, and force them upon public consideration.

If "the people's representative government" is to return to this conceptual relevance, first must be a public movement to end, once and for all, ALL campaign $$$$ influencing "the people's representative government"…otherwise, all else is in permanent fail mode…focus, people…


yves, I totally agree with your analysis of the shortcomings of hedges' understanding of the history of anticommunism. its been one of the few undercurrents that really annoys me about his otherwise admirable body of work and thought.

i would add that in addition to the repressive state apparatus's mastery of human movement through the urban landscape which you mention, there's at least one more important bit of geographical context to the underdevelopment of American oppositional culture: the suburb. It's a lot easier to mass on the streets when there's a mass of people living on the same street.


Yves makes good points but she's wrong that not having a street culture necessarily precludes activism. It is the propaganda regime that has silenced real dissent and it has, and this is far worse, the betrayal of truth by both Hedges' liberal class and the radical left. The left, as a whole, has accepted the mainstream narratives about the nature of power-relations in this country and the basic narrative that our leaders always mean well even though they may be misguided and that Vietnam or Iraq was a "mistake" by policy makers suffering from hubris. Bullsh!t!!!! Macbeth did not make a "mistake" he was a greedy bastard who wanted power. Well, that's the case for the vast majority of American politicians and power-brokers–not grasping this clearly has destroyed the American left–let's bury it and start again shall we?


The biggest and most invisible elephant in the American psyche is this: our government has long since abandoned the goal of managing this nation as a nation.

Instead, America as a nation is managed as a means to global empire.

And everyone's all right with this.

While a middle class was useful to produce salable products to the rest of the world, we had a prosperous middle class. Now that industry can be relocated wherever wages and taxes are lowest, America's middle class is being stripped of its jobs, homes, pensions, social safety net, civil liberties and future.

All to feed the last sticks of furniture into the raging war for global economic and military dominance that benefits only our wealthiest one percent.

Even wingnuts respond to the idea that we need to leave off policing every square foot of the planet and return to looking after our own nation as a nation, rebuilding decent jobs, rebuilding communities, and rebuilding our sense of there being a better future for our kids than we got.

Discussing and organizing around this idea that our lust and quest for empire has gone way too far scares the powerful more than anything else. It cuts at the very root of their power when they hear demands from all political sides that we cease empire building in favor of returning our full attention to domestic progress, to managing health and success for the citizens of this country, our country, before projects to surveill, conquer, or economically dominate any other nation.

Call it the Me First project. Everybody gets to make demands for a better life for themselves and their children. That's the American Dream that everyone wants.

Call it Nation Building. We're gonna roll up our sleeves and make our country self sufficient in clean energy, first in education, first in healthcare, first in equality and liberty, and the model for nations everywhere. Cuz that's how we roll.

It is not normal for Americans to lose their futures, for Americans and their children to be starved of shelter, food, medicine and education in order to have an active military theater command for every continent on earth.

Where is that in our Constitution?

from Mexico

All through history one may observe the tendency of power to destroy its very raison d'être. It is suffered because it achieves internal unity and creates external defenses for the nation. But it grows to such proportions that it destroys the social peace of the state by the animosities which its exactions arouse, and it enervates the sentiment of patriotism by robbing the common man of the basic privileges which might bind him to his nation. The words attributed by Plutarch to Tiberius Gracchus reveal the hollowness of the pretensions by which the powerful classes enlist their slaves in the defense of their dominions:

The wild beasts in Italy had at least their lairs, dens and caves whereto they might retreat; whereas the men who fought and died for the land had nothing in it save air and light, but were forced to wander to and from with their wives and children, without resting place or house wherein they might lodge… The poor folk go to war, to fight and to die for the delights, riches and superfluities of others.

–PLUTARCH, The Parallel Lives


Echoes Jesus: "Foxes have dens and birds have nests, but the Son of Man has no place to lay his head." Luke 9:48.



that "propaganda" you mention is summed up in entirety in Adam Curtis' fine BBC videos (and you are accurate):

I would love to be able to post the entire Adam Curtis "The Power of Nightmares" video also-but due to U.S. video of neocon bushit, shown on U.S. television, and number of us who have posted it in direct contradiction to fundamentalist propaganda, it is permanently removed from youtube…entirely too controversial…(too funny-buy the video):

people might also be advised that Curtis' videos include British and Russian economic history, in parallel to historical treatise involved in these videos:


Try here: It works.


Not any more, it only took one day since your link to take it down.

Dan Kervick

It seems to me that if people of a leftist orientation want to achieve some sort of real, comprehensive and enduring social change, the first step is to accept and embrace the idea that what they are trying to do is achieve political power. That might appear obvious, but it sometimes seems to be a characteristic psychological trait of the contemporary left to have turned their politics into a matter of pure psychological identity, temperament and personal expression. Most self-described lefties seem to possess such a deep antipathy toward all forms of political power, such as it actually exists in actual human nature and human history, that their aspirations for change are utterly and comically doomed from the outset.

So all that is left for them is a kind of waiting around for some vaguely imagined spiritual transformations of humanity, wringing an occasional concession out of existing elites due with a noisy protest or two. Lovely. Keep praying, dreaming and "demonstrating" forever. Meanwhile, keep being dominated, because real politics is not a quest for millennial religious enlightenment, or personal liberation from all forces of external control. That's just egotistic self-indulgence. Real politics is organized, coordinated, strategically and tactically mature action in pursuit of difficult social goals.

People like Hedges, Chomsky really have little to offer, I'm sorry to say. Their style of leftism has been on proud and impotent display for about four decades now as the right has taken over the world. They are angry and alienated outsiders whose entire intellectual and emotional identity is based on remaining angry and alienated outsiders so they have a mighty wall of oppressive counter-reality against which to rail and define themselves.

People who want political power might want to start by at least imagining themselves in power. Now, I can already hear the contemporary critic, "No in my utopia, there is no power. There is no coercion. There is no institutional organization with conventional systems of governmental direction and control. There is no commerce and exchange. There are no police enforcing any rules. There is no "wielding" of anything. There is no hell below us; above us only sky, blah, blah. There are just people living in perfect magical harmony, achieving a lovely, comprehensive but utterly non-coercive egalitarian coordination."

Let's just say that there have been periods of left-wing success in the past, and this isn't how they thought. They built a middle class out of a peasantry; they created social insurance systems; they destroyed serfdom; they ended child labor; they created tax regimes that leveled inequalities and funded broad-based investment for the general good; they built powerful unions and parties that actually managed to run things, get elected and implement a difficult agenda. they wrested control of society's capital resources from powerful private owners of those resources who were in no mood to give them up. They fought and died in Spain; they fought and died in Germany and they fought in Stalingrad. And that wasn't just because they wanted to be martyrs, but because they judged these battles to be necessary steps in a long, hard strategically coherent slog.

Paul Tioxon

Billy Joel-Prelude/Angry Young Man- WITH Lyrics


" People like Hedges, Chomsky really have little to offer, I'm sorry to say…."

Says who ?

Says Kervick. Mr. Dan Kervick.

WTF is that? Has he done anything ? Is he anybody ? Does he have any bright ideas ?

None that are readily apparent.

Well he should shut his bashing-all-leftists-that-aren't-himself pie-hole till he does , then.

Maybe when he's sued the gov't on behalf of all of us and our civil liberties , as Hedges and Chomsky did recently , he'll have some reason to puff himself up. As of today , he ain't got jack shit.

Lambert Strether

Less ad hominem, more responsiveness, please. It's going to take a little more than suing the government to get us out of this hole. It's certainly good, admirable, that Hedges ad Chomsky did this. C'est magnifique, mais pas la guerre. Kervick points this out. It's a perfectly respectable argument.

from Mexico

I thought Kervick made a valid argument too.

We've dreamed of a world free of politics, hierarchy and coercion for a long time, in the Modern period since Rousseau. And this aversion to politics has had a strong influence on the left, as Hannah Arendt explains in "Karl Marx and the Tradition of Western Political Thought."

But there are plenty of people out there, like Adam Curtis, who believe this is a Utopian vision. In his latest film, All Watched Over by Machines of Loving Grace, he speaks of the latest ideology, "computer utopianism" or the "California ideology," that, as the trailer says, held out the promise of a society "without politics and the old hierarchies of power."

"But power hasn't gone away," concludes the trailer. "It never does."

Chris Rogers


One of the major problems with the 'organisational meme' is that very often said organisation becomes rather staid and Conservative – much as Robert Michel's noted with his 'iron law of oligarchy', i.e., 'who says organisation, says oligarchy',. And, if I'm not mistaken, those who were at the forefront of the OWS movement wished to avoid this and remain truthful to their grassroots – the problem with OWS, who's aims were noble, was it seemed to be a 'middle class' movement', which by its own definition alienated much support from the working class.

Now, if only we had another Martin Luther King, who by any measurable standards is one of the USA's greatest political leaders and a brilliant orator in his time – regretfully, and as history suggests, he was a once in a lifetime brilliant leader – he was also able to connect to not only his core constituency, but those with a moral outlook whatever their class or colour maybe – Regretfully, I see no MKL on the horizon to inspire and coral many of the disparate forces and opinion expressed on these boards.

So there you have it, our left-of-centre leanings mean in effect we are awaiting a messiah to deliver us from this neoliberal dystopia and deliver us the 'new Jerusalem' – which seems highly religious.

One 'big plus' for all concerned, is that Hughes comments and opinions have driven an unusually large response from the commons – its very disparate, with forces from both the left-of-centre and more libertarian elements having similar aims and goals and all highly concerned.

What to do next is the obvious question, and its a must to avoid false prophets, such as one Barack Obama in the US or Tony Blair in the UK.

Joe Miller

"We've dreamed of a world free of politics, hierarchy and coercion for a long time, in the Modern period since Rousseau."

It's entirely possible to be free from the latter while still engaged in the former. Here's what Morgan Finnegan has to say about egalitarianism in extant forager societies:

"Egalitarianism in BaAka contexts is a relationship rather than a static term, within which there is continual bargaining and disputation. Individual autonomy and freedom, as in all hunter-gatherer communities is prized, so that the social ethos of sharing and the perpetual motion against dominance must be continually reinvented. This tension is what gives the egalitarian relationship its fluid, dynamic quality."


Cute. An orthodox Marxist lecturing anyone about what it takes to succeed. THIS time it'll be different, right comrade?

Dan Kervick

I'm not a Marxist. I don't believe in the labor theory of value or dialectical materialism or the withering away of the state, and I believe societies need to have vibrant private sectors as well as public sectors. I'm just a practical egalitarian who believes in old-fashioned "mixed economy" economics, and the possibility of vibrant real-world, problem-solving democracy. A society with state-supported full employment and ongoing public investment in human capital and strategic economic transformation; a broad and much more equal distribution of the national output with strong caps of private accumulation; a socialization of retirement, education and health care, with most of the remaining consumer economy handled by private enterprise; a drastically reduced and reorganized financial sector with reformed institutions of public finance; more time spent on citizen deliberation, education and practical governance chores, and less on entertaining oneself and doing one's day job – these things all seem eminently achievable to me, since in one form or another they were being achieved in the past before neoliberalism swept much of it away. So the left just has to pick of the pieces and get started again.

We don't need a revolutionary "spark" or a "charismatic leader". We're talking about a long ground game. There needs to be coordination on an ambitious agenda, and some strategic thinking about how to put it into practice. How did the radical right agenda of people like William F. Buckley and Barry Goldwater become the depressing mainstream that it is today. No revolutionary romance. They just spent decades organizing and carrying through a gradual takeover.

No dreams of tribal life in a pre-historical rain forest, where 200 people manage to live without formal rules and law enforcement; no fantasies about techno-geek, open source, government-free utopia of untrammeled anarchic liberty.

There is always a certain element of thinkers who thinks the very idea of a police department that keeps people from pissing on the sidewalk is "fascist" or "maoist", etc.


I think I sympathize with you. The left's aversion for politics comes from the sense that, in the end, politics breeds the struggle for power and that, in itself, is the deep problem that we are sitting with that makes us unable to move.

For me this is because leftist have tended to accept the dominant narrative as the container of their own. I claim that the dominant narrative is a carefully constructed and engineered lie and should be totally discarded.

The essence of the left's problem is that all power that isn't a result of the usual Machiavellian game comes from community. A mobilized community can stand up to political power and has and won clear victories over and over again. By accepting the individualist philosophy that cripples any movement we accept defeat. We cannot be a collection of individuals voting for the usual clowns–that is no way towards anything but neo-feudalism which is coming about as sure as the sun will rise tomorrow.

First, form communities–you talk about change, about peace, about egalitarianism–then give up your selfish ways and join with others by pooling resources and building trust. There is no other path. The alternative to that? Mysticism and it could lead to community, who knows. The monastics seemed to have done rather well back in the day.

jake chase

Yes, give up your selfish ways- now there is a message that will resonate with the working class. On the other hand, you could promise them all a new Webber grill with an electronic starter.


No I would tell them about teamwork, parties, relaxing because your friend has your back–how long before "things" become empty? Life is to be lived not endured mediated by products.

Timothy Y. Fong

The mistake is in believing that there is some end-steady-state utopia. There isn't. No matter what we do, in 100 years (or less) some angry 20-somethings are going to look back at us and say we screwed up. Nonetheless, the winning is in the struggle.


"Most self-described lefties seem to possess such a deep antipathy toward all forms of political power, such as it actually exists in actual human nature and human history, that their aspirations for change are utterly and comically doomed from the outset."

To base your argument on such an empty abstraction as "human nature" is to fail Popper's test of falsifiability.

Look, this works too: because of human nature any successful fight for political power is doomed to turn first tragically then comically into tyranny, as it actually has happened throughout history.

At the end of your argument you make a strawman of the other view but that's OK, it's a free blog-comment section.

Anyways, the perfect example you are looking for of leftists achieving political power at the last paragraph of your argument existed for several decades, it was called the USSR. Earlier examples include the Jacobins.

Achieving political power is not the solution, political power itself is the problem. Whomever achieves political power, no matter how pious, immediately suffers moral debasement, because the well being of the abstract collective notion he/she undertakes to protect overwhelms the natural, evolved, in-built morality of the individual.

Dan Kervick

Human nature isn't just an abstraction. There is a science of it.


Insofar as there is a science of human nature, that science is genetics, and genetics is no ground at all to prove the need of political power.

Dan Kervick

What about the union movement of the 20th century? Or the successful creation of the Social Security system? Or minimum wage laws? Or the 90% marginal tax rate?, etc. These things were passed by actual legislators who achieved political power.

You know, every exertion of leftism doesn't degenerate into "Mao" or "Stalin". Can't we get

Dan Kervick

Mean to say: "Can't we get past that?"


I guess we want different different results so our views cannot be reconciled.

I lived some time in a country that has a well developed and firmly established social safety net, no poverty, very little crime, high taxes, allowances to help the less fortunate, strong unions, unarmed police, short work hours, good salaries, the whole machinery.

I observed the system attentively.

Of course I set out to find two fundamental elements, a girlfriend and a soccer league. As it happened, both provided me excellent windows into the entrails of the system.

The captain of my soccer team worked for the gov't safety net. His job was to cross-check and spy on those receiving help. The way he spoke about beneficiaries and the things he did to spy on them so they were not cheating convinced me that a strong State that takes seriously the role of protecting the working class reduces to just one major functioning principle: the State buys poverty.

Those receiving help must provide the State with poverty and the State will pay for that supply. The State spied on its clients to know whether they have any other income except the price paid by the State for their poverty because if that was the case then these client were not really providing all the poverty the State was paying for.

So in my view whenever the left gets political power and the result is not Stalin then the result is the commoditization of poverty, the commoditization of workingclassness.

Timothy Y. Fong

I agree. I hear Hedges' argument about speaking in the prophetic voice and calling out abuses of power. There's a role for that in every society, By definition, those embodying the role cannot every take power– which means they are, at best, Cassandras.

For those of us who want to implement positive programs (such as the job guarantee), then the path is the same as always; kick ass and take names.


Yes, Obama is the ultimate Manchurian candidate. Sadly, Hedges, while completely well-intentioned, seems to underestimate America's collective apathy and indoctrination. Most Americans are still too comfortable to care, and until enough of the population takes a hit to the wallet they will continue their journey toward the "American dream", only to find that the dream was more a mirage.

from Mexico

There was a comment that was made very late on yesterday's Hedges thread, but which I think has great merit, so would like to repost here:

tongorad says:

July 20, 2013 at 12:08 am

I think environmental gloom and doomers are a non-starter for the working class. So you want to take away my working class food, one of the few things I'm allowed to enjoy, and nibble on twigs and leaves?

The neoliberals are serving up a bogus prosperity gospel that will not be defeated by the likes of Mr Vinegar-Tits himself, Chris Hedges. In fact, I think environmentalism will only serve to quicken the pace of facism, as the psychology of it harmonizes with the idea of an Other that we need guard or protect ourselves against. And the austerity angle too (those working class have had it too good, they need to do what's good for them).
If the left can't articulate a positive vision, then it has nothing for the working class.


If we look at one of the most successful mass movements of all times, Christianity, what we see is that it ministered to both man's material needs and his spiritual needs. The PBS special on the history of early Christianity makes this clear:

The evolutionary biologist David Sloan Wilson had this to say about it:

Christian society provided "a miniature welfare state in an empire which for the most part lacked social services" (Johnson, 1976, 75; quoted in Stark 1996, 84). Even the emperor Julian acknowledged this fact in a letter to a pagan priest: "The impious Galileans support not only their poor, but ours as well, everyone can see that our people lack aid from us" (84). Julian saw the problem and tried to institute pagan charities to rival Christian charities, but the social dilemmas implied by the word "charity" are not solved so easily.

–DAVID SLOAN WILSON, Darwin's Cathedral: Evolution, Religion, and the Nature of Society.

Here's what the Rev. Martin Luther King said on the subject:

…the gospel deals with the whole man, not only his soul but his body; not only his spiritual well-being but his material well-being. It has been my conviction ever since reading Rauschenbusch that any religion which professes to be concerned about the souls of men and is not concerned about the social and economic conditions that scar the soul, is a spiritually moribund religion only waiting for the day to be buried.

When Christianity became the official religion of the Roman Empire all this changed. Plato's two-world theory of body and soul was revived and interjected into Christian theology, and was revived once more by Jefferson, Madison, and Williams to become the reigning political philosophy of the new republic, a phenomenon which Thomas E. Buckley describes in great detail in "The Political Theology of Thomas Jefferson," or David Little in "Religion and Civil Virtue in America."

Carroll Quigley in The Evolution of Civilizations speaks of the potential pitfalls of the sort of Neo-Platonic dualism that, according to Reinhold Niebuhr, "corrupted" Christianity when Christianity was "philosophically elaborated in Greco-Roman thought" (Niebuhr, "Optimism, Pessimism, and Religious Faith"):

We deal with continua rationally either by dividing them into arbitrary intervals to which we give names, or by giving names to the two ends of the continuum and using these terms as if the middle ground did not exist at all. This last method is called "polarizing continuum," and is frequently done even when the greatest frequency of occurrence is in the middle range… Such polarization of continua is so common and so familiar that we come, frequently, to accept our categories as real instead of being arbitrary and imaginary, as they usually are…

This practice of slicing continua into parts or even into dual poles and giving names to these artificial categories is necessary if we are to think about the world or to talk about it. But we must always remain alert to the danger of believing that our terms are real or refer to reality except by rough approximation. Only by making such divisions can we deal in a rational way with the many nonrational aspects of the world.


In summary, religion will take over as a pacifier, or the promise of a better life in afterlife.

As for the environmental argument… in Japan, when the Emperor noticed a little too much deforestation, he put a moratorium on tree cutting. Of course, the poor and destitute suffered the most when the twigs disappeared.

That's why think humanity will be going through a tough time before it gets better.

from Mexico

Moneta says:

In summary, religion will take over as a pacifier, or the promise of a better life in afterlife.

Well that's certainly a one-eyed view of religion, a view which the rich and powerful who corrupted Christianity with Neo-Platonic dualism hoped to instill in the Christian faithful: forego rewards in this life because your true reward is in the next life.

And, according to the liars by omission, that is also what Marx believed. He did, after all, say that religion "is the opium of the people."

However, like any literalistic or fundamentalist interpretation, that is a distortion and a half-truth achieved by selective quotation of "scripture," as Susan Neiman explains:

Metaphors have long lives, and Marx's description of religion as the opium of the people helped mislead us all. In fact, though Marx was the first thinker to show how deeply our worldviews may be shaped by material needs, his views of religion are more complex, and less condescending, than most leftist critics who followed. Far from reducing religious needs to economic ones, Marx called the criticism of religion the first premise of all other criticism because he understood its power. Here's what he actually says in the passage leading up to the one-liner about opium:

"Religion is the general theory of the world, its encyclopedia, its logic in popular form, its spiritualistic point d'honneur, its enthusiasm, its moral sanction, its solemn complement, and general ground for the consummation and justification of this world….Religious suffering is at once the expression of real suffering and the protest against real suffering. Religion is the sigh of the oppressed creature, the heart of a heartless world, just as it is the spirit of spiritless conditions. It is the opium of the people."

Sitting in the British Library, Marx may have got his drugs wrong. On his account, religion is anything but a sedative; in fact it sounds more like cocaine. In Marx's description, religion is the force that keeps the world awake. Heart of a heartless world calls up love as well as courage; hearts are also sometimes seats of purity, another quality one longs for when one longs for faith. But saccharin allegories aside: anatomically speaking, the heart is the organ that keeps us alive.

Marx's judgment of the forces arrayed against religion was just as savvy as his judgment of its power. His description of what capitalism did to the world it found might, with few changes, have been written by believers in Afghanistan—or Arkansas.

"The bourgeois…drowned the most heavenly ecstasies of religious fervor in the icy water of egotistical calculation. It has resolved personal worth into exchange value, and in place of the numberless indefeasible chartered freedoms has set up that single, unconscionable freedom—free trade…All that is solid, melts into air, all that is holy is profaned."

Of course this is irony, and verbal acrobatics, but it's also ambivalence. Marx's attitude towards the religious standpoint is hardly one of scorn. Something fateful was lost when bourgeois calculation replaced religious devotion, and we are right to feel bereaved.


Indeed, we ought to feel bereaved. Religion is not an option but a constant whether we call it religion or atheism–we bind ourselves to some conceptual of mythological framework. Our current religion is just as real as any of the others–it is seen in the films, shows, and news stories we watch that make up our culture. Our rituals, Christmas, the Super Bowl and so on are religious and re-enforce the values of radical materialism and competition. Fortunately for all of us today's religion is so confusing and contradictory that unlike the relatively mild contradictions of other religion it cannot be maintained for long. In addition, our current secular religion does not offer satisfying rewards.

Doug Terpstra

Timeless — Marx could have written this just yesterday about the Wall Street-Washington kleptocracy.

"…drowned the most heavenly ecstasies of religious fervor in the icy water of egotistical calculation….resolved personal worth into exchange value, and in place of the numberless indefeasible chartered freedoms has set up that single, unconscionable freedom—free trade…All that is solid, melts into air, all that is holy is profaned."

It's no wonder Marx is taboo, Howard Zinn too. Thanks.


I should have written that religion will be used and/or promoted as a pacifier but sometimes you need to try to find the right one to pacify the baby. Some babies will never take to one and others will bop other babies in the face with them.


I don't claim to know Marx's attitude toward religion, no doubt manifold, yet did he not think it would fade away, part of that earlier phase of human history that was irrational and that would be superceded by the later industrial and scientific phase? The passage you end with, "All that is solid, melts into air, all that is holy is profaned." continues, "And man is at last compelled to face, with sober senses, his real conditions of life, and his relations with his kind." For Marx, a starting point for building a better world.

Whether we should take his idea that human history is necessarily a story of progress seriously is mooted. Civilization by its nature is a collective enterprise with interacting components of commerce, politics etc. The usual result is bureuacracy, Hannah Arendt had this to say, "Bureaucracy is the form of government in which everybody is deprived of political freedom, of the power to act." That seems to be where we are now and where human enterprise frequently dead ends.


Well the creationist putsch and some other religions are a thorn on science's side right now.


I have a problem with the general concept of religion being the general theory of the world. That theory worked until the Enlightenment where the general theory of the church was shown to be BS.

We are there again because the inherited rich made a devils pact of relevance for the should have evolved to myth religions in exchange for unquestioned inheritance and accumulating private ownership of property (i.e. the class system of the past few hundred years.

If religion is the general theory of the world, does it have a theological explanation of the hexagonal clouds on the North pole of Saturn? GRIN

Why can't we proceed with the humility of knowing how much we don't know or will never know and not try and integrate any faith based theories as other than myth.

jake chase

Marx was a brilliant social critic and the only thing he ever got wrong was his dialectic, which doesn't make any more sense than other Millennial nonsense. The best thing he ever wrote may be the Eighteenth Brumaire of Louis Bonapart.

Perhaps he just spent too much time in cold rooms fueling himself on Hegel?


I don't think of the Rev. Daniel Berrigan or Rev. Martin Luther King as passive. And if you read what Christ actually said in the bible, you'll find no pushover, but someone who aroused considerable fear among Romans and other ruling authorities.


Looking to religion to provide a solution is just substituting one Daddy for another.

from Mexico

True enough.

That point was certainly driven home by Jacques Barzun in From Dawn to Decadence.

At the turn of the 20th century, Shaw despaired that his hallowed Fabian socialism and other socialisms had failed to overcome man's "brutish instincts and his propensity to lie and mouth empty ideals," while another disillusioned socialist, Georges Sorel, in Reflections on Violence, urged the industrial unions towards a final combat with police that would overthrow the capitalist system.

The scientists of the day were all agog with the latest scientific fads: Social Darwinism, anthropo-sociology and Eugenics. The world of the scientific and artistic elite was all gilded wrapping paper, hermetically sealed off from the hoi polloi:

With all the preaching and practicing of bloodshed between 1890 and 1914, how can it be that in retrospect the period was seen as an ideal time deserving to be called la Belle Époque? … Here it is enough to say that the intellectual and artistic elites, and to a certain extent high society, lived in their world of creation, criticism, and delight in the new. They were aware of the crises, no doubt, but after one or two had gone by gave little thought to what they might still cause…

And when the war broke out, their reaction was equally as depraved:

This haughty ignorance of social and political facts enables us to understand why the cultivated classes reacted as they did when war came: several hundred intellectuals in Germany signed a manifesto denouncing "the other side" as if betrayed by a friend and brother. It was answered, with a like rhetoric, by several hundred of the French. The enemy's purpose must be wicked since we are innocent.

A prominent German pacifist responded to the pro-war manifesto with a 'Manifesto to Europeans', which challenged militarism and 'this barbarous war' and called for peaceful European unity against it. 'Educated people in all countries should use their influence to bring about a peace treaty that will not carry the seeds of future wars.' Only three other people were brave enough to sign this peace manifesto; one of them was Einstein. As Barzun explains:

Looking over the roster of great names in literature, painting, music, philosophy, science, and social science, one cannot think of more than half a dozen or so who did not spout all the catchphrases of abuse and vainglory.

But despite the depravity of the artistic and intellectual elite, the deportment of the clergy was even worse, as Barzun goes on to point out:

And everywhere the clergy were the most rabid glorifiers of the struggle and inciters to hatred. The Brotherhood of Man and the Thou Shalt Not Kill were no longer preachable… [B]ishops in various countries spoke out for total war. They enlisted God: "He is certainly on our side, because our goals are sinless and our hearts are pure." The most moderate said: "Kill but do not hate." One English preacher spoke of "the wrath of the Lamb" and another speculated that although Jesus would not have become a combatant, he would have enlisted in the Medical Corps.

But, as Barzun continues, even though the "20C fury recalled the wars of religion," in "1914 religion was no longer a prime aggressive impulse" and "not before 1914 was the flush of blood lust seen on the whole intellectual class."

jake chase

On the other hand, you have Henry Ford, who people think of as an anti-Semite and a fascist, who did everything he could to stop the War.

Have you read his autobiography? Nobody ever had a better understanding of bankers. That is why he never went public or borrowed any money. It took less than ten years for his descendants to totally fuck up his company.


Unraveling the common thread of human atrocities leads inevitably to tribal identity. But without a strong attachment to some group, the individual is left with the lonely burden of always swimming against the tide. I think we can try to understand the past and pretend to predict the future, but cannot hope to make sense of the time we live in because we are the actors who are creating it.


Thank you for mentioning my comment, from Mexico, I am truly honored as I admire your writing on this forum so very much.


…it's also known as "Black-White" DUALITY…which is an imperfect point of view, used primarily by reductionists and power monger-manichean-"ends justifies means" advocates…view Hitler-George W Bush propaganda, as perpetrated by "Rendon Group"=John Rendon…as shown here:

The Man Who Sold the War
Meet John Rendon, Bush's general in the propaganda war

Dan Kervick

Early Christianity doesn't seem to have had much to do with ministering to humanity's material needs. It was an apocalyptic cult based on renunciation and waiting for the end of the world. Only after Constantine perverted it into a Greco-Roman style religion of praying to gods for military victories and the like did it turn into a quasi-worldly faith.

Joe Miller

Have you ever read The Legitimacy Of The Modern World by Hans Blumenberg, FM? I think you would learn a great deal from it if you haven't yet. You can learn about Blumenberg's ouvre here.


When violence is directed toward the state and state supported corporate interests then our militarized police forces will certainly, aggressively, dial up state violence. I agree that a general strike is unlikely mostly for the reason that we're inculcated to see success as an individual effort. Violence, random or otherwise, will come as a one on one action to self-survival, the have-nots taking from the have just a little more than.

Pierce writes of it as Stand Your Ground vigilantism:

On the streets, we are being trained paradoxically to both submit to the authority of the police, and to take the law into our own hands, if necessary, because the police cannot possibly protect us from every danger. Stand Your Ground, though it played no role in the Zimmerman trial per se, is vigilantism hallowed by legislation. That's all it is. This does nothing but produce a national schizophrenia about crime and fear and weaponry that we inevitably act out.


Dear der;
It looks increasingly like the organs of State violence are proactively applying 'maximum coercive force' against even peaceful and societally accepted forms of protest. See the police response to the feminist protest in Virginia recently as highlighted by skippy. A little overt psychological bullying has become the norm. When will it go over to overt physical bullying, unprovoked? That's going to be the testing point.

from Mexico

There exist two equally old and time-honored traditions concerning the basis of political power. One of these — that professed by the likes C. Wright Mills, Max Weber, Voltaire, Clausewitz, Strausz-Hupe, Marx, Bodin, John Stewart Mill, and Stalin — was most succinctly summed up by Mao Tse Tung: "Political power grows out of the barrel of a gun."

However, there exists another tradition and another vocabulary no less old and time-honored, which is that it is the people's support that lends power to the institutions of a country. This is what Madison meant when he said "all governments rest on opinion."

Hannah Arendt fell into this later grouping, which explains why in "On Violence" she wrote: "Rule by sheer violence comes into play where power is being lost."

Those, however, who embrace the first tradition — that "Political power grows out of the barrel of a gun." — probably perceive these as being pretty bleak and hopeless times.


Ultimately power does come from brute force at least as we understand it. There are other sorts of power that come from community. However the modern state has sought to destroy community so that those who come to power have more power. In the U.S. there is no need to always use force–they have used the power of science and stage-magic to rule by controlling the collective unconscious to believe that up is down and down is up. Almost all of the mainstream narrative is demonstrably false–yet people, including nearly all of the left accept it as, at least, mainly true.


"Rule by sheer violence" also comes into play when power is achieved.


There is a huge misconception among many on the left about Stand Your Ground laws. Granted, there have been times when these laws have been twisted to grant license to acts that had, or were perceived to have, a racist component. But these laws grew out of the absurdity that existed (and still exists) without them. Without a Stand Your Ground law, the rights all reside with the criminal. You, the victim, are required to retreat. The criminal has the right-of-way.

The classic example is someone being approached by a mugger. Absent SYG, the potential victim is required to retreat and can only exercise a potentially lethal (or even harmful) response AFTER he or she runs out of room to retreat.

Another classic example: You surprise a thief breaking into your car. You CANNOT attempt to stop him. You must retreat and let him finish the job. (Absent SYG you cannot use potentially harmful or lethal force to protect property, your own or others.) If threatened, it is the victim's legal obligation and responsibility to defuse the situation by retreating. (Or standing idly by at some "safe" distance.) In jurisdictions without SYG, there have been cases where thieves successfully sued the targets of their crimes for financial compensation for injuries sustained. The criminal was viewed, in the eyes of the law, as the victim. This kind of Kafkaesque, through-the-looking-glass bullshit is what prompted SYG laws in the first place.


In CA there is only instruction to the jury to be "reasonable" when evaluating the victim while requiring the "aggressor" to retreat or to prove his need to shoot. In contrast to Florida, Martin had the right to stand his ground. Zimmerman, the aggressor, should have stayed in his car or retreated. At trial he had the obligation to prove he was in mortal danger.
I hope the feds investigate both the obvious racial profiling of Martin using his many tapes from the police on different occasions and the problems with the GOP/ALEC/NRA stand your ground laws passed in all the red states.


In the general case it is not clear who, if anyone, is the "criminal". Is an older man with a gun, apparently stalking a teenager, a criminal? Or is he an upstanding member of the community carrying out necessary nieghborhood policing activities? Without the telltale shading of the respective skins, who would know?

Thankfully we don't have to worry about such subtleties because these laws typically refer to the shooter's subjective perception of threat without requiring any objective basis for that perception. That allows the application of the law to be more black and white than it might otherwise be.


Yalt's point about your use of the word "criminal" is spot on, but let's deconstruct it just a little more.

When you say "criminal" it is really code for "person of colour", or "poor person". When you imagine coming across someone breaking into your car, that's who that someone is. Strictly speaking someone isn't a criminal until they have been tried and convicted in a court of law, but to many Americans people of certain racial or ethnic backgrounds and certain socio economic classes are presumptively criminals. And stand your ground, like so many law and order initiatives in the US, is about extending the law to exert every greater social control over them -in this case by giving ordinary citizens -specifically "law abiding", middle class citizens- the power to act as judge, jury and executioner over their inferiors.


Technically, you're right about the term criminal. After all, on a hot day the guy breaking into your car could just be acting to free a child or pet trapped inside. (Provided, of course, there was a child or pet inside.) And at night, the guy could just be trying to move your car that was blocking his driveway. (If, in fact, you had parked blocking his driveway, which is not at that uncommon in certain communities which are near nightclub hot spots.)

However, when you're legally parked on a public street and come out of the restaurant or movie theater to find a guy trying to jack your car, for the purpose of everyday common language and communication, you're pretty much safe in describing him as a "criminal".

from Mexico

@ Jess

Since when is someone committing a property crime deserving of being shot?

If you surprise someone burglarizing your car, the appropriate response is to call the police and let them handle it.

You're just spouting a bunch of stupid vigilante nonsense, in which a non-violent crime stands a high likelihood of being escalated to a violent confrontation.


@ Mexico —
"Since when is someone committing a property crime deserving of being shot?

If you surprise someone burglarizing your car, the appropriate response is to call the police and let them handle it."

You're kidding, right? No, I'm afraid you're not. For you, the criminal has superior rights. I, who has worked hard (sometimes at multiple jobs) just for the ability to drive a reliable car, owe it — OWE IT — to the thief to let him make off with my car or it's contents. I've got a suggestion for the thief: Don't wanna get shot? Don't rob people and their cars and homes. But that's not good enough for you. No, you believe that the criminal has a RIGHT TO ESCAPE. Because, you see, unlike cop shows, cops usually aren't right around the corner. Even in densely populated urban areas and typical suburbs, police often take 10-20 minutes or more to respond to a call. By then the thief is long gone.

So what do the police do? Write a report, which you can get within a few days at the local police department — but often only after paying a fee! Then you can get your insurance to pay whatever the residual amount is over and above your deductible, unless your deductible is higher than the damage, in which case you pay the whole thing.

Got any idea what a replacement airbag costs? About $1,000. Not for a Benz or a Beamer, but for the average car. And that's not including the installation cost. And you know what?

a) By your reasoning, the thief has the right to come back the day after your car is fixed and rob it again! Because, again, you — the law-abiding, tax-paying good citizen — cannot or should not protect your property.

b) Your insurance deductible is usually per-incident, meaning that in this scenario, once again you must go out-of-pocket for the replacement cost.

c) Insurance claims, esp. repeat claims for the same type of damage, can get your policy canceled or the rate raised.

d) To prioritize things like food, shelter, medical care, etc., lots of people do not carry "Comprehensive" coverage on their policies, so they have NO coverage for losses due to break-ins and vandalism.

This is what I mean by the inverted logic that pervades jurisdictions without SYG laws. All the rights belong to the criminal. So how about I exercise those rights? I'm hereby giving Yves permission to give you my email addy. You give me your info — residence location, car license number, etc. Then I'll come and rob you over and over and over and over again and you promise never to try to stop me and always to settle for just calling the police. (I'm sure this won't be a problem because evidently you have all the money necessary to continually replace your valuables.)


Although this discussion is completely off-topic, you both have valid points:

1) Standing by and waiting for cops is a complete waste of time and you will rarely, if ever, get your property back or be compensated in any way other than the loss of valuable personal time dealing with police, usually on the order of hours and adding insult to injury, insult even from the police themselves. I say this from more than one incident of direct personal experience.

2) Shooting someone over a radio theft in your car is a little over the top, to put it mildly. On the other hand, in most states, the thief is protected and there is nothing you can do, including the use of pepper spray, taser, or baseball bat/baton, which in my opinion is far more reasonable and appropriate. But most states do not allow even this if you were not attacked directly.

Which goes to show how unbalanced our society truly is.

If I cautiosly "swipe" (download) a bunch of 1's and 0's intelligently encoded into 3 minutes of music I face 10's of thousands of dollars in fines and potential loss of a couple of years of feedom, but if I cautiosly jack the radio out of my neighbor's car very little, if anything, will ever happen to me.

People like Mark Ames say that the average worker is cowardly but the fact is the average citizen wants to avoid like the plage both the left and their accusations (and no real organized solutions) and the right with their accusations (and their highly organized "solutions").

They just want decent jobs, decent children, decent communities, and decent and reasonable law enforcement. Once 3 out of 4 of these things are gone, there will be a reaction good or bad.

from Mexico

@ Jess

I'm not buying it.

Here's a rebuttal to your argument:

"A Most American Way to Die"

If you're an unarmed black teen in Florida, someone can gun you down – and they might get away with it

Read more:


Nice try at pulling out the old straw man. No attempt to rebut my arguments about why SYG laws came into being, or the factual situation where they do not exist. SYG is a lot like a person's right to protect themselves in their homes. "(Every man's home is his castle.") Prior to changes in laws, it was possible for people to be charged with, and convicted of, murder or manslaughter for using deadly force against intruders WITHIN their own homes. In times past, you couldn't shoot an intruder who was trying "just" to steal your TV or other valuables. Inside your own domicile you could not protect your own property, own the lives of you and your family or guests. Upside down, ass-backwards, through-the-looking-glass laws? Absolutely. Now, in most jurisdictions, that has changed. In many areas you can now even use deadly force to protect your valuables outside the house as long at they're on your property.

The fact that SOMETIMES, in SOME situations, SYG can either be abused or result in a verdict like the Zimmerman one. There have been many cases of family members accidentally being mistaken for intruders and shoot within the home by other family members. Should it therefore be illegal for homeowners to possess firearms? Most people would answer, "No". (There are, of course, people who believe that citizens should never, ever, EVER, under any circumstances, own firearms, even if they live in areas of Alaska so remote as be reachable only by plane. Never mind the bears feeding on your livestock and threatening your kids, firearms are always and forever intrinsically bad, bad, bad!)


"The fact that SOMETIMES, in SOME situations, SYG can either be abused or result in a verdict like the Zimmerman one." should have ended with "is being used as the logic to strike down SYG laws."

My bad. But edit function would be so nice.

from Mexico

As the article I linked explained, the Stand Your Ground law is the extension of an ancient law, one which allowed someone to shoot an intruder who had broken into their home:

It was another wild debasement of existing law, this one dating back to a distinctly American iteration of English common law called "castle doctrine," where the original duty to retreat was rejected and you had the right to use deadly force if your castle, i.e., dwelling, was invaded, though there were subtle differences state by state. But the gun lobby got cracking in the 1960s and expanded the law to include your lawn and backyard, then, a couple of decades later, your car, as well. Now, with Stand Your Ground, your castle was your person and your right to use deadly force traveled with you.

I remember many years ago, when I was living in West Texas, there was a doctor who shot and killed a teenage boy. The boy was stealing a battery from the doctor's car and the doctor shot him from the second story window of his home using a high-powered rifle.

So let me ask you, was what the doctor did morally justified? It sounds like under Stand Your Ground that what he did would have been legal. But is summary execution an appropriate punishment for someone stealing a car battery?


As I said in another reply to you (which may or may not show up at some later time) "You don't wanna get shot, don't steal."

Although in my personal situation, I would have:

First, demanded that the thief drop to the ground;

Second, if he tried to flee, wound him in the leg. (But then again, I'm a pretty damn good shot.)

Third, if he demonstrated any hostile intent toward me, such as reaching for or brandishing a weapon of his own, I'd put two in his heart and before he hit the ground another in the head. (Like I said, I'm a good shot.)

Yves Smith Post author

You really think theft justifies murder? Not even the bloody Old Testament stands for that: "an eye for an eye".

So why don't you go kill Jamie Dimon or Lloyd Blankfein or Joe Cassano? You're wasting your vigilante energy on the wrong targets.

I lived in NYC in the bad old days, when pickpocketing and other types of theft were common. But no one was worried about their personal safety, even people who had break-ins. These guys just wanted your stuff, they weren't interested in killing or hurting you. People carried mugger money, $10 or $20 they'd hand to a robber in case they were accosted.

You've said you don't even believe they are threats, just robbers, but you feel justified in blowing them away. That's depraved.

Plus you are kidding yourself that your precious pop-shooter is any protection if you were to get a hardened criminal pissed off at you. Being good at a practice range or hunting has no relationship to using a weapon in a real life situation. Even cops, who generally have their weapons drawn before going into a hostile encounter, hit their targets only about 15-20% of the time (cops have a higher success rate because they travel in pairs, usually have their weapons drawn and aimed in advance, and can call in backup if they really get in trouble).

And they've studied how effective guns are. The short answer is not very. The Tueller Rule, based on numerous studies, is that within 21 feet, an assailant can get to you before you will get your weapon out and aimed. And cops have them in holsters, far more accessible than they'd be to you.

Try pulling out a weapon, and a serious bad guy will kick you in the groin or ribs (crushing your liver or spleen depending on how he decided to aim) or gouge your eyes out, and for the encore, slam your head into the pavement and crack your skull open. But be my guest. Try escalating a fight with a robber. Maybe you'll be right, but if he's a real criminal, you are the one more likely to wind up dead.

This advice, BTW, comes from folks who helped develop the hand to hand combat course for the Navy Seals and now teach cops, the FBI, and interested laypeople, and they study tapes of prison fights and police encounters. So the scenario above isn't theory, it's what often happens.



I just noticed your response to Jess after I wrote my response to you. You are seriously overestimating the competency of cops! Many are capable, but many are not. Many are a danger to themselves, their fellow cops, and the citizens they serve. They should not be allowed to carry guns. On the other hand, many of my civilian friends are far more capable to defending themselves and others than are many cops. Blanket statements and policies are for governments; they have an agenda.

"Just give them what they want." "Then they will go away!" It is not quite that simple when one is dealing with a sociopath, and there are a lot of them. Freedom of choice fits here too. If one's freedom to have the means to defend one's self is denied because of some blanket statement by some element of power in society, then we have lost

We then have returned to the law of the jungle, where the strongest and most ruthless rule by violence. The firearm is the only effective available equalizer and it makes the weakest woman equal to the strongest and most vicious man. The police do not protect people except in a matter of pure happenstance. What they do is arrive after the event and take pictures of the mess. Then they try to catch the bad guys before they do it again.


When I read comments like these, I get depressed. I am astounded at the depravity in the US.

Whys is it that in Canada and Europe, we generally don't feel the need to carry arms? We can generally walk around anywhere without being afraid of getting robbed or attacked.

Why is that? Is it because we have more equality? Gated communities are frowned upon. We believe that it takes a village to raise a child.

You know what I find really depressing? It's that I see the American way of doing things creeping up on us. Gated communities are popping here and there. Our prime minister is accelerating the process with his neoliberal or neocon policies. Inequality has ballooned… it is still being masked by a real estate bubble where equity is making the low middle class do stupid things. But it is appearing here while most do not see it and I have no clue how to stop it.


Right on. Creeping neo-liberalism has hit Canada. Even Quebec, which pretends to be so progressive and socialist, has been cutting their $7.00 day cares and unemployment budgets, and throwing in some nationalism to divert attention away from the reality that Pauline Marois is right-wing.

Yves Smith Post author


I have more knowledge of this terrain than you might think.

1. There are pretty clear indicators of social (male posturing) and economically motivated crimes versus anti-social violence. They stop talking. If they are still talking, it's still a social interaction. Even a crime can be a social interaction. If it's social, you may be able to keep it social. Plus you may have no better options:

2. As I indicated, guns are far better at getting your loved ones killed in your house than in any kind of self defense. Even cops have trouble using them well in the heat of battle. If someone is in close proximity to you and has bad intent, you are not going to get your weapon out in time to hold him off. Not even close.

If you are serious about self defense, take a course taught by people who teach law enforcement professionals. And not martial arts, that's a sport.



Thanks for your advice on seeking instruction from professionals. I'm way ahead of you though. For the past 30 years I have been inventing and selling them a few of their favorite tools. Some of my closest friends are prominent weapons and tactics instructors for the FBI, Secret Service, Seal Teams and Delta Force. In some cases I am not particularly proud of this, as some organizations such as SWAT teams and other groups have totally corrupted their original ideals. Nevertheless, I have taken instruction on a regular basis and it has been one on one and free of charge in all cases.

You are right about martial arts, as they are not of that much value in reality.
These guys deal in reality though, and the reality is that they cannot protect us from violence, simply because they cannot be there at all times. There is an old saying in my social community. "I carry a gun because a cop is too heavy."

If you carry a gun, at least you have the option of using it if it comes down to a life or death situation. Freedom of choice again. Of course, one most certainly must have instruction in rules of safety and proper use. Concealed carry permits always require an extensive background check and basic instruction. Blanket statements and policies by government and well meaning individuals restrict this freedom of choice.

It is sad that we live in a society that is saturated with the mentality of violence. My visits to western Canada always give me a glimmer of hope. But the reality is that we do live in a culture of violence. Our children are almost constantly entertained by the same computer games our military uses to de-sensitize soldiers to killing. TV and action movies present lethal violence as a normal solution to many problems. Our wonderful country has been fucked up by the mass media and other factors in more ways than one!


To the moderator:

It appears that the truth is way too uncomfortable for this forum. A real discussion is not just preaching to the choir. It involves civilized disagreement and tolerance for diversity. Thanks for giving me the opportunity to present my points of view!


I agree. Thanks for letting all sides chime in.


"guns are far better at getting your loved ones killed in your house than in any kind of self defense."

The studies that presumably make up the basis for that statement have been discredited because they did not segregate out houses and homes used for or by people engaged in criminal activity, most notably drug dealing. And those studies usually linked having a gun in the home to being shot — but NOT by your own gun. (Granted, that does happen from time to time, but it is not nearly as prevalent as the gun-banishment folks would have you believe.)

What's interesting about this debate is a story that was on HuffPo earlier this week. A former husband was shot dead by his ex-wife in their former family home 15 minutes — FIFTEEN MINUTES — after they left court where a judge slapped the guy with an injunction not to come near his former wife. In this particular case, after he broke down the front door she retreated to the bedroom and only after he broke down that door did she shot and kill him. By your reasoning, she should have never had the gun in the first place, leaving her these options:

a) Wait however long it took for the cops to get there, and quite possibly being killed before then.

b) Climbing out a window and trying to outrun her obviously enraged, adrenaline-pumped up husband. Good luck with that. (Not to mention the idea that fleeing would have left any children in the house at their psycho father's not so tender mercies.)

BTW, just to clear the record of any lingering doubts:

a) I am not, and have never been, a member of the NRA and I have nothing but disgust for their stance against background checks and their shilling for the firearms industry.

b) I have been a registered Democrat all my life (although after Obama's betrayals my Dem status merely reflects my desire to vote in the state legislative primaries for my district). In fact, I'm such a racist whacko gun-nut cracker that I worked in Tom Bradley's first campaign for mayor of L.A. (For those not aware, that would be BLACK Tom Bradley). Among my other liberal bona-fides are volunteering in the campaigns of JFK, RFK, and McGovern, plus over two decades of activism with local initiative and referendum campaigns fighting over-development and bond-issue boondoggles.


"I lived in NYC in the bad old days, when pickpocketing and other types of theft were common. But no one was worried about their personal safety, even people who had break-ins. These guys just wanted your stuff, they weren't interested in killing or hurting you. People carried mugger money, $10 or $20 they'd hand to a robber in case they were accosted."

So, in effect, the robber has a right to your money or belongings without resistance? Then why do you refer to that time as "the bad old days"? Seems to me that was your perfect world: poor thieves took your money with impunity, no threat of suffering harm, and all was right with the world. $10 or $20 was just "mad money" for you Wall Street types but you made no mention of the people for whom $10 or $20 was a lot of money, enough to buy milk and groceries for the kids, enough to ride the subway to their job for an entire month, etc. And in those days, $10 or $20 bought a lot. Today the equivalent would be what, $50 and $100?

And, like the example given of the doctor who shot the kid breaking into his car, you believe that it is the sole responsibility of the crime victim to assess what is the appropriate, or potential, result of any response to the crime? The doctor has to ask, "Is it worth killing some one over a battery?" but the thief NEVER has to ask, "Is a battery worth getting killed over?" That's how it's supposed to work?

Let's examine the motivational aspects of the crime: If the thief needed the battery because he's poor and the battery to his car died, perhaps that mitigates his crime. But it also begs the question, "What does he need his own car for?" If it's to drive to work or the store/pharmacy for food and medicine for his family, then that's more mitigation. Conversely, what if he just wants to be able to cruise around, go over to his chick's crib to get laid, hang with some buds and smoke some weed? (Not that I think there is anything wrong with smoking weed, but let's face it, that reason pales against the others I've mentioned.) Or what if he needs to battery for his car so he can pull off a robbery or deliver some dope to a buyer?

Now let's turn it around and look at the doctor's perspective:

Why should he devote 12 years of studying and a grueling internship to become a doctor, incurring mountains of debt in the process, only to arrive at a position where he has to let a thief steal the battery out of the his own car in his own driveway?

What if the doctor gets an emergency call, what if he is a neurosurgeon or a key member of a heart-transplant team and suddenly his special skills are needed, but he is delayed (or even prevented) from getting to the hospital or patient in time because his car won't start and he has to get a friend, neighbor, cab, etc?

What if the patient who dies, or suffers irreversible brain damage, is a close friend or relative of yours? What if it was Lambert? Glenzilla? Naomi Klein? Edward Snowden?

Yves Smith Post author

You've just proven my point to have to resort to such strained hypotheticals.

It is depraved to think that theft of property justifies killing someone. Period. Depraved. Take your sick world views and go pollute another site.


You are absolutely right that the doctor had no moral or legal right to shoot. I hope that the doctor got life without parole.

In the Florida M vs Z case though, Mr. Martin's constitutional right to attempt to bash the brains out on the pavement of someone who irritated him was violated by Mr. Zimmerman.

Yves Smith Post author

The idea that Martin was a threat to Zimmerman was never established. Zimmerman had no serious injuries and the angle of the gunshot that entered Martin could be explained by theories other than that offered by the defense.

There are really obvious reasons why SYG is a bad idea: male posturing. Guys get in bar fights all the time, and one slugs the other and one guy falls and cracks his head on the floor or the bar and winds up dead.

The Zimmerman verdict has just officially opened up hunting season on minorities. Some white dude accosts black/Hispanic dude and utters a racial slur. Black/Hispanic dude gives him some lip back. White dude escalates and starts getting verbally abusive, maybe gets in black/Hispanic dude's face. Black dude backs away and reaches into pocket to pull out cell phone. White dude shoots, claims later he thought black/Hispanic dude was pulling out a gun whether or not he actually felt threatened.

Rinse and repeat.

You might as well call it "legalized ethnic cleansing"



Zimmerman had "no serious injuries" YET. As you pointed out in the next paragraph about the bar fight though, "one guy falls and cracks his head on the floor and winds up dead".

Considering "ethnic cleansing", black folks have a legal right to buy and own guns, just like white folks, and they do. (unless they are a convicted felon of course) When they use these guns on either whites or blacks, there is usually no mention of race. Quite the contrary when whites use them on blacks. Another case of the media trying to create a frenzy.

All indications are that Zimmerman is (was) a wanna be cop and a fool. He did not physically attack Martin though. Martin violently attacked Zimmerman evidently just because he felt offended. He was using a deadly weapon, the pavement, apparently to try to remove Zimmerman's brains from his skull.

I would submit that you and many others have been watching too much TV and too many action flicks. They do not begin to accurately portray the ugliness and sometimes brain damaging or even fatal results of a severe beating inflicted in an unyielding environment such as a city street or sidewalk.


When they use these guns on either whites or blacks, there is usually no mention of race

Perhaps not, but if they are caught, they are arrested, convicted, and sentenced to prison. They aren't acquitted, much less released the same night without an investigation or being charged.


Dave, Zimmerman did not physically attack Martin? After stalking him in a van (if you've never been stalked by somebody, it is frightening), He SHOT him. To death.

Martin was trying to stand his ground, after being psychologically terrorized by a vigilante. Had Zimmerman not done that, nor been emboldened by SYG laws, that boy would be alive today.


There's a logical flaw in your statement:

"Without a Stand Your Ground law, the rights all reside with the criminal. You, the victim, are required to retreat. The criminal has the right-of-way."

Both people walking down the street have the rights you speak of. It's only after one of them assaults the other that you can call them a criminal. Until something happens, both people have the right of way. SYG seems to allow a pre-emptive defensive strike, to something that may or may not be there.


"Both people walking down the street have the rights you speak of. It's only after one of them assaults the other that you can call them a criminal. Until something happens, both people have the right of way. SYG seems to allow a pre-emptive defensive strike, to something that may or may not be there."

Wrong. SYG only allows you to SYG after you have been threatened. Two folks walking opposite directions, both have equal rights. But absent SYG, once the other guy pulls a gun or a knife or a lead pipe and demands your money, he has the right-of-way. You must retreat and/or fork over to avoid confrontation. It is your responsibility to insure that the situation does not escalate. Forget the guy aspect; if you engage in hand-to-hand combat with the guy, you're liable for his injuries because you didn't comply with his demands and/or retreat or flee. This is the absurdity of jurisdictions without SYG laws.


Should be "forget the gun aspect".

Can we please have an edit function? Pretty please?


Can we please stop paying attention to anything you have to say.

Lambert Strether

Wrong. Not "have been threatened." Feel threatened. Unfortunately, racists tend to feel threatened by black people. CNN:

A Florida man charged with murder in the fatal shooting of a [black] teenager amid an argument over loud music at a gas station pleaded not guilty Monday.

Michael Dunn, 45, entered his plea during a hearing Monday morning at the Duval County, Florida, jail.

Dunn told investigators he fired at a car in which Jordan Davis, 17, and three of his friends were sitting because he felt threatened by them. No guns were found inside the teens' car, the Jacksonville Sheriff's Office said.

So, if open season on black people sounds like a good idea to you, by all means support lost cause "stand your ground" laws.


And you'll notice the man has been charged with murder. That's what gets the whole SYG issue confused. As I understand it, any SYG defense predicated on the idea of "feeling threatened" rests on having some valid reason, such as the presence of a weapon, menacing behavior, etc.

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middle seaman

Hedges mentions the Swedish success of eliminating poverty in the 80s. This success belongs to Social Democrats which, in this country, means the more liberal wing of the Democratic Party before Reagan. Social Democrats don't equate with socialism. Socialism which, at least most of its 20th century life, means a very limited capitalistic economy. We know that system doesn't work.

The left has weakened drastically during the late 20th century years and since then. The US is not alone in that. The Israeli left deteriorated to almost a joke. Many European countries went the same way.

The US left became increasingly frustrated with its inability to respond to popular affinity to low level affluence. It became Tea Party left. Hate became a major factor in everything. They gang raped Hillary. They abandoned labor unions, they rejected poor whites, they hated everything right wing and developed a racial rejection towards Israel that was copied from its European equivalent whose source, mainly a Millennium of European Anti-Semitism.

Uprisings don't help. Million demonstrated, with limited violence, in Madrid, Athens and Tel Aviv. The rich couldn't care less. The Arab Spring, a historical and universal achievement of the Arab youth, has been kidnapped by Fundamentalists.

In the two segments so far, Hedges provides important information, but his prescription for solutions are awfully misplaced.

Chris Rogers

Hugh Sir,

Sorry to rain on your parade, but most left-of-centre parties in Western Europe were founded on Socialist, as opposed to Communist, foundations and principles – as an example, within Germany from the states founding in 1871, and until the mid 1950's the German SDP group was an avowed Socialist movement – the KDP, an off shoot of the SPD, was an avowed Communist Party.

Here in the UK, the Labour Party founded at the beginning of the 20th Century was an openly Socialist and progressive movement – even if its leaders when in power failed to honour Clause IV of the party's constitution.

The UK Labour Party under one Tony Blair ceased to be an avowed Socialist/Labour Party with the removal of Clause IV in the mid-1990's – the rest is history, for as with the US Democratic Party, the UK's Labour Party is as addicted to neoliberal economics and self serving careerist politicians as the Democrat Party.

The German SPD had its Blair moment in the 1950's, but was still a credible left-of-centre progressive movement well in to the 1990's – not so now I'm afraid.

In a nutshell, most Northern European left-of-centre political groupings favoured whats referred too as a 'mixed-economy' with state and private enterprises – Southern European nations, among them France, have a somewhat different history as far as Communism and left-of-centre political groupings are concerned, much of this religious-based, namely the Catholic Church.

Whilst its been a while since I've studied European comparative politics, you had common threads in Europe in the more Northern states.

Its all interesting stuff, but Communism, not to be conflated with Socialism or social democratic movements, was always more stronger in the Southern European nations – we should discount Weimar Germany's experience, which was an exception to the rule as politics became more polarised due to economic dislocation.

What is a fact, and one usually well hidden from the US populace, is how brutally repressed anything with a hint of left-of-centre smell to it was in the USA, this from the time of the Irish diaspora through to the treatment of OWS.

Its truly shocking now that Nixon could be accused of being a Socialist by those running both the Dems and Republican's presently – which gives an indication of how much to the right US politics has moved in less than 40 years, and this trend coincides with the ascendency of the economic philosophy now referred too as 'neoliberalism', which in reality is a backwards looking system of governance and economics born out of the Victorian era – it really should be consigned to the dustbin of history.

As for myself, born and raised in the South Wales valleys of the UK, I have no issue calling myself a Socialist, which is a philosophy again that favours a so called 'mixed-economy' wedded to a strong welfare state – I'm certainly no Communist, although have o issues with much of Marx and Engels output, as well as many other noted left-of-centre progressives and revolutionaries of the later part of the nineteenth century.

Chris Rogers

That should be in reply to Seaman and not Hugh – so an apology to Hugh.

from Mexico

That's a great comment, but I think socialists have to do some really profound self-examination and soul searching.

Lawrence Goodwyn, for instance, in The Populist Moment renders a rather harsh criticism of socialism:

On the available evidence, twentieth-century people around the globe are paying a high price for their submission to the hierarchical languages of political analysis that have grown out of the visions of Adam Smith and Karl Marx. The problem that will doubtless interest future historians is not so much the presence, in the twentieth century, of mass political alienation, but the passivity with which the citizenry accepted that condition.


But while American socialists, for reasons they themselves did not cause, can be seen in retrospect as never having had a chance, they can be severely faulted for the dull dogmatism and political adolescence of their response to this circumstance… [I]ndividual righteousness and endless sectarian warfare over ideology came to characterize the politics of a creed rigidified in the prose of nineteenth-century prophets. As a body of political ideas, socialism in America — as in so many other countries — never developed a capacity for self-generating creativity. It remained in intellectual servitude to sundry "correct" interpretations by sundry theorists — mostly dead theorists — even as the unfolding history of the twentieth century raised compelling new questions about the most difficult political problem facing mankind: the centralization of power in highly technological societies. If it requires an army responsive to a central political committee to domesticate the corporate state, socialism has overwhelmingly failed to deal with the question of who, in the name of democratic values, would domesticate the part and the army. In the face of such a central impasse, it requires a rather grand failure of imagination to sustain the traditional socialist faith.

Perhaps this is what Hedges means when he speaks of the "inability to articulate a viable socialism."


One of the issues I see hindering the liberals in North America is their focus on materialism.

What I have noticed is that those of a conservative mindset tend to see the pie as limited in size and those of a liberal mindset tend to think that the size of the pie can be unlimited. Admittedly, there are those with a conservative mindset who do think resources are unlimited but their primary goal is often to corner the markets so they can control a bigger portion of the pie and this caps the size of the pie.

I believe the pie can be unlimited but not as long as our money and economic systems are primarily based on hard goods and materialism.

I think the liberals will always lose when the resources become scarce within the scope of the economic system at the time. When the hard assets got scarce in Europe, we got the righties digging their heels and mass exodus.

Now that all land is owned in the US, we are slowly seeing a creeping rentier society. And globally, there is not much more land to go to that is free for the taking.

Materialism individualism will need to shrink for our situation to improve. I am optimistic humanity will improve and technology will help but I don't think this will happen with 7 billion people on the planet.


We need to put birth control chemicals in the water! Personally, I would tax children rather than greedy capitalists.


That's what we're doing, except we don't explicitly call it taxes.


I have a different impression of US labor history. "Bread and roses" in Lawrence, those iconic "I am a Man" signs in Memphis, the Wobbly soapboxes in Spokane…all pretty creative if you ask me, and hardly passive.

"Intellectual subservience to sundry correct interpretations?" Not down in the trenches, where it mattered.


Goodwyn's point is perhaps not inaccurate when discussing the history of socialism in America, but you're point is equally well taken: history isn't destiny.

from Mexico

@ Yalt

Your take sounds closer to that of Reinhold Niebuhr:

The American labor movement was almost completely bereft of the ideological weapons, which the rebellious industrial masses of Europe carried. In its inception it disavowed not only Marxist revolutionary formulas but every kind of political program. It was a pragmatic movement, born of the necessity of setting organized power against organized power in a technical society. Gradually it became conscious of the fact that economic power does try to bend government to its own ends. It has, therefore, decided to challenge a combination of political and economic power with a like combination of its own…

More recently, housing, medicine and social security have become matters of public and political policy. All this has been accomplished on a purely pragmatic basis, without the ideological baggage which European labor carried.

–REINHOLD NIEBUHR, The Irony of American History

Niebuhr may not be an unbiased source, though, because he was a member of the Socialist Party up until 1940. Niebuhr's break with the Socialist Party, however, was related to pacifism, and not specifically due to labor or welfare society issues. Niebuhr had been a pacifist, but his position had changed so that it was no longer reconcilable with that of the anti-war Socialist Party. It was also over the issue of pacifism where the Rev. Martin Luther King parted ways with Niebuhr.


No, that is not my take.

Niebuhr's use of the term "baggage" is telling. The Wobblies were as principled, as "ideological" in the true sense of the word, as any labor movement I can think of. "Bread and roses," the demand for the satisfaction of spiritual and not just of material needs, was anything but pragmatic. The Seattle free-speech soapbox action was a sophisticated civil demonstration and a deeply political act.

Their deeply-held principles, their ideology, gave them a moral power that organized US labor has never regained. For Niebuhr this is "baggage".

There's a reason he found it so easy to make his piece with the militarists, and there are few people I would less want to see my views conflated with.

Chris Rogers

@Down Mexico,

Can I first refer you to a post I made in yesterday's comments on Hedges first Real News interview, namely, due to the elaborate language he utilised in his opening missive, he'd already lost the argument due to the fact that if you are from a non-universiry educational background most would not have a clue what he was talking about – I do not blame a persons ignorance on them personally though, this issue has much to do with the education system and other modern distractions – this applies in equal measure in the UK and USA.

Further, and when you reference 'socialism', it seems to me you always do this from the vantage point of having read it in a academic book, rather than actually lived or experienced it.

To be perfectly honest, I do not believe you can learn about socialism from a book or academic study – socialism must be in the heart and learned from real life experiences and real life struggles and only the poor, or, as I refer to it, the working class, can have a true and meaningful understanding of what socialism is, and again this is learn't from real life experiences – for this and this alone, I'd always rather read Thomas Paine, than anything written by the supposed great minds of political philosophy, i.e., I cannot abide John Locke.

Now, you are instructing members of the working class, whom many would believe should be well versed in socialism, to re-evaluate what socialism and left-of-centre politics is about, this despite the fact that the vast majority are not versed is such matters. And this is because, on the whole, the State denies them an education whereby by they can be versed in left-of-centre political philosophies, never mind, there own history and contribution to the formation of the USA, both prior and after 1776.

Further, in the USA at least, talk of the working class is avoided, i.e., as far as I can tell, the USA has no working class, you are either middle class or blue collar – but never working class.

This I find strange, for where I grew up, we were all fully aware of what class we belonged too and the socialism and working class solidarity I often refer too originated in actual real and oppressed communities, where working class solidarity was essential if we were to better ourselves and reverse class injustice – to all extent and purposes, one is talking about 'communtarianism', which our friend Rousseau discussing in much of his own output.

Now, as highlighted, and thankfully I was lucky enough to have a good education paid for by the state, whilst I may be able to cotton on to much of the debate, dialogue and academic-based research and philosophy many here highlight continually, the fact remains, that many of those who are required to combine forces to change matters, be this by legal means, or revolutionary means, to be frank, have little idea what many are discussing on these boards – and yet, these are 'socialists', they just do not understand it because class and education are denied in the USA and many other nations.

Anyway, that's my two bobs worth, but, its no good preaching to the converted and highlighting how well read we are and expect revolutionary change, if those forces that can bring about said change cannot understand us – might as well speak in Latin.

So, I do not think left-of-centre grouping, namely the working classes need to re-evaluate themselves – progressives and academics perhaps, the working class that's denied a class consciousness certainly cannot do that – and these are your socialists and the vanguard necessary for a better tomorrow.

charles sereno

Just came late upon this discussion and was impressed (and maybe missed some of it). I see several viewpoints, not particularly contradictory, though typically ones employing the kind of arguments that lead to non-productive cat fights. One bit that I can add based on experience is this — the "masses" (or fill in the blank) are not unattracted to the intellectual elite, on one condition. That condition being that the person espousing views, (even when offensive to those they currently follow), has risen up from their own background and have experienced enough of it to understand how they think. Once that happens, they swell with pride and are eager to learn new ways. This is the makings of a true revolution. The acid test of a leader is this — Does he/she fully comprehend that one's own competence in a particular area must be accompanied by a quest for leaders in many other areas?
The problem Chris Hedges has (not his fault) is that his audience doesn't suspect how much he's shared their own experiences.


I suspect the academic left in the Nordics and elsewhere were too effective at selling the message of education as a road to a high wage.

To take my home country of Norway, the supposed labor party has become something of a bureaucrat's party. And their "socialist" splinter party has mostly focused on students, academia and foreign issues.

In its place has risen a populist right wing party focused on entrepreneurship and the myth of the self made man. Meaning that there is no political party that think about the industrial and service worker from their own point of view.

It is either from the professional administrator/bureaucrat point of view, or the budding business man point of view (where the laborer becomes a one man business doing contract/consultant work rather than wage work).


Parts of your post are sort of facepalm.

Firstly, what is wrong with not supporting that center right clown Hillary? Do you really still think she would have been any different than Obama? Or Bill Clinton for that matter?

And the antipathy towards part of the left of Israel, which by the way is certainly a minority (DiFi is part of the 'left' for gods sakes! Shes practically Israel's representative to the Senate!), is most certainly not based on racial grounds. To suggest as such is a thorough misdirection and strawman, and quite insulting.

Though I agree with most of the rest of the post, with the exception of your attitudes towards socialism, which Rogers debunks far more ably than I.


Most social-democrats are described as being proponents of a managed economy. You allow capitalism to thrive where it thrives best and you guarantee that citizens do not suffer from deprivation. When capitalism goes awry you stem pin. Scandinavia was never socialist–it always had capitalism at the center of the economy.

Tokai Tuna

I thought the Arab spring was promoted by NGOs and the like, but billed as an authentic youth uprising. Fundamentalists are fine as long as they still behave like Mubarak did. Behave as 'Murica prefers and we'll call it a Democratic incubator of Jeffersonian Fundamentalism, the weapons and money are on the way – it's getting harder to buy people off these days.
Part of the problem with the "American Tinderbox" is the torrent of misinformation and propaganda aimed at everyone. Right next to Hedges columns for example, you'll see Eugene Robinson, who chops out the type and posts a civil whimper of protest. Starbucks readin'.


I suspect it was both at the same time–that was certainly the case in the Ukraine, where the great majority of the Orange demonstrators were blissfully unaware of the fact that the movement they embodied was being funded by and steered from the West.

It's not so different here–our local Tea Party crowd really believes they're a genuine grassroots movement set off by a completely unscripted and impromptu television rant. They know nothing about the Kochs, if you told them they wouldn't believe you, if they believed you they wouldn't care.


Respectfully, that which you describe as "left" is nothing more than a faction of the neoliberal movement. Faux "progressives" of the MSNBC variety are nothing more than useful stooges for the official narrative which seeks to convince us that the Democrat party is a leftist party, that Obama is the best thing since sliced bread, that there is an actual alternative to the neoliberal sociopathy which is leading us into the serfdom of the new Dark Age. And I refuse to recognize anyone named Clinton as a leftist, what with NAFTA, Graham-Leach-Bliley, and the unhealthy Rubinite dependency…


AMEN. My thoughts exactly.

I fail to see why some 'leftists' are STILL upset that Obama beat that Rubinite Hillary. For those folks, whenever Obama does something bad, they say, "Ah, Hillary would have been so much better!" with absolutely no evidence at all that she would have done anything different. Its sort of nauseating to me.


Another AMEN.

And it's not "sort of nauseating" to be, it's just nauseating.


I don't agree with that. I think Clinton would have been a fair bit better than Obama. Obama is a centre-right corporatist, Clinton's a centrist.

But the big difference is she would have understood that there was no room for compromise with the republicans. Obama is a bit of a pussy basically, whereas Clinton isn't, and shew also understands the need to keep your base happy, which in her case included unions.


Lesser evilism again. Really?! Let me guess, her Secretary of Energy will be Ed Rendell… No thanks. And I will never buy the "Obama is a pussy" meme, he gets precisely what he wants.

Doug Terpstra

Yup, different puppets; same string-pullers, same show. Obama is puppet V2.0, artificial sentience, apparently without conscience or soul.

Tenney Naumer

It is utterly amazing how the introduction of fracking has galvanized Americans on both sides of the political divide. Anti-fracking movemnts are growing like wildfire across the country and they are also partnering with the anti-pipeline movements. People are looking at the role of city and county governments like never before. The battle between ordinary people and oil and gas companies and all the campaign money flowing in to state legislators have awoken the passive public.e


As it's said in politics, things can move quickly from the impossible to the inevitable, without stopping at the probable.

If we keep pumping a million or more college graduates into the workforce every year without decent prospects for employment, very soon we will have a critical mass of 10+ million who may be ready simply to "withdraw from the system". Young, educated, indebted, and unemployed.

I believe, of course, that power will try to cling to power: when social unrest emerges, the federal government will find the money for a massive jobs program. It's the least risky option, the most conservative, for the plutocracy.


I wonder what role Professional Sports (including NCAA) and the Entertainment Complex (including Iphones, Ipads, other entertainment devices) play in the Pacification of America. Seems most folks have their entertainment if nothing else.

Professional Sports all have virtual Monopolies granted by government fiat. They all get huge government tax subsidies either directly through stadia financing or other means. Every city in America has its team. Many of these teams are owned by Wall Street types or hedge fund guys (Boston Red Sox). Bernie Madoff was using NY Mets to get clients. The airwaves are full of Sportz Talk. Every newscast has its Sportz Update. The only alternative commentator I have ever heard really go after Professional Sportz is Alex Jones.

Universities too have all their Sportz, generally acting as feeders into the Big Money Sportz. Many Latin Perfessors will tell you that Sportz runs the University.

If I am not mistaken, is that not an ADIDAS shirt Tsarnaev is wearing on the cover of Rolling Stone? ADIDAS one of the biggest domestic and international Sportz suppliers and advertisers. So even Tsarnaev has been Sportz brainwashed? I have seen this many times. Michael Moore wearing Sportz hats. I have seen demonstrators at labor rallies wearing NYYankees hats. NYYankees, the team of Wall Street.

Then there are numerous Progressives and Liberals who all have their favorite teams. Really remarkable, they do not even understand the link between Sportz, the State and the Great Deterioration. No, they need their lighter moment at the ballpark where they can forget, guzzle ten dollar beers and be advertised to.

Then there's Hollywood, Disney, and all the Entertainment conglomerates who control that Industry. Not exactly Occupy material.

Lastly, all the Tech Toyz. Ipads, phones, Facebooks, etc. to divert and entertain us all on the way down. Get all the latest Sportz scores and Celeb Chatter. Cheaply too. If things get really bad, the 1% can just give free sat TV and the newest Apple trinket to the 99% and just keep on truckin'. Just like buying Manhattan for $24! Maybe throw in a ticket to the BIG GAME.(Obummah gave away free cellphones.)

Why are Sportz, Entertainment, Tech Toyz all ignored as factors in the Pacification of America? Is it because we all have our favorite teams, conglomeratized entertainments and Tech Toyz? Seems that there is one Big Elephant no one is mentioning.

So, being from Boston, go Red Sox, Patriots (there's a name a revolutionary can love), Celtics, Bruins, BC Eagles, Harvard Crimson,…. etc.

What's your favorite team or TV show or Tech Toy?

When is NC going to have a Sportz Section?

Boston Scrod

Skeptic doesn't seem to appreciate the fact that our founders freed us from the yoke of colonial oppression so that we could use our hard won freedom to commit our lives to the enjoyment of spectacle and entertainment, both real and virtual. Wake up and smell the coffee, man!

mark worden

Neil Postman: Amusing ourselves to Death. comes to mind.

not to mention….bread and circuses

Adam Noel

Good comment and one with many here agree. This is why I am completely fatalistic about change coming as long as the entertainment-media nexus exists. No change can occur because change would entail missing Glee, The Kardashians or the Football game.

From an evolutionary perspective the current system is novel. This system, through pursuit of the profit motive, has been optimized (selection of products that produce the most profit will result in more of those products. These products, if they are to be extra-profitable, most exploit psychology in some shape or form) to override our instincts and drive consumerism.

To a certain degree even those who profess to be proponents of change (Michael Moore, etc) view such events as "just fun" while they are nothing like the sporting events, plays, etc of the century prior. These events, once you are plugged into them, are marketing machines optimized to ensure you keep coming back.

Huxley is ultimately more right then Orwell. Most people read Huxley and are terrified at the idea of soma yet fail to recognize such a system already exists. Through exploitation of evolutionary novel contexts to produce rampant consumerism we are already enslaved. Like you said, as long as the entertainment-media complex keeps on churning out content nobody will notice.

People who promote wanting a simpler life cannot compete with sky-diving out of planes recording the experience with google glass, jumping off ramps and then zip-lining (Or something) into a press release. Life is Hollywood now, baby. You either go big or go home.

F. Beard

Quit blaming the victims!

Back when most of us were on the family farms the banks stole, there was plenty of wholesome entertainment and work to do.

But now most people have to make do with the mess of pottage they've been given in return – cheap entertainment and mass consumption.

Adam Noel

I do agree with you that it is not anyone's fault. It is a way of life now pretty much and as I said to a friend before… when I look behind it all sometimes there is still a distinctly human character to some of it. (i.e. all is not lost)

For example, watching a television show with a sibling eventually becomes part of the bond between those two siblings. Sure, to a certain degree, it is a mass produced pile of garbage but the bond formed through the mass produced pile of garbage is still meaningful.

It is never the victim's fault and to a certain degree it isn't even the oligarch's faults. The system itself is the problem.

F. Beard

I do agree with you that it is not anyone's fault. Adam Noel

I've never said that. Those who set up the money system and those who continue to support it in the face of a just alternative are certainly at fault.


If you were them, you would do the same thing.

Empathy is what will help us get us out of this hole.

F. Beard

Speak for yourself.

I've lent people money quite a few times but never charged them interest. So it appears I can't even get to 1st bank when it comes to being a banker.



Cognitive empathy: the drive to identify another's mental states.[14][17] The term cognitive empathy and theory of mind are often used synonymously.[18
It's not a question of putting the person you are in someone else's shoes because the reality is that if you had the genetics, upbringing and experiences of the 1%, you would not be the person you are now.

Another reality is that you never really know how you would act in intense situations until you live it. I know, I've been there and it's an eye opener.

F. Beard

Actually dear, (now that I know you're female) I do realize that we're in a tragic situation and I don't blame very many at all. For example, I hate usury but I'm pretty sure my pension depends on it. I hate credit creation but realize pension funds are invested in banks.

I do seek a painless way out for everyone except sadists and those who seek to profit from misery.


I do realize that it is very difficult to get our worldviews across in blurbs.

And I do also realize that each one of us has a few pieces of the puzzle. Some more than others but each piece counts.

Chris Rogers

Noel Sir,

First, I concur with your analysis that a large part of the populace, be it in North America or the more northerly parts of Western Europe do seem to be addicted to Soma – of course referencing Huxley's Brave New World, which as with Orwell's 1984 is a wonderful dystopian novel predicting a ghastly future for mankind – indeed, if we mix both Huxley's dystopia with that of Orwell's, I think we are more or less 99% there in those northern nations where unemployment is at or below 10%.

I don't think we can say this for places such as Mexico, or many of the Southern European nations – many of whom due to poverty are unable to enjoy the 'paid for' bread and circuses our masters wish us to consume.

However, and what's perhaps even more interesting, and shall I say I think Yves's misses the point a little in Hedges second RN interview – there is actually no commons so to speak, no hallowed and commonly owned ground where critics can air a grievance and communicate effectively face-to-face. Indeed, we have to all extent and purposes become digitally atomised – and as others have noted, one cannot launch a revolution via digital means blogging on sites like NC. Indeed, NC actually benefits TPTB by the very fact we are stuck in front of a monitor or with a iPad posting comments on these boards, rather than socialising and rioting – which our friends in Southern Europe seem adapt at doing, namely in Spain, Greece and Italy, and sometimes in France.

So, my analysis for what its worth, which may be a little deterministic for some, is this: At our present juncture in the profit-driven proto-fascist nations such as the USA and UK we have the drip feed of SOMA, or as I refer to it as, bubblegum entertainment of the lowest kind, much of which you have to access via paid subscriptions. Now if you have high employment levels and a decent welfare safety net, its possible to keep persons of the street and from interacting at a personal level – be this in work, taverns, sports grounds whatever – what happens though, when the majority due to lack of funds cannot actually access these dumbing down services>

And this is where our trajectory is taking us, for not only under neoliberalism does every thing have to be paid for and a profit derived thereof, but by the very act of cutting wages and increasing unemployment to unheard of levels, our masters are digging their own graves.

I will make one further addition based on observations in the UK. Its been approx. 40 years since the neoliberal inspired counter revolution was launched, in which time we have witnessed a huge increase in inequality, unemployment and real poverty, exacerbated by the GFC – unlike its bedfellow though in the USA, so demented are our neoliberal baboons in the UK, that they have adopted a policy of austerity in a period of stagflation and high unemployment, however, the cutbacks are not only on the welfare state, quite the reverse in fact has happened to that in America, namely, even the forces of law and order, and the military have had huge cutbacks – with the only increase in spending on our secret services. So, instead of militarising the state apparatus, as in the US, our masters have done the reverse, i.e., they are so greedy and tightfisted that they will not pay for their own protection.

So, don't be surprised to see further outbreaks of public rioting and disorder in the UK over the coming years as further austerity is embraced – for if you cannot even afford the Soma, like most addicts you'll turn to crime, or combine with others and riot – as for political change, I think this will only come when this inflection point is reached, which is basically what Hedges is saying, and if the UK goes, so does much of Europe – particularly given we are about the most passive of all our European neighbours I'm ashamed to say.

Funny that!!!!!!!!!

from Mexico

Carlos Fuentes called it the new Baroque, a Baroque that had devolved into its Rococo extreme. There is no empty time and no empty space, as every space and every moment is filled with dazzling, lavish, elaborate, swirling splendor. Here's an illustration of the orginal Rococo:

It was also used in religous settings. Here's an example from Mexico, where the Rococo perhaps was carried to its most elaborate extreme:

Other terms for it are, in Mexico, pan y toros, or in Roman times bread and circus.

It didn't work out too well for Luis XVI or Marie Antoinette, nor for the Bourbons in Mexico. And some argue it wasn't a sustainable form of social control in Rome either, although I'm sure you are aware there are about a thousand different theories on why the Roman Empire declined.

Lambert Strether


Yes, the whole entertainment industry and consumerism did not arise randomly as everyone including nearly all leftists belive. It was engineered as surely as Hedges has carefully examined the origins of manufacturing consent by the power-elite. The current narrative we live under is not a random interaction of market forces–i.e., giving people what they want. I used to think that. One book that changed my mind, is Captains of Consciousness, Advertising and the Social Roots of the Consumer Culture written in the 70s that contains numerous quotes from the power-elite on how to condition the populace to create the culture you describe.

This is not the sort of natural result of freedom of expression and all that. Our fetters, our narratives have been carefully constructed using the best minds, the best materials, the best research available to enslave us not by jack-booted thugs–that clearly did not work but through what would have once been called "magic spells."

I believe that the interest in magic and fantasy has a lot to do with the fact that consciously we are not allowed to admit to ourselves that we live in a world manipulated by, frankly, evil magicians–they use our desperate need to believe we actually are "individuals" who want to be free to create our own identity. We're not, we're food for predators. Hedges, by the way does an excellent jobs in several of his books describing some of this though he and I disagree on some of his conclusions.

Lambert Strether

To them we are food. To us, we are individuals, fully human moral agents.


We are ruled by evil magicians. Objectivism falls on the same slice of the alignment pie as True (or Neutral) Evil:

A neutral evil villain does whatever she can get away with. She is out for herself, pure and simple. She sheds no tears for those she kills, whether for profit, sport, or convenience. She has no love of order and holds no illusion that following laws, traditions, or codes would make her any better or more noble. On the other hand, she doesn't have the restless nature or love of conflict that a chaotic evil villain has.

Neutral evil beings consider their alignment to be the best because they can advance themselves without regard for others.

This ethos holds that seeking to promote weal for all actually brings woe to the truly deserving. Natural forces which are meant to cull out the weak and stupid are artificially suppressed by so-called good, and the fittest are wrongfully held back, so whatever means are expedient can be used by te powerful to gain and maintain their dominance, without concern for anything.

Neutral evil characters are primarily concerned with themselves and their own advancement. They have no particular objection to working with others or, for that matter, going it on their own. Their only interest is in getting ahead. If there is a quick and easy way to gain a profit, whether it be legal, questionable, or obviously illegal, they take advantage of it. Although neutral evil characters do not have the every-man-for-himself attitude of chaotic characters, they have no qualms about betraying their friends and companions for personal gain. They typically base their allegiance on power and money, which makes them quite receptive to bribes.

The neutral evil is an unscrupulous, self-serving character who is only out for himself. Power, glory, wealth, position, and anything that will make his life more comfortable is his goal. It matters not who gets caught in the middle, as long as he comes out smelling like a rose. This person will lie, cheat, and kill anyone to attain his personal goals.

from The D&D Alignment System: Neutral Evil


The class war is ultimately based on the failure to understand how both human nature and money works. Ultimately it's a failure to understand the importance of balance. Balancing self-interest against other-interest and public creation of money against private creation.


That's for sure, ir as Henry Ford said many years ago before things got really out of hand, "It is well enough that the people of this nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

I'm reading Bad Money by Kevin Phillips at the moment, and although outdated by 5 years or so, the patterns he describes have gotten worse.

The first thing the Left needs to do is read this, have all their acolytes read it, and then ban all discussions on his nuanced politics (such as always describing the presidents of countries that castigate the U.S. as "strongmen" while using the polite honorific for those presidents/prime ministers that are our allies) and pay attention to the bare facts, as well as read NakedCap :)

I'm not done with Bad Money yet, maybe I'll change my mind, but until you get the average person on the streets to understand our system of money, nothing good will be accomplished.


see recent column of Prof. Johan Galtung of Transcend Peace University


If you're looking for a real tinderbox, check out the Comex. JPM's eligible gold down 66% in one day. LOL! One has to wonder how long the bullion banks and Fed can keep this game up? Any coincidence that the Fed is now reconsidering banks' commodity trading actions? Things that make you go hmmmm.

Perhaps Hedges should begin a movement to expose the gold leasing actions contributing to the obfuscation of balance sheets? In an age when regulation has become a joke, this is looking more like another MF Global waiting to happen. It's pretty hard to tender delivery of what you don't have.


And when they declare Force Majeure and offer settlement in cash only, the COMEX will finally be recognized as the "bucket shop" that it is.


I agree that Obama has been terribly destructive-whether by design or by accident doesn't really matter. And I agree that there is nothing very hopeful about the political "left". But there are pockets of hope and resistance everywhere-the low-wage organizing happening all over the country, the ripple effects of Snowden, the fight in Texas over choice. More and more people are recognizing class war, even if they don't call it that. And there are mainstream allies in this, even if they don't have the same rationale. It's always a question of how this dissatisfaction will channeled, if people think they can vote for Democrats indiscriminately and get change, than no, that is not going to work. But if a few independent voices could be elected, and/or if people can organize around specific issues, and hold accountable whoever is in office for those issues, things could happen. It's true that Americans don't take to the streets the way others do, but seriously what has all that street protesting got Europeans? As far as I can tell, nothing. I don't want to say protests are useless, of course not, but it's just as silly to suggest that's the only way significant change will occur.
I will tell in Chicago there is organizing all over the place, mostly by young people who fully understand what is at stake.


Actually, street demos have gotten the Europeans almost everything. The governments feared the public and provided them with the benefits they now receive because of that fear. This began to change in Europe starting in the 70s, like here, it's a long story but, at this time, the European left has been outmaneuvered pretty easily.


Jennifer, as your fellow Chicagoan I have to ask: do you honestly think that the organizing by the young people will overcome King Rahm's fundraising muscle and his court of 50 merry yes-men alder-creatures? I agree that in the past year the general level of awareness has increased given the events surrounding the teachers' strike and the total war on public education, but come 2015 will that be enough to overcome Rahm's ability to raise $2 mil every quarter? I think not. As a fellow "lakefront liberal" (from Hyde Park), let me share what I see on the South Side: struggling minorities who are unhappy with the status quo, but happily accepting a few minimum wage crumbs thrown their way by the Penny Pritzker/UChicago Hyatt development, (paid for with TIF money taken from their public schools of course), and asking for more of the same. I see an ever-accelerating stripping of the public assets and an administration which makes me long for the days of Little Daley. And worst of all, I see a majority which is too damn apathetic to do anything about it, with or without organizing. I am sorry but I do not share your upbeat view of the events in Chicago.


You should get out more.


Thank you for the advice, but I do get out plenty. I suspect I go to places where you do not. Hint: the North Side is not all there is to Chicago. I do have some very dear friends living in your neighborhood, good 'lakefront liberals' one and all. Their problems couldn't be further removed from the problems of the South Side populace, and I don't think one can organize people whose problems they don't understand. Regarding schools, Rahm is careful not to push north siders too far, something which he has no compunction doing to the minority south and west sides. That's because he knows only too well that north siders have the money and muscle to cause problems while on the south side power comes from churches and precinct captains, institutions which are in his pocket. Outside organizers as yet stand no chance given Chicago's racial history. Again, learn about the people you want to organize. I suspect that will require stepping outside Lakeview every so often. I am sorry if that sounds mean-spirited, I certainly do not intend it to come out like that.


Your protests will be tolerated and held to be constitutional as long as they have no real effect. If they start to have an effect, they will be ruthlessly suppressed.

Thor's Hammer

"Everybody Knows" Classic description of the world by Jonette Napolitano and the band Concrete Blonde

Thor's Hammer

And if apathy doesn't do it for you, there is always Jonestown.

Lambert Strether

The classic version…

Thor's Hammer

My instinct tells me that "Jonestown"has has more prediction probabiliity than all the dreams of tecnosalvation.

Paranormal Corpse
Paranormal Corpse

sorry, unsuccessful embedding

Corporate Elect

F. Beard

Looks like Leonard Nimoy.


Don't expect anything from the 'people'. Expect the gov't to go publicly HARD right and crash the economy in the effort to wring every last penny out of it. When power distribution, communications, dollar collapse and fuel shortages isolate us, the country will fragment. We'll see what shakes out after that.


Shutter, i tend to agree with your statement : " Expect the gov't to go publicly HARD right and crash the economy in the effort to wring every last penny out of it. When power distribution, communications, dollar collapse and fuel shortages isolate us, the country will fragment. "
For me, i would nuance your statement so that the focus ends up clarifying the force and monied long-term strategic planning that has concentrated the neoliberal agenda's implementation into supra-national institutions, tireless working at destroying national sovereignty by for example, multi-national trade agreements with corporate controlled investor-state resolution bodies. … For me, civil soceity clearly realizes how 'illegitimate' those publically financed economic bank bailouts are. … But TBTF banks are global institutions fighting to maintain hegemony and the maintainance of the status-quo which is ever needy, and always greedy. … It is inherent to 'the system'.
But, i really just wanted to mention Gar Alperovitz. His writings, to me, convey the role that 'pain' has in gradually becoming the catalyst for the building of the 'critical mass' needed to bring about … if not global institutional change … maybe regional pragmatic transformative change as communities take back control. … I do believe in people, the spirit of co-operation, innovation, and regional communities reclaiming sustainability. … Hedge's thoughts and writing continually throws cold water as a wake-up call.
Yes …, and as you may agree, … the battle is one of economies of scale ! … It is also about redefining the dominant narrative so that the moral, ethical, environmental, health of the eco-system, rejection of solely the fiduciary commitment, … etc., concern for the public good, …etc., … gets inserted into the policy making agenda. … ALEC has to go!
I don't think that a more equitable horizontal hierarchy can co-exist with the imperialist, militaristic, financialized, neoliberal global vertical hierarchy … furthered by some unrepresentative national governments. … The more regional 'pain' that we see the more daunting and yet also related we see different pluralist struggles. … I guess the question here is, how large can regional civil society friendly communities/regions become before the represent a threat to rule from the stratosphere. …
So, to come back to your comment, I also am very concerned the disaster capitalism's monsters are getting ready for profit from the fire sale ! … phrase


Personally, I don't think so. The hard right today has a strong and growing part that is against war, for civil liberties and sees our own government as the enemy. I believe they are far in advance of what is left of the left and offer the only avenue for change at this time. The government fears an armed and motivated public. They certainly try to manipulate the right by trying to induce racial hatred and all that but I don't think it is working so well anymore. The far right in this country is not fascist but libertarian–though there is a real fascist right I believe it is more a construction created by billionaires that, without considerable funding, would collapse.


Great point…I'm seeing that too here in flyover country. There have recently been publicly displayed banners supporting the 4th amendment, which may explain why some Republican politicians have actually been skeptical of Obama's position on surveillance. I think many here are finally getting that social issues are just a way to distract people from the corporate hegemony built in Washington.

Personally, I've been monitoring what I call the "Bullet Price Index". A couple of acquaintances of mine are avid gun collectors, and when I get a chance to speak with them, I always ask what the price of ammunition is, not at Wal-Mart, but amongst themselves in underground transactions. A typical .22-caliber round is what I ask about. About a year ago, the price was around 80 cents. The last quote I received, in June, is about $1.80 to $2.

Feel free to debate the implication of this, but I think this creates an opposing argument to the "frustrated individual" theory in this post. Anger is more widespread than even NC readers might think, and creates a risk that the possible results of this may neither be social-issue friendly, nor big-corporation friendlly…just another data point to throw into the mix.


Yes, I think if you live in the South as I do you see a lot of interesting developments particularly among the young who see the influence of the government as toxic. I had an interesting talk with someone not too long ago who came from Kentucky who told of her community being destroyed by Social Security disability checks and crooked doctors writing pain-killer prescriptions. She was looking for a way of just dropping out of society she was so disgusted.

The Rage

Don't agree with this at all. The "right" are just goons global capitalists want to use to abolish the bougeois states and turn all law to the capitalists.

fwiw, it ain't 'social security' checks that are doing anything, stop issuing them, the price would just go down and drugs would still be flowing.


Some, particularly the growing movement of pro-gun, anti-corporate, pro-libertarian, anti-globalist, anti-chemicals in your food are beginning to coalesce–I see it in young people in the fly-over country. That's where the action is.

Lambert Strether

I like that index.


The armed far right has a large number of religious zealots. If there ever is an armed rebellion, religion will be a major factor. The wars against the Muslims have been a significant issue. Many have been to Iraq and Afghanistan and actually consider those campaigns to be a Christian crusade. Many active duty officers certainly do. Coups have occurred in other countries when similar wars have been "lost". So if there is a revolution, it's possible that it may be a military coup.

Lambert Strether

Yes, and the Christianist loons at the Air Force Academy controlling some nukes. Happy thought!


My own experience is that the people who are into guns aren't necessarily religious–they use religion as a frame of reference but aren't that dedicated to it. I think they are more suspicious of the the political order and think civil society is disintegrating.


Americans will demand change when their vehicles are taken away, or their ability to drive those vehicles whenever and wherever they please (curfews, $15/gallon gas). Not before then.


No, not until the cable and the electricity are turned off.

Then fantasy world America is over and survival America will begin.

F. Beard

Here, Hedges laments the lack of an effective left, and blames its death on the "inability to articulate a viable socialism". Yves Smith

The Left speaks of sharing and equity but have never, to my knowledge, been against central banking which promotes usury and debt.


His discussion of socialism was vague. He seemed to suggest social democracy as the solution? Then just say it. There is such a lack of willingness to discuss concrete plans, with the exception of people like Richard Wolff, who has shared how worker cooperatives can be quite successful.

Of course, the social democratic state was preserved as an alternative to communism in Europe. Since "there is no alternative" to crony capitalism, the social democratic state is in pretty lousy shape in Europe, especially for those in the EU, although even Sweden has been privatizing its public schools (!) How viable is that model? It's better than the virus that's spreading throughout North American and Europe now, although there will always be some inequality under social democracy, albeit significantly less.


Agreeing with Yves' misdiagnosis of Obama, oddly referred to as merely "mediocre" by Mr. Hedges. Bush is venal, and Obama is just average? No, Obama is brilliant, because who saw it coming? The same man who wrote so eloquently about black male suffering in Chicago in his memoirs, could be so indifferent to children in Pakistan and Afghanistan? Who thought such a nuanced thinker could be such a brute, and thug? There you go.

He's a new breed, one of Morris Berman's hollow men with no moral compass and reminds me of another highly accomplished "progressive" with all the right academic credentials, Ms. Samantha Powers, who also proves to have a similar shaky moral compass. Now, she's totally cool with Israeli atrocities! Who saw that coming? But if it gets you ahead, why not? She's moving in high places, with the right books behind her (she has "proven" she cares about humanity), yet the monstrous capacity to work for this administration, and everything that entails (legitimizing mass murder and torture as foreign and domestic policy).

These people are so much scarier than Bush. What's that line from the Usual Suspects? The greatest trick the devil played was convincing the world he didn't exist. Obama and his ilk are real-time, real world shape-shifters.

For Morris Berman's talk:


Berman analysis is precise, but I am realllyyyy tired of intellectuals soaking their analysis of the US public in a wretched judgmentalism that rivals any Calvinist. It emerges from a deep sense of superiority. And anyone who thinks US public is too stupid to get that is too stupid themselves.

Thus the first question that Berman fields (24:50) is from someone bemoaning the failure of democracy and wondering about a benevolent dictator (via Plato, of course, right?). And Berman answers, among other things: "…de Tocqueville mentioned that democracy can only work if the population is fairly intelligent and we don't have that."

The next questioner tries to address this, asking about "A General Theory of Love" (Thomas Lewis ed) from which Berman quoted: "A good deal of modern American culture is an extended experiment in the effects of depriving people of what they crave most."

Berman says, further, "In other words, what we are channeled into by this system is substitute satisfaction. Because human beings want is what they've always wanted: community, friendship, sex, interesting things to think about, safety…And what this system does is it takes those things away and says, 'here, here's a cell phone…here's television'. It gives you stuff that basically is crap and it says, "You'll be happy with it" and generally people aren't, on some level. And that's part of the crisis, really."

This isn't part of the issue, it is at center. What underlies community, friendship, sex, etc, is the need to be to be loved and to believe that one's life is meaningful. When these things are methodically stripped from humans over decades (over generations) by a culture ruled by big business' bottom line of maximum profit, they will take the allowed substitutes, and they become defeated. Of course it follows that they will also become stupider. How could they not? They suffer malnutrition.

Stupidity is not the problem but a symptom. No wonder the working class remains alienated from the remaining handful of intellectuals. No wonder the liberal educated class never cared all the much about labor unions. And, FWIW, the working classes include all groups of color, because that is where they also predominantly reside.

Failure by superiority. Talk about stupid!


Terrific comment!!!! I agree with you on Berman, someone who does have the some of the best analysis around, certainly, for me Hedges and Berman, who are friends, should be at the center of any discussion on culture and politics. But Berman's demonization of U.S. culture comes from his own sense of alienation from the rest of us not his analysis, in my view.

We need all the things you say and we are malnourished on a psychic level. I've made the argument that we live in a new age of magicians. I maintain that Americans have been victim of a carefully calculated and engineered mind-control system. How and why this happened has been well-documented but isn't generally known. Both Hedges and Berman touch on it but they miss the power of the magic. By magic I mean both traditional stage magic and careful manipulation of the subconscious. Nearly everyone I talk to that is reasonably intelligent categorically denies that they are influenced by advertising. Well consciously, most people reject advertising claims–but unconsciously, if it's done right their subconscious accepts it and waits for the opportunity to express that acceptance. Much of our problem lies in our refusal, despite over a century of theorizing and research that most of our motivations come from the unconscious and this is most true in American intellectual culture. If you don't understand the overwhelming force of unconscious desires both individual and collective you cannot possibly understand contemporary society in any way–you would just be blindly throwing darts or coming to Berman's conclusions that we are just stupid and, eventually, to the conclusion that human beings are base creatures. My experience is that human beings are splendid beautiful creatures and this gap between beauty that I see inside people and the reality of their sad state has always struck me and pained me almost beyond belief. It is like seeing people being flogged and tortured from the inside–no wonder so many people are in pain physically and emotionally!!


Yes — those propagandists are the ultimate wizards behind the curtain, aren't they?

It's true that if we dismiss most Americans as unintelligent, we might fall victim to a kind of snobbery that alienates the very people with whom we need to build solidarity. I also agree that we shouldn't underestimate the well-oiled machine started by Bernays (Adam Curtis does a fine job of establishing this timeline).

Frankly, when I hear that Germans, Canadians, and British people aren't freaking out in massive numbers over the Snowden allegations, nor storming the American embassy, I start to realize that more and more people have been seduced and lulled by sophisticated lies, not only Americans.


Europe may have changed more than the U.S.–the dynamic there is fascinating. I see less hope there than here.


I disagree. It is true that Europe has changed more, but what is still true IMO is that unlike us in the US they don't have to deal with the chimera of the "American Dream" and its attendant belief in individualism over society. Class conscience there is still strong unlike here in the US where, as Chris Rogers has correctly noted, we act as though there are no class divisions. Never underestimate the capacity of the European masses to make important heads roll, figuratively and literally.


You maybe right there. But my instinct is, no offense to Europeans, that European society strikes me as being as even more confused than Americans by contemporary society. I agree that Europeans have more communitarian values one hopes that young people will find a way to move things in a more radical direction.


I am not sure precisely what you meant by "contemporary society" but I will admit that you may have a point, though from my experience it may only apply to some parts of Eastern Europe. I was born in one of the former "communist bloc" countries (one which is currently racked by protests), and what strikes me is the reactionary venom against anything perceived as "left", never mind that most people seem to have trouble defining "left" and "right" and never mind that it was the supposed "socialists" who imposed flat taxation. So we have the paradox of protests for social justice and complete public resistance to social spending or anything with the word "social" in it. Though it is due in part to the well earned distrust in the corrupt ruling elites, your point about the propaganda used to control, blunt, and misdirect the anger also applies. But this is Eastern Europe so I wouldn't use it to generalize about the rest of the continent. In my experiences and observations, Southern Europeans and the French are in no way confused about what is going on; the problem there as I see it is that the populace has yet to find an effective way to overcome the loss of sovereignty which has come with the rise of the EU and the financial control of international institutions like the "troika". And witness the explosive bitterness in the UK which manifested itself after Thatcher's death: the people didn't seem to have trouble identifying the source of their issues and remembered only too well how this new economic order was imposed upon them.

Perhaps I am biased by my euro origins, but I truly see Americans as far more compliant and easy to control. The myth of the "American Dream" I already mentioned. The myth of the "American Exceptionalism" is where I see the tool used to control the American people: we are exceptional so we must protect that at all costs, including sacrificing treasure to pursue our imperial interests abroad and sacrificing essential constitutionally guaranteed freedoms at home to "protect" us from "evildoers". I only wish I knew who would protect us from our "protectors"…


One important issue with Europe is its dependency on banking and the US. They can not deforest and energy is limited. So they really have to limit their materialism, something they have not managed very well over the last couple of decades.

If they really want to keep their material way of life, they will have to be extremely productive… hard to see with their ageing population.

Once again, materialism is at the core.


Sorry, by "contemporary society" I mean the modern social contract that devalues family and community and encourages atomism, i.e., people live without reference to traditional values–in all sections of Europe these ties have been more important than in the States and therefore, in my view, the trauma may be greater.

As for the American Dream and all that, I think that is changing–the youth, increasingly, don't believe in it.


One morning, in my mid-20s, while I was pulling up my 3rd pair of stockings in 5 minutes, I had an epiphany. I realized that I was one of the brainwashed by culture… why do we women wear such wasteful an uncomfortable accessories?

Every time I think I am so "independent or special", I remember this incident and laugh at my hubris.

Dan H

I was sure you were male, and would have gauged my ability to make that call as rock solid…I look out for your handle, have a well formed conception of your outlook etc…at least I thought I did. Your moment of self introspection has caused one of my own. Thank you.


LOL! I majored in math-economics and work in finance. I have spent most of my life in men centric circles… I'm here because in real life I'm surrounded by people who have no interest in the subjects I find captivating and the top 20%, most of which are deluded and drive me nuts!

I guess I have been forced to be an actress for 20 years, no awards lined up though…

F. Beard

Gee wiz, gal!

I'll not be able to get so mad at you now.

But I sure disliked you as a male!


Yes, excellent comment.

Lambert Strether

"The other guy is stupid" is a very well-worn trope among Obots and Democrats generally. Every so often The Daily Howler does a Maddow takedown, which should dispel any notion that either legacy party has a monopoly on stupid.


"who saw it coming?" Adolph Reed did, as far back as the mid-90's:

"In Chicago, for instance, we've gotten a foretaste of the new breed of foundation-hatched black communitarian voices; one of them, a smooth Harvard lawyer with impeccable do-good credentials and vacuous-to-repressive neoliberal politics, has won a state senate seat on a base mainly in the liberal foundation and development worlds. His fundamentally bootstrap line was softened by a patina of the rhetoric of
authentic community, talk about meeting in kitchens, small-scale solutions to social problems, and the predictable elevation of process over program — the point where identity politics converges with old-fashioned middle-class reform in favoring form over substance. I suspect that his ilk is the wave of the future in U.S. black politics,
as in Haiti and wherever else the International Monetary Fund has sway. So far the black activist response hasn't been up to the challenge. We have to do better."

"The Curse of Community," Village Voice, January 16, 1996


Great, great find–kudos to you!


The closer you were to the Soviet Union, the more meaningful socialism your society enjoyed. Scandinavia > UK > USA

The key to upper class concessions is a real fear on the part of the upper class that without compromise they risk revolution. Working class revolutions are usually only possible if they are supported by an external superpower: the USSR in the the 20th century played this role for the West.

Today, interestingly enough, the US is providing this same benefit to the working masses of China. As someone who frequently travels to the PRC and closely watches the party-state it is clear that they're continuing policies of raising the minimum wage and extending health insurance, and subsidized education are being motivated in part, by a real fear that without these concessions, the lower classes will revolt and demand democratic freedoms, inspired in no small part by the (actually inaccurate) perception that the US is both a democracy and a superpower (in PPP terms the PRC is a much, much larger economy; the US is being propped up only by its overvalued currency)

The lower and middle classes in the PRC will sorely miss the US when it is gone. We may be entering into a new conservative period akin to 1815-1848 Europe when a concert of authoritarian monarchies kept a firm hand over the restive European lower classes.

Chris Rogers


No, no, no.

Your analysis is wrong to say the least, particularly with regards the development of more socially democratically orientated states in Western Europe.

I don't wish to belittle your analysis, but by focusing on post 1917 developments in Europe after the Communist seizure of power – Russia after all was a democracy in 1917 for a few months – is wrong.

First and foremost, you need to acquaint yourself more with German History after unification in 1871 following the Franco-Prussian War and consequent Paris uprising and the Commune – the first true elements of a modern welfare state, which is now associated with social democratic nations, were actually sown by Bismarck, and wether we like it or not, Germany under Bismarck was a functioning democracy despite its three tier voting system that favoured the ruling elite – remember in the 1912 German elections the SPD had the largest share of the vote and were a formidable presence in the Reichstag – so fear of the Soviet Union had little to do with it in Western Europe.

As an illustration, the UK suffered a pretty severe recession from the early 1870's until the 1890's, welfare provision was limited to say the least – we had the Poorhouse/Workhouse and a philosophy of its the poor's fault they are poor – not the states – a wonderful attitude if you are the sole Superpower, not so good when you had the French, Germans and USA biting at your heels – now, if you look at international relations in Europe during the timeline 1871-1914, there is an emerging trend, not only a growth in the power of the working class, but the development of an alliance system that ultimately led to WWI – further, and with regards the development of a welfare state in the UK, it was the Boar War and UK's inability to field a strong and healthy army that resulted in the post 1905 Liberal Government reforms, and, the requirement for a large standing army to deploy in France as a result of the Duel Entente – until that requirement, which needed strong healthy cannon fodder, the authorities could not give a toss – a similar effect rippled over much of Europe – not so Tsarist Russia.

So, one of the reasons for the development of a welfare state in Western Europe, was not so much the demands of the Working Class, but the huge demands of fielding massive armies when the populations were far smaller than today.

Hence, it was actually the struggle for supremacy in Europe after German reunification that resulted in what we'd term social democratic states – indeed, such was the dire poverty in the Scandinavia states prior to WWI that emigration to the New World was a major problem.

Hope this illuminates a little?


I think both of you are right so some degree but I mostly agree with you. Nation states, from their inception, let's say with 17th century France had as their goal the enrichment and prosperity of society. Yes, the royals got caught up in wasteful stupid wars but their non-war policies tended to favor having a prosperous country whether just to have revenue or not–it was generally accepted that the privileged should take care of their dominions.

This caring about their subjects was also a factor in the early history of the U.S. Lasch in his great work Revolt of the Elites points out that oligarchs in small towns and cities often competed with each other in buiding libraries, beautiful parks and fine schools for the populations under their control until the post-Civil War era gradually changed all that. The movie It's a Wonderful Life is an example of the old noblesse oblige that was present in smaller communities as late as the 1930s and 40s.

Our own system is a result of the fact that authority began to be unstable and up for grabs so that there was a competitive advantage to be immoral, selfish and ruthless. So the George Bailey's were replaced by the Mr. Potters and the those were replaced by Mr. Potters sons with MBAs.

As for the Chinese, their culture has consistently pointed themselves in structuring their society with central authorities motivated by what is best for the society as a whole not out of fear of the peasants but out of logic. That is why their society of guaranteeing that a certain class maintains power and that class be very limited so that while dynastic struggles are present there is no direct need to ruthlessly repress the people as a whole because those people are quite happy to be well-ruled. Good governance, not political freedom, is how people prefer things. Americans too would be happy if they had good governance without political freedom–sadly we have neither which is why we are probably headed for trouble.


Change is the only constant with the shape of change being the great mystery. Society has to offer a standard course for success to keep the majority on similar paths that maintains the status quo. The financial crisis was too large a shift towards the oligarchs/plutocrats and left many without a clear path forward. The wild cards are the surveillance state, militarized police, and constatnt propaganda intermixed in the steady drip of infotainment being capable of the level of control necessary as the number of disaffected grows. I lean towards thinking that the surveillance state is a real game changer and has forever upset the familiar historical cycle of government.

The built in safety valves to bleed off societal stress have been reinforced by active social engineering and the very real threat of violence by the state. Conditions are going to need to get much worse before change happens on the ground in America. The shape of the future isn't one conducive to individual rights and an egalitarian society. Far from it in fact.

Current population growth and enrironmental degradation will eventually trump the contrivances of modern society but as is standard throughout history, it will be the 99% that will suffer the harshest consequences. Mother nature is one helluva of a clean up batter when the bases are loaded with the excesses of humanity.


I watched the first Obama-Obama debate and gave up after 15 minutes. I was talking to a reporter friend, who commiserated that she had to watch the entire thing. I explained that after 15 mintues neither man had said anything I didn't already know and I wasn't going to waste any more of my time. She said the same thing about the entire debate and added that in fact she had decided to become a Socialist. I started laughing because I'd come to the same conclusion after a lot less time.

This country desperately needs a real revolution…any kind will do. The level of anger in the country really is alarming and I'd hoped that we'd see more large protests. I wonder if people are just exhausted or if they've given up? Chris, I don't think you can blame a weakened left for the lack of people in the streets. But the generations that used to march are getting to old to do it again. We need the younger generations to wake up and get out there.

Jim Haywood

'I watched the first Obama-Obama debate and gave up after 15 minutes.'

Hell, I don't blame you.

What was the preening narcissist doing — talking to himself in the mirror?

Likely the backward reflection of the teleprompter confused him, never having learned Leonardo's skill of reverse writing.


Very LOL–cool comment. I agree, almost any change is good. Sadly the left is indeed dead for reasons I've given below and other Chris' reasons as well. But that change is likely to come from the right not the left. In fact, I believe the new left will come out of the right somehow by magic perhaps.


They would just sit around and play games on their smart phones!


The late Tony Judt had gone over some of the same ground in his book, "Ill Fares The Land" – albeit from a "Western" perspective (Europe, North America) – in lamenting the fecklessness of contemporary Social democracy in the face of a radical challenge from the Right. Moreover, he asserts that the best a progressive agenda can hope for is, "…[I]ncremental improvements upon unsatisfactory circumstances…", an exceedingly modest and indeed a near-defeatist posture. For Judt as well has all but conceded Advantage Neo-liberalism, and also despairs of any sort of "bottom-up" revolt against abusive capitalism and its enablers and protectors in government.
In fact, "It is the Right that has inherited the ambitious modernist urge to destroy and innovate in the name of a universal project. From the war in Iraq through the unrequited desire to dismantle public education and health services, to the decades-long project of financial deregulation, the political Right – from Thatcher and Reagan to Bush and Blair – has abondoned the association of political conservatism with social moderation which served it so well from Disraeli to Heath, from Theodore Roosevelt to Nelson Rockefeller".
Were Judt alive today, he certainly would have included Obama – with his unprecedented expansion of state surveillance, connivance with the financial overlords, suppression of dissent and transparency in government, and continuation of a militaristic foreign policy – as an avatar of the neoliberal or neofascist project. Both political parties, the courts, corporate and financial interests, "law enforcement", all are united in preserving or extending this "project", and in fact consolidate their stranglehold on the people in the aftermath of each inevitable crisis that continues to befall late-capitalism. How, one asks, can a severe pessimistic reading of any chance of meaningful reform be anything other than a realistic assessment of where the future lies.


The left in the U.S. has, traditionally, three sources of "energy": (1)religious/spiritual/ethical people; (2) intellectuals and artists; (3) the labor movement. These forces have been divided and may never come together again in large part due to what was termed identity/ethnic politics. The sixties ended up shattering the alliances that were already fraying–we can't blame any one group of movement other than say that the left was, by the seventies pretty much shattered.

All the contradictory forces were in conflict of course but the problem, at the time, was that the central figures that offered a clear and realistic alternative vision were shot-down like mad dogs.

My critique, unlike Hedges, is that the big mistake was to accept, without criticism the official stories on the JFK, RFK and MLK assassinations despite overwhelming evidence to the contrary. There are thousands of researchers that have meticulously deconstructed the official narrative on those assassinations but almost no one on the left has the courage to even look at the evidence–usually they cite the famous Richard J. Hofstadter essay of 1964 "The Paranoid Style in American Politics." Of course Hofstadter made good points and so on but basically it was, as an essay, a typical work of sophistry–certainly conspiracy theories abound about many things most of them based on rumor and fantasy by radically misinformed people. But the 60s assassination "conspiracy theorists" had mountains of evidence and even more now that would, at the very least, be an invitation to dialogue. Instead the liberal and radical left have both categorically rejected the direct evidence in those cases in favor of the official narrative. This is why I consider the American left the "Stasi left."

To nearly all prominent leftists in this country official government narrative on the assassinations (and nothing else) was a priori as true as the fact the Moon circles the earth. Any contrary opinion cannot be discussed–if you bring the matter up you are clearly insane and belong on medication or in a mental hospital.

Worse, the left, along with the mainstream, refuse to believe political conspiracies exist in the Unites States. Other countries and other eras, of course had conspiracies as anyone who has read the classical historians can attest but when the U.S. was born conspiracy only existed in a box called "crime" and the political elite are incapable of assassinating rivals or breaking the law to fix elections, plant false stories in the press (except very rarely–in fact the left ignores much of what Frank Church managed to expose about the CIA).

In my view the intellectual left, by ignoring the assassinations of the 60s, literally has put an end to the rationality and dialectic as a legitimate mode of inquiry. Is it any surprise that so many Americans reject science and rationality? Of course when it's done on the right everyone laughs and I can only think "hypocrites." At least right-wingers usually have the excuse of lacking the tools of analysis.

The most obvious evidence I know because it is quick to describe and takes a very simple Google search is to cite the fact that Thomas Noguchi's Cornoner's Report was never entered into evidence in the Sirhan's trial. Do you get that? Why? Because it showed that RFK, who would have been the next POTUS, was killed by a gun shot at point blank range from the back and pointing upwards. That's just for starters–the official case is a lie from start to finish as are all the other cases and I won't waste my breath beyond that except to add that sound analysis clearly shows that more than nine shots were fired–you'll have to find for yourself what that means.

Once you start looking into these matters you will be stunned by how obviously wrong the narrative is. It's not a matter of careful detective work it is staring you right in the face. My own analysis is that all the major assassinations were hits by professional killers and all the assassinations were covered up by all the agencies involved. This is where, of course, the critics of conspiracies balk and say "too many people were involved", again, I have a counter argument but I shouldn't have to argue that–one starts from evidence and then works towards a theory and you cannot discount a theory before looking at the evidence and the American left along with the security services and their stooges in the press have been signing from the same song-book. My experience of being around power at various levels tells me that these people don't f!ck around–if you're in the way they don't blink to kill you or even millions to get what they want and this has been true throughout history.

So there's my rant–my guess is that none of you have the courage to address this if you accept the official narratives about the history of the past few decades–I've seldom, in any forum, been exposed to anyone willing to debate this issue other than dismiss me as conspiracy nut or kook or whatever which obviously means that I'm hallucinating Thomas Noguchi's Coroner's report because it can't possibly exist. This is the chief reason the left has failed in this country and will continue to fail until it decides to deconstruct the official narrative. Until then, I maintain that the only possibility of positive change comes from the right not the left.

Chris Rogers

I'm not one for conspiracy theories, and being British, perhaps I'm not the best person to get involved in the detail of your argument.

I can tell you this, under the UK judicial system, a mock trial was actually held with regards the person accused of slaying MLK for the UK's Channel 4, and the accused, based on all known evidence and forensics was deemed not guilty.

its also a fact the USA denies much of its own horrendous history and portrays itself purer than the white driven snow – a point Oliver Stone often makes in both his movies and documentaries.

In the UK, do not fear, conspiracies abound, its now a well known fact that elements within the UK security services in the mid 1970's wished to have an actual coup in the UK and depose a sitting Labour Prime Minister, one Harold Wilson, whom many considered was a Soviet stooge – Mr. Wilson being the British leader who told the US to stuff its Vietnam adventure up its arse – hence we were never involved in that war with you – if only that were true of one Tony Blair.

However, I do think your attacks on the left are a little unfair, in the UK at least, there has always been a lot of distrust between academics and leaders of the real working class, never mind other progressive movements that constituted the Labour Party.

to my mind, and understanding of US politics and history, there has never been a true working class party to represent the workers interests, indeed, the closest you got to this was the Wobblies, and look what Woodrow Wilson did to them.

Indeed, US history is replete in the states utter aberrance and detestation of populist working class movements, its the reason for the 1788/89 Constitutional Convention and creation of a Federal State, rather than the loose alliance or Confederate states that the anti-federalists desired – the anti-federalists being the real supporters of democracy and other rights, rather than that rag you now revere, namely the Constitution, which established a Federal Republic that favoured property and wealth over actual human and civil rights.


In the thirties and forties there was a fairly close connection between the intellectual left and the American labor movement that carried up until the McCarthy era and that is all a very interesting story too long to get into.

The UK situation is very different and always has been.

As for conspiracies–in the case of the RFK as I cited there can be no doubt–you either accept that the official story is wrong–the evidence is very obvious or you live in a fantasy world. There was a MLK trial in the U.S. The NYT reported the verdict: Note that no mainstream media reporters sent reporters to the trial. No one commented for or against, as far as I know, on the merits of the evidence. Generally the story was ignored. That is, in my view, a conspiracy right there.

Again, no one ever answers my sort of allegation other than say that they don't believe in conspiracy theories or don't indulge in them as if it was a vice–you cannot understand history without it so then throw out Herodotus, Theucidities, Livy and all the rest of them and burn Machiavelli while we're at it.

But I enjoyed your comments and appreciated you non-insulting answer.

Chris Rogers


Actually, the biggest conspiracy at the moment, at least here in Europe, is the lack of comprehensive media coverage concerning the anti-austerity protests in most of Southern Europe – no doubt, our masters learn from the experiences of the media and the Vietnam War, would prefer to with hold all news of protest from us.

As for differences between the UK and US, its the growing lack of difference that frightens me – our ruling elites being virtually identical, although the Uk's has always been more 'stupid' than its US counterparts.


Hey Western Bloc country slaves! The ruling elites are not virtually identical, they are a global sect of plutocrats. They play nationalism off between their slave nation states as needed to divide and retain control.

Wake up and smell your enemy!

Andrew Watts

There's always been a deep relationship between the US/UK power elite. Even during the American revolution leading British opposition leaders like Charles Fox portrayed it as an English civil war. This attitude has always been offensive to the pretenses of American exceptionalism. Or to the average British subject. I believe the 4th of July is called "Go home Yankee!" day in Great Britain.

As for how stupid the American elite is, TARP was a complete rip-off of the British bailout plan. According to Hank Paulson, the US Treasury had a worst case scenario plan that was judged to be inferior within days of writing it.

Chris Rogers

Andrew Sir,

I'm unsure on that one, yes in one respect the US War of Independence was an 'English Civil War' to all extents and purposes, however, many a historian is of the opinion that the last 'English Civil war' was the actual US Civil War itself, or, as it should more aptly be called, 'the War of Secession', and here the UK was highly supportive of the Southern cause, or State's Right's – its not one of my strong points as far as history or politics is concerned, and obviously, its regrettable that the debate of 'slavery' was very much tied in with the War itself – although not the main cause at its outset.

Indeed, I'd say the US Civil War was the eruption of violence between the 'anti-federalist' forces in the US and pro-Federal forces, and I for one have always sided with the Anti-Federalists, who cause was just, if regretfully tainted with the horror of slavery.

Anyway, that's my two cents worth here.

Andrew Watts

That makes sense. I've always secretly harbored the opinion that the seeds of the United States' dissolution was sown by the English Civil War. The English people who came to the colonies during and after that time were just as divided by the conflict. With Roundheads settling primarily in New England, and Cavaliers immigrating to Virginia and the southern colonies. It helps explain the cultural and political differences between the Mason-Dixon line.

As for the future, America is quite advanced in undoing the Glorious Revolution. Many of the rights that were originally derived from it and enshrined into our Constitution have become a dead letter.

The Black Swan

But ignorance is such bliss. I spent a lot of time over the previous winter digging through the internet and have come to almost the same conclusion. Everything we've been taught in History class in school and everything taught by the media is purposefully designed to obfuscate the truth. Maybe it's not all outright lies, but when we get the truth, it's only the truth that TPTB wish us to know. Once you accept that everything you've ever known and believed is a lie, it becomes very easy to see the truth and understand much more of how our modern world works. But I've yet to meet (in person) anyone who was willing to challenge their false beliefs and start to look at the truth. It is a painful experience to confront reality and something most people are not prepared for and mostly uninterested in.


Exactly. It is very painful to experience this. How can you live in normal society and function and understand that most of what other people believe to be true is false. More and more people I know believe being interested in politics is a form of "escape" because it is meaningless–I think they have a point and I've tried to move away from it. But I'm haunted by it since my life has been spent in vicinity to Washington and the whole scene there until recently.

Well, for me it's not so hard because people I know don't think about public affairs other than when the media makes a big deal of something like the Zimmerman trial and that kind of thing but it's all quickly forgotten in a week and people go on to their private affairs. People are more interested in the TV shows they watch or see politics as comedy. My wife is, for example, utterly uninterested in public affairs (other than local) other than what she watches on Comedy Central–she isn't stupid she understands that the news is bullshit so she may as well laugh about it.

I think most people, deep down, really don't believe the narrative but they need some kind of intellectual framework and they look around and see nothing so they accept whatever they see. I suppose Comedy Central is better than CNN.


One of the things I'm struggling to understand with this is what the fate of the Kennedys is supposed to have to do with the fate of American socialism. Is the idea that JFK was a leftist, knocked off by counterrevolutionaries, and the left's fatal error was to not understand this?

I supposed by contemporary American standards the Kennedys were, indeed, on the left. Of course, so was Nixon.

Workers trying to hitch a ride on the wagon of one or another faction of the ruling class seems to me to be a big part of the problem. Warping history so as to be able to do it retroactively doesn't seem likely to be part of the solution. It's not that I think you're wrong so much as I think it's completely irrelevant.


I agree with you in a sense.

I dont think the Kennedys would really have saved us or anything. That sort of thing is wishful thinking to me.

But how can we have faith in a political system, where those of the ruling class who buck the status quo in even the very smallest amounts, can get knocked off by even more influential sectors of the ruling class?

I think understanding that the kennedy's were assasinated in a conspiracy is more important than the influence the assasinations themselves created. The fact is not that it was the Kennedys who were assasinated, but that anyone was assassinated by the PotB at all. How can we have faith in the PotB or our 'democracy' when the elites pull this shit on eachother when they get out of line?


Whether you believe JFK was on the left or not is irrelevant. The fact he was killed in an illegal coup d'etat is a concern of everyone. He was a social democrat but a careful one. He was killed because he wanted to end the Cold War so the world could resume the movement toward egalitarian societies. The world would have been transformed.

Go back and read what RFK proposed–I was in the midst of all that at the time and followed events closely. MLK would have united all the left social movements that later dispersed because he may have been the most brilliant leader of his time.

Frankly, Americans just don't want to face what happened back then. I find this as yet another example of our collective insanity. If read the correspondence between JFK and Khrushchev you will be touched by the desire of both men to get out of the trap they found themselves in. If you just examine closely the Cuban Missile Crisis and what was said–you will realize that almost the entire U.S. military wanted a first-strike on the USSR. Their bloodthirsty evil almost got us all killed but for JFK and Khrushchev. Also in the mix were others including another great man Pope John XXIII.


I, personally, think these conspiracy theories have been deliberately nurtured by the authorities to distract the masses from useful analysis of their own plight.

It's a conspiracy.


So then you are just don't believe in evidence. You are saying that I made up the fact that the official story of the RFK assassination is correct despite the fact the coroner's reports says it's false. Stop hurling accusations around when you are not acquainted with the obvious facts.


JFK and RFK were opportunists as all politicians are but were both social democrats, clearly. MLK was a radical leftist and regarded as "the most dangerous man in America" by J. Edgar Hoover and, I believe, all the power-elite. JFK confronted the entire power-elite and lost. RFK was going to continue the job and MLK would have represented the social forces that would assure RFK would succeed.

JFK wanted to end the Cold War and that was the main reason he was killed. RFK would have ended the war and instituted social democracy beyond LBJ and in concert with MLK.

The left died in '68 not just from the assassination but continuing the denial of what happened.

Andrew Watts


I don't buy that story. It was well-known at the time that the Kennedy family were aspiring social climbers. The Kennedy patriarch stood a good chance of being nominated as a presidential candidate for the Democratic Party. If it wasn't for his pro-Hitler views during his time as American ambassador in London he probably would've been. The fact that he was able to realize his ambitions through his progeny did not make them the natural leaders of the left-wing in American politics.

The Cold War was still in it's early formative years. Despite that one individual no matter how powerful, was not going to stand against the tide of history. This was a socio-economic and political struggle between aspiring global hegemons. That individuals like De Tocqueville foresaw well in advance. The cult of Kennedy resembles the Obamabots in too many disturbing ways. At some point you have to accept that the Democrats cannot possibly satisfy the grievances of every American radical/dissent group.


Of course you don't buy the story because you are ignorant on the matter–you have not studied the issue because you are afraid to and you are in excellent company. No one wants to look at this stuff–your characterization of the Kennedy's is simple-minded and part of the propaganda of the center. Kennedy was clearly prepared to take concrete steps to end the Cold War–he wanted to blow up the CIA and he opposed all his generals who did want a nuclear war with the USSR because they felt they could destroy the USSR for good and believed that the U.S. would only lose 30 million people. That's a f!cking fact and there is much else you are afraid to look into.

Andrew Watts

Banger, that hurts. It was only a week ago in the Snowden post that I mentioned how close we came to atomic warfare over the Stalin-Tito split based upon declassified documents. I am not ignorant of how crazy some of those old Cold Warriors were.

It was under the Kennedy administration that the top marginal tax rate got a tax cut. What sort of left winger would support that action? Neither Presidents Truman or Eisenhower consented to a tax cut for the very richest people in the country. As for your assertion regarding the CIA… Bay of Pigs. Eisenhower couldn't be fooled into such a moronic plan by the CIA. Truman loathed the CIA so much he openly referred to it as the American Gestapo.

I can overlook the Kennedy brother's personal and political faults, but it seems extremely unlikely that they would accomplish either of the things you think they would've been or become in the future. Besides the whole not starting a nuclear war bit.


Look, Kennedy was a kind of fool–he was constantly fooled and manipulated by the powers that be and then got his head blown off–his instincts were good and his heart was, in my view, in the right place as many men of courage, however foolish, have their hearts in the right place. Compare his travails in WWII with the coward G. Bush senior or junior who was even worse.

I don't mean to insult you–I respect your thoughts expressed here always thoughtful and well written. But I get impatient with the following: that the assassination reflect a coup d'etat that makes the Civil War pale in comparison. These events are the single most important events to have happened in the history of the U.S. Maybe the Kennedies and MLK were a bunch of mad dogs who would ultimately endanger the world–I certainly can't be sure that they weren't. But it f!cking happened and these people who did these deeds, and the evidence is overwhelming that they did, stole our history from us. I can't possibly see how these events can be ignored. And I assert that no left-wing movement can even come close to having more than a slight effect on politics unless it confronts this reality. This may be one of the chief reasons I believe change can only happen from the right who tend to be more open to alternate visions.

If I'm wrong and the coroner's report on RFKs murder does not indicate that they got the wrong killer then, of course, I'm a deluded paranoiac. If what I say is true then everything in the mainstream narrative collapses like a house of cards.


I think we have to go back to Carlyle and Ruskin in England to grasp our present situation. Theory needs to be broomed into the dustbin. The question is a moral one. "Signs of the Times" and the Condition of England Question

O ye hypocrites, ye can discern the face of the sky;
But can ye not discern the signs of the times? — Matthew 16:3, King James Bible

In June 1829,the Edinburgh Review published Carlyle's "Signs of the Times," (text) in which he anticipates the Condition of England Question he raised a decade later in Chartism (1839) and Past and Present (1843). As G. B. Tennyson notes, "Carlyle more than any man before him perceived the changes being wrought by the Industrial Revolution" (XXVIII). He criticised vehemently the ethos of the Industrial Revolution, which, he believed, was destroying human individuality. He expressed his distrust of the spirit of the "mechanical age", which was manifested not only in the technical progress of English society but also in an overwhelming feeling of inanition: "The King has virtually abdicated; the Church is a widow, without jointure; public principle is gone; private honesty is going; society, in short, is in fact falling to pieces; and a time of unmixed evil is come on us" (33). The essay was aimed to draw the attention of the reading public to the spiritual price of social change, caused particularly by the frenetic industrialisation. In "Signs of the Times" Carlyle warned that the Industrial Revolution was turning people into mechanical automatons devoid of individuality and spirituality. For Carlyle, machine and mechanisation had double meaning: they meant literally new technical devices, but also metaphorically mechanistic thought that suppresses human freedom. Carlyle strongly criticised the mechanisation of the human spirit and indicated the high moral costs of industrial change.

Were we required to characterise this age of ours by any single epithet, we should be tempted to call it, not an Heroical, Devotional, Philosophical, or Moral Age, but, above all others, the Mechanical Age. It is the Age of Machinery, in every outward and inward sense of that word; the age which, with its whole undivided might, forwards, teaches and practises the great art of adapting means to ends. Nothing is now done directly, or by hand; all is by rule and calculated contrivance. [34]

In this sermon-like essay, Carlyle led a crusade against scientific materialism, Utilitarianism and the laissez-faire system. He believed that the freedom of the emerging mechanical society in England was a delusion, because it made workers into greater slaves than their ancient counterparts had been and mechanisation of society threatened the human ability to think and act creatively:

Men are grown mechanical in head and in heart, as well as in hand. They have lost faith in individual endeavour, and in natural force, of any kind. Not for internal perfection, but for external combinations and arrangements, for institutions, constitutions, for Mechanism of one sort or other, do they hope and struggle. Their whole efforts, attachments, opinions, turn on mechanism, and are of a mechanical character.

Brooklin Bridge

No matter how bleak things appear, the reality is probably much much worse.

The greed and corruption that we are discussing will play itself out, possibly with minor social upheavals and attempts to rectify things, and along with that "playing out of corruption" will be irreversible additions to C02 emissions and other climate change triggers that take us way way beyond the tipping point we have already recently crossed. Each degree of temperature rise means a new degree of unstoppable catastrophe. And while that will certainly bring governments down, and corruption along with it, it will do the same to civilizations.

The idea that if we just stop everything now, right now, we will avoid the existential threat is absurd. We are going full steam ahead with exploitation of the most lethal substances in earth by the most powerful unstoppable global force of corruption in recorded history. We are not going to stop the madness. We are the madness.

Sure we could stop it (if we were suddenly transformed, say, into angels). But short of something along those dubious lines, we won't stop it any more than we would stop the sea level rising with a tea spoon.

If we are lucky, humankind will essentially be made up of small nomadic groups of hunter gatherers within a hundred and fifty years (probably made up of the descendants of the 1% no matter how grotesquely unfair that seems). Keeping hold of technology seems iffy. I remember hearing that there is a point of critical mass, population wise, below which we probably go extinct. Either way it will be a blessing for the other species that manage to survive.

casino implosion

Does Chris Hedges deal with any actual people in the course of his activities?

We're about as close to a revolutionary uprising as we are to the orbit of Neptune.

Chris Rogers

Actually Hedges analysis is correct if we use history as a guidance, i.e,. sooner or later an inflection point will be reached and chaos will be unleashed – what will cause this is certainly unknown, but, and on the continuing trajectory the US is following, something will give – and I doubt very much, your so called 'middle class', once the funds run out, as they will given the unlimited greed of your masters, will like the concentration camps your post 9/11 governing officials have in mind for you.

Greg T

Agreed, Chris. Hedges actually knows quite a bit about the mood of the country. He is first and foremost, a reporter. His book Days of Destruction, Days of Revolt is based on his travels in some of the worst economic pockets in the country. If he says the US is a tinderbox, we should take him seriously.

I don't think he's as optimistic as Yves suggests. In Part 1, he says he's existentially optimistic but practically pessimistic. I think that means he is confident people will come to realize their condition and who is responsible for it, but changing it will be difficult. He does say in the interview that he's not naive enough to believe that 500 K people marching in Washington will immediately change anything, but it would be a necessary step.

Chris, I think you are correct. With each crisis, more and more people will become ' excess baggage '. Theres something about survival that tends to galvanize people to a purpose.

Lambert Strether

"Pessimism of the intelligence, optimism of the will." –Gramsci.

Mark Stevens

We have indeed become a culture that is a mixture of both Brave New World and 1984. One aspect of the current situation which is overlooked is the state of our physical health. I can not see a revolution led by people who are too fat to walk a few blocks. How much of the population is dependent on the government for medicaid and medicare? Many of them would be literally risking their lives if their source of medication and treatment were to be cut off. With 50 million food stamp recipients how many would starve without that assistance? I can not see those so dependent leading the charge on Capitol Hill. When the system collapses under its own weight and the population has started to decline there will be nothing to lose, so maybe then.


When the food stamps are cut, and medical care becomes less and less due to the effects of austerity, we may see uprising, at least of a small sort.

When people cannot survive, they get angry.

But right now they CAN survive, albeit pitifully. So there is no revolution at the moment.

People will not revolt until they are forced by their desperation to do so.


Massinissa, so many people are absolutely not surviving right now. There are American counties that lack running water, tent cities propped up for the newly homeless, whose numbers continue to rise, not to mention suicides.

Many of Americans have already reached that breaking point. Maybe we need more of the formerly middle class to join their ranks? I don't know. But the situation has already grown so severe…


Anger does not lead to revolution. Organization does.

Tokai Tuna

"I suspect we'll see more and more random violence as frustrated individuals lash out." That's cynical, but it will be very much welcomed as it potentiates opportunity through crisis.
Business has long succeeded profitably by designing things to fail, or engineering failure or setting things up to fail.
Controlling information, wind shield wipers or human capital, destroying things to save them. It's worth reminding people that frustration or anger can be helpful and doesn't necessarily mean violence or lashing out.


For Cris Hedges, wherever he may be lamenting today
Teddy has an Operation


Socialist alternatives have been articulated for a long time and most primitive societies are more egalitarian than our clown fest. The communism of the free table was articulated in a slave economy that was sexist. The China of Mao and the USSR of Stalin were disasters. One might even put forward Thatcher as the most Gramscian of our politicians, destroying the hegemony of communities and their representation (unions).

Philosophy has long had a radical theory,which we might put as Wittgenstein noticing the long history of the subject had produced a hill of beans and language was worth looking at as the cause and re-grouping it a potential solution, complicated by the solution being expressed in language. There is a shed load of critique across the social sciences and our literature, even on how dominant ideologies arise and are maintained. Science, which is apolitical in teaching and practice, produces liberals in massive preponderance, with a tiny GOP/Tory rump – we are not, in the main, products of Critical Theory classes or the excellent line of Mexico. Of course, science as it reaches the public is not what we go through in learning it, but the dunnage on the next diet-fad as Banger tells us.

I dislike blaming the current squalor on the US – we need to identify the real shadows. We know who they are – the people with massive, hoarded wealth across the planet. Detroit is interesting here because the bankruptcy threatens another form of what we thought hoarded wealth, that expected to pay pensions. This money is probably long gone across the US cities and down a Ponzi drain. I note a judge who co-authored a book on Ponzi unwinding is in charge in Detroit. This could be the tipping point that tells us as a society that our politicians have been engaged in a vast cover-up (or so dumb the could not read the writing on the wall) – I was teaching this as far back as 1992 but may as well have been walking the streets in 'the end of the world is nigh' sandwich-boards. Cops could retire here on two-thirds pay back then.

Detroit, Gary (Indiana), Birmingham (Alabama) … might just be the touch-paper if substantial numbers of middle-class people find their income gone. We have similar situations in the UK, as does much of the EU. Not long ago we were being told pension pots were brimming full!

The key thing we don't grok is that most people don't learn very much and are very easily swayed by cultural rot – look how many cop and secret service hero shows hinge on will they won't they sex and a sub-text of personal revenge, heroes nice to children, animals (NCIS is the utter classic) and the notion we the public will do what is right when asked. Young South African boys queue up for ritual humiliation to become 'men' (whilst losing 'manhood' in botched circumcision) – I see little difference in Western cool.

Young populations are much more likely to rebel. Analysing internal conflicts in 175 nations during the second half of the 20th century, Urdal found that "with every percentage point increase in the youth population, relative to the [total] adult population, the risk of conflict increases by more than 4 per cent." When young adults exceed 35 per cent of all adults, the risk is 150 per cent higher (International Studies Quarterly, vol 50, p 607). The relationship persists, he says, even when factors such as the state of national economic development, democracy and conflict history are filtered out. In a study for the non-governmental organisation Population Action International in 2003, Richard Cincotta, a researcher who currently advises the US government's National Intelligence Council on demography, found that countries in which more than 40 per cent of the adult population is aged between 15 and 29 are more than twice as likely as older societies to experience some form of civil conflict.

We may not be on the streets because we have become pathetic/apathetic with age. Perhaps we oldies are to blame and should make the trip to 'Lemming Hill' (though lemmings don't actually commit suicide), as a gesture to the future of our species? Bees leave the hive when ill in a form of altruism.

History tells us any kind of revolution will not do. Why should we have more success if we take to the streets than the Egyptians or most of Eastern Europe? Do we feel racial superiority? The older academics when I was a student almost all supported massive change as we want now. We got human resource management instead (an evil).

The question has always been how we get things done after the revolution and hanging bankers has become a bore. Money needs to go in its current form as thirty pieces of silver, or whatever the globally arbitraged level that has sunk to. We hardly discuss the needed attitude changes and the new constitution

Chris Rogers

Hate to break the news to you, but any change at all, if its to come out of the UK will be driven by the grey haired brigade, i.e., those most likely to vote, and not the youth you allude to.

Given the ConDem government in the UK now has its mindset on another 5 years of austerity after 2015 and proposes attacking the benefits of pensioners as it decimates social welfare – somehow, i can't see pensioners buying into this crap.

Don't expect any change from Ed Miliband's NewNuLabour Party – an absolute disgrace and I certainly will not be voting for them – Green and Plaid Cymru all the way for me from now on.

Lambert Strether

FWIW, I think it has to be the diamond geezers plus the youth. This picture from Moral Mondays encourages me:

Note the younger person also being arrested in the background.

I heard a similar anecdote locally: Three geezers like me and two young women stopping an oil tank car train.

* * *

All defensive, though. Stopping stuff, not starting it. So, back to TINA. Maybe Alperowitz is pointing to the way forward to a real alternative. I'm not sure.


Really nice analysis. Hope you continue in this vein in the future. As for the youth contingent you are right of course and that may be the reason we are all standing around waiting for something to happen.

However, we can take courage on one central fact: we live in a world that is so radically different that the old criteria just no longer count–something deeper is at work here and we haven't yet been able to grasp it.


The tinderbox was last week with the Zimmerman trial. For the left it was a repeat of the south before the Civil Rights movement. GOP/NRA/ALEC laws passed in all the red states included the Florida version of "stand your ground". The right began an immediate portrayal of Martin as a thug who deserved what he got. Zimmerman was sent home with his gun for 40 days until civil unrest demanded a trial. The right claimed "stand your ground" was not part of the trial although the juror said instructions were from that law. It could be the tinderbox will be something like the Martin trial, the massacre in Newtown or some other event that incites crowds and brings out the armed militia of Homeland Security. Occupy was clearly under Homeland Security attention just as the Civil Rights movement was covered by the FBI with local police alerted to any protest in order to prepare a bloody response. A map of all the red states shows where the new laws are in effect. They involve voter suppression, extreme gerrymanders, restrictions of women's health care rights, corporate reduction of taxes and increased rights to pollute. When the red states show the effects of no health care for the poor (no medicaid), back-alley abortions, millions with concealed gun permits but questionable backgrounds like Zimmerman, we may see a tinderbox. That could also be part of the plan like the billionaire funding of the tea party.

Waking Up

Regardless of his past part in our current state of affairs as a nation, I have to say that I was surprised to hear a former President of the United States… Jimmy Carter… acknowledge the truth that the United States is no longer a functioning Democracy.

Bravo to Jimmy Carter for speaking the truth!


I am getting ready to approach my neighbor who belongs to the tea party and the Libertarian party to discuss opposition to the surveillance state. I would also like to talk about the economy, but one thing at a time. I believe a few liberal friends should join in and we should schedule small group talks about this. I picture doing this at our homes or the libray etc.

I think we should do this together to show that fighting a surveillance state matters to people on both the right and left. We need to come together and I believe this is one area where we share things in common.

Should anyone like to give me advice on what to say, how to say it, etc. please offer it. I want to hear it. If you have advice on speaking about the economy in plain language, that can cross ideological divides, I want to hear that also.

Thanks, Jill


Before you speak, listen.

Lambert Strether


I thought I posted on this somewhere, but I can't find it. So I hope I tell the story the same way….

* * *

Last month I was driven home from a permaculture event in Northern Maine with a nice churchgoing couple and they asked me what I did. I explained, in fairly general terms, and the husband asked me What I thought the big stories of the day were, mentioning that he heard a lot about Benghazi. [oh-kaaay…]

I responded that I felt that most of the big stories weren't covered at all, at least in the news. For example, "Why haven't any bankers gone to jail?" Big nod from the husband, bigger nod from the wife. So commmunication is possible….


Thanks Lambert and Otter!

To All: When I read these comments I was struck by the amount of love behind them. Even people who disagreed with each other, or whose ideas I personally do not hold–I could tell they were motivated by good will and the desire for things to turn better for other people and our nation.


Let's not forget to look for resistance in other ways than street protest. Immediately after the Nazi take over of France in WWII, it seemed that the French were compliant to rule by Germans and the Vichy French collaborators. Gatherings by more than 5 persons was illegal. But, in fact, hearts and minds were continuously defecting as each day continued under the occupation. People of all backgrounds joined the resistance and many of them behaved with great heroism performing relatively small acts of sabotage.

Although they may not be marching in Washington, a high proportion of Americans obviously do distrust schemes of man at a relatively high rate. Where it goes from here, I'm not sure.


The late Tony Judt had addressed similar issues to those of Hedges in his "Ill Fares The Land", where he lamented the inability of Social democracy to either preserve the gains made earlier in the 20th Century, or indeed repel the savage attacks on them by "the neoliberal agenda". In fact, Judt concedes that ""incremental improvements upon unsatisfactory circumstances are the best that we can hope for…", a rather tepid and underwhelming outlook, I'm afraid. Judt notes that the forces of reaction have indeed stolen a march on progressivism, and writes: "It is the Right that has inherited the ambitious modernist urge to destroy and innovate in the name of a universal project. From the war in Iraq through the unrequited desire to dismantle public education and health services, to the decades-long project of financial deregulation, the political Right – from Thatcher and Reagan to Bush and Blair – has abandoned the association of political conservatism with social moderation […]."
He surely would have included Obama as an avatar of the neoliberal project, as his administration has connived with major corporate and financial interests to further protect their interests, has extended the Surveillance State into unprecedented territory, has continued a militaristic foreign policy – fine-tuned, really, with his drone-based "projection" of US power – and generally rewarded "the malefactors of great wealth" at the expense of the vast bulk of the US public. In fact, as late-capitalism careens its reckless way through Western economies, each national or international crisis fomented by the plutocracy elicits even further punishment of its victims. How can anything but an acute pessimistic expectation of any sort of meaningful reform be a valid position?

Lambert Strether

I dunno where the touch paper or the spark is, but I'd be thinking seriously about supply chain vulnerability, since AFAIK the supply chain has been highly optimized — i.e., is fragile — since "just in time" days. The supply chain is the common terrain of anti-fracking, anti-pipeline, Walmart protests, and even efforts like local food sovereignty. I'm sure there are more….

Granted, drones, surveillance, militarized police forces, besides other Leviathon-like tactics but (a) our military just lost two wars applying such tactics internationally, (b) it's a big continent, and (c) check out Lieutenant General Paul K. Van Riper and Millenium challenge.


You might enjoy a paper introduced at Zero Hedge awhile back as "Nassim Taleb meets Edward Lorenz meets Malcom Gladwell meets Arthur Tansley meets Herman Muller meets Werner Heisenberg meets Hyman Minsky meets William Butler Yeats, and the resultant group spends all night drinking absinthe and smoking opium, while engaging in illegal debauchery in the 5th sub-basement of the Moulin Rouge circa 1890."

Lambert Strether

Well, we'll just have to see, won't we?

Meanwhile, try harder.


Try looking at things from more angles.


Somebody should translate that into English.


If it's ZeroHedge, you can assume it means "Buy gold!".

Lambert Strether

Because now is a always a good time to buy gold!

I haven't mocked that mindset nearly enough lately.


It's not from ZeroHedge, I said it was introduced there. I wanted to quote the sentence about absinthe and opium.

The paper comes from the Foundation for the Economics of Sustainability:

"Feasta was launched in Dublin in October 1998 to explore the economic, cultural and environmental characteristics of a truly sustainable society, and to disseminate the results of this exploration to the widest relevant audience.

"The position Feasta has adopted is that many of the world's problems are caused not by bad people but by dysfunctional systems and it sees its purpose as designing better systems. For example, the economic system demands continual growth if it is not to collapse into a catastrophic depression, and this leaves politicians with little alternative but to pursue short-term economic growth more-or-less regardless of the damage that that pursuit might be doing to longer-term environmental and social sustainability.

"Feasta has spent a lot of time examining the reasons for this growth compulsion to see if an economic system can be devised without it. Feasta has also looked at money systems, agricultural systems, carbon systems, energy systems, taxation systems, rationing systems, land tenure systems and democratic systems and come up with ideas for these.

"We take it as given that sustainability must benefit everyone in a society, rather than merely those who are financially or otherwise privileged. We consider a society to be sustainable if it can expect to survive for several hundreds of years without being forced to change because it is currently destroying or undermining something on which its survival crucially depends."


I agree with you that 1/ Obama has done as well as might be expected and 2/ many young people have probably been disabled from taking their usual leading role in protest.

I should like to make the case for retirees. They are usually dependent on the economic system for their pensions and that will mitigate the effectiveness of many but some will have more freedom to act and they all recall the America of 'Burns and Allen' and 'Happy Days.' They know it does not have to be like it is today.

Marching does not concern the elites any more but not voting in elections, non-payment of taxes, boycotts of particular products, barter of goods and services and many other tactics can force political attention.


Anecdote— after reading this article this morning, I sold an item I had on Craigslist. The person who bought it was a man around 40. Very clean-cut, and Mormon.

He proceeded to tell me that he lost everything–home and a growing business, in 2008. He now works at the North Dakota oil rigs cuz the money is good.

He told me that in his travels he meets a whole lot of folks who understand very well what is going on in this country, and they believe that there will be a revolt, and that many of them are preparing.

MSM and others can call them nutjobs, but when the nutjobs reach a certain percentage, well, who is the nutjob? The one who knows the truth or the one in denial?

Out here in fly-over country, this is very real.


This is the best commentary on current affairs I've read.

With the fall of the Soviet Union, the Western Elite ceased to fear a workers revolt and commenced to accumulate wealth any way they could.

Modern Consumerism works to calm and divert our society. Marketing satisfies our human needs; but, only if you have money to spend. When all your earnings from slinging hash are going to pay off your student loan; material consumption is impossible except to survive. Corporate propaganda continues to message that this is the best of all possible worlds. When it isn't, it's the dead beat's fault. This works i.e. the 28% increase in the middle age suicide rate. But, at some point, when the middle class realizes they about to lose everything; then the aristocrats' heads will roll, once again.

Chris Rogers

@Vietnam Vet,

You are absolutely correct that since the demise of the USSR the Western Power elite have become reckless in their pursuit of more wealth and more power – combined with the establishment of both a single world currency and single world government for want of a better word – this triumphalism is epitomised in Fukuyama's "The End of History and the Last Man."

Regretfully, TBTB are better advised to read Kennedy's "The Rise and Fall of the Great Powers", rather than Fukuyama's trash.

It should be no surprise that with the fall of the USSR the Power Elite felt safe enough to begin the final part of its neoliberal economic assault on the masses – epitomised by the election of Clinton in the US and Tony Blair in the UK – the rest is history, but Reagan and Thatcher may well have begun the neoliberal counter-revolution, but it was their progeny in the Democratic Party and NuLabour Party that finished off what they begun.

Indeed, think how much different history would be if George Bush had won the 1992 Presidential election – not as if I'm a supporter of the Bush clan or the Republicans by the way.

Paul Tioxon

There is ongoing work by many people all over the world and all over America to strengthen the things that remain. I just finished "THE PEOPLE'S PENSION" BY ERIK LAURSEN. Bill Black covered it in post here a month or so ago. It is much a manual to understanding the opposition and how to counter it as it is a useful history of recent American politics. Social Security First has been the driving force for a United Political Front of different groups to rally behind. I know I am even more so than before will be using it as an instrument of political organizing in everyday conversation.

As to building a better future out of the chaos and ruble that is all around us, again, many different anti-Establishment initiatives are taking place. But if you are looking for some great big blowout, it is not predictable or even recognizable at first. Sometime an event is so large as not to be measurable unless it is well past its mid point as a social process. Trayvon Martin, Occupy, The Texas Women Filibuster Movement, The Unions in Wisconsin and Ohio, Teachers in Chicago and Philadelphia and on and on, don't have to been operated out of central control from commie pinko HQ, but a lot is happening now that hasn't been in long while.


The problem with the egalitarian position, and with most of the posters on this website, is its hollow materialism. Glenn Beck and Sean Hannity will probably always kick your asses because they can speak the cultural language of the American religion: atavist and manichean, of God, religion and family, and the battle between good and evil. Orwell, often mentioned on this website, described brilliantly the problem of the soulless idealist in his essay "Can Socialists Be Happy?"

The first problem of the egalitarian is the problem of language and semantics (see also Orwell's "Politics and the English Language"). The language of H.G. Wells, Huxley, and other empty utopians can never compete with that of Dickens, Churchill's 1940 speeches, or of the Four Gospels in the King James Version.

You can't ever win over people to egalitarian principles if you are also joined to the hip with ideas that are perceived by them as leading to the breakdown of the family, or are perceived as morally wrong. You can't fight culture; you must learn to work within the culture of the American religion.


Just because SOME people adhere to that world does not mean that all or even most do. There are many more people in the US who are not part of "American" society than you think.

Lambert Strether

And the act of corruption starts with corrupt language.

However, being able to sense or indict corrupt language (Hedges is not only an English major but the son of a minister) is not at all the same as inventing a new language.


Corruption on a massive scale is constantly disguised with perverted language so it looks like a Big Mac which the masses are happy to eat up.


Cadams: I've been recently reading in the online US Evangelical community because I want to see what's going on. I've been away from the church for 35 years.

I've been fascinated to find deep conflict there over the same issues as in our larger culture. Abusive opaque authoritarianism is rampant with its usual demeaning/controlling of membership (demands, tithing, but getting no voice). Leaders grab/misuse tithes as our gov't does to taxes. There is propagandistic exceptionalism (Christians are "righter and better") that rivals our nation's propaganda of US exceptionalism. Etc.

And more and more membership are rejecting it. There's been a slowly increasing exodus of members even while many of them do not reject the faith itself.

In that context, Fox and Beck are the propaganda. Of course, propaganda is not complete BS. It works best in mixture.

On various sites, I have been commenting about the similarities, here/there, and there's been receptivity, so that's good.

Thus, your accusation of hollow materialism is merely beam-off propaganda from that corner of the world.


Yves, here's my thoughts about when this "neo-fascist" rule began; July 4, 1776. Those guys wanted to be kings too. They were mad that the only way to get there was thru birth. So they opened up the requirements. But I want to fast forward to the depression. Social stirrings were already roaring outside the US. And when they began inside the country, amists the depression, I believe the elites became worried. They felt really threatened that the depression was gonna be the end of their power run. they opened up the pocketbooks and slowly implemented marginal socialist policies. by the time the US was out of the great depression, they had effectively stopped "benefits" and resumed their campaign against "communism" (communism being this fear of an economically healthy middle class). I also think it was partly to do with the fear of the baby boomers. Their voting power had to be contained and focused. Here, by providing well paying jobs with extensive benefits, boomers could be lulled into complacency and a sense of false optimism (they did well, and the myth that the next generation always does better) so that they were no longer a political threat (ongoing). In the 1970s, the political parties and campaign strategies were given the green light. And Reagan was their man. Carter went along with their plans, but Ronny gave then free reign. The absence of active govt from Ford and carter, who appeased the pent up tension from Vietnam and watergate (apathy breed apathy), released the 'Reagan revolution'. Ppl wanted change, and a great media campaign focused that blame at govt.
So my point is that this "neo-fascism" has been going on for a long time. It's just had a different name and face. It didn't start with Obama, w, Clinton, reagan, etc. it has always existed. And blaming the latest figurehead is just parlor tricks

Jack Heape

Maybe not 1776, but for sure when the Constitution replaced the Articles of Confederation. The end of the Civil War consolidated the Federal government as the supreme law of the land, and ever since then the elites have worked to centralize and monopolize. They did this by the creation of the Fed, granting corporations legal personhood and immortality, the income tax (allows the creation of favoritism toward certain classes), public schools (state run propaganda), and media centralization and ownership. Americans have been propagandized into thinking they are exceptional. I see no future for the US. The neo-facists will take over and we will follow 1930's Germany down their road into dictatorship. The game is rigged, elections are a joke, and the police state is in place.

The Rage

Uh, Public Schools were in America since the beginning. Just about all the founders were a favorite of them. If anything, it is the private schooling industrial complex that is the problem.

The Civil War frankly, "created" the United States. Without it, the country couldn't survive. Capitalism has built up enough. Now Capitalists want to destroy the Federal Government………what does that tell you?

Your whole post is pathetic and full of internationalism.

Chris Maukonen

I will amke the same comment here that I made at FDL to a similar post:

I agree whole heartedly with Hedges assessment of the situation. His analogy of this being a neo-feudalistic society is spot on. And that the democratic party is an extreme right party with an extreme right agenda.

HOWEVER I disagree that any solution will be achieved in the voting booth. Any more than it would have been in Stalinist Russia.



It is going to be nigh near impossible to get a mass movement underway in our current police/surveillance state, which is only growing stronger and more severe. The tipping point would almost have to be some mega-catastrophic event. Before that, people will be weighing the trade-offs and coming down on the side of passivity and acceptance. For example, should I risk an arrest at the protest down the street that would potentially jeopardize my current and future employment? Previous generations of activists had their own set of problems, we have the computer database.


To paraphrase Madeline Albright: "What's the point of creating a totalitarian police state if you're not going to use it?"

So where is the American totalitarian state going? If you look at the NDAA and the discussion around repealing the Posse Comitatus Act, the key words include quelling "domestic civil unrest"… So what are the "deep government" types anticipating so hysterically?

Well, the financial crisis keeps grinding away and is about to enter another phase of collapse as "quantitative easing" has run its course. Interest rates are rising, posing "technical insolvency" of the Federal Reserve itself. What this means is that time's up for the 46 million in the Food Stamp Supplemental Program; 56 million getting Social Security retirement or disability benefits; and at least 20 million more needing full time employment. Obviously there's some overlap, but the total number of people living on the margins of subsistence pushes 30% of the population.

For these, they face an immediate "Final Solution"… not exactly direct extermination, but death by deprivation, illness etc. Can work camps be far off for these tens of millions and the many millions more living paycheck to paycheck? This population and their sympathizers comprise the tinder for "civil unrest". Hence the corollary to the famous "Collect it all" (communications) is "control it all" (civil disorder following further economic collapse).

Furthermore, prolonged neglect of key infrastructure will lead inevitably to severe food, water and electric power access — another source of civil unrest potential.

Of course, overseas the totalitarian police state eliminates all expression of opposition that can change policies in the quest for "Permanent War" and "full spectrum" military dominance. This ends in global military confrontation… just as the financial crisis of the 30's gave rise to another World War… only this time around world war will pitch towards thermonuclear war in short order. That's how totalitarian regimes collapse into catastrophe, dragging the rest of us to an unpleasant demise.

Unfortunately, I don't think there's a damn thing any of us can do to arrest this beserk Levithan…

The Rage

The Totalitarian state is called "Capitalism"…….once you understand that as the decadent phase of the merchent class.

The lack of reasoning on this thread is amazing. People simple DO NOT GET IT!!!!


I do think that things are a lot worse than people want to recognize or realize. I'm in my late 40's and so many of my friends are out of luck and out of hope. One of my friends is currently squatting in a house and is near suicide.
The situation sure looks hopeless now.


Suicide is what they want. Never commit suicide (unless, y'know, your problems really are your own fault); better to murder whoever ruined your life. I realize this view is unpopular, but it is a view with a pedigree dating back to ancient Sumeria.


Banger has it right when questioning the murders of JFK, RFK and MLK. I add JFK jr. to the list. He was a threat to the establishment in 2000. Nearing the 50 year anniversary of JFK's murder, the existing facts completely wash over the obvious blatant lies of the Warren Commission findings. This murder and subsequent murders of important American citizens are still as relevent as the day they happened. These murders have erased our civility as a justice and freedom caring nation, clearly by design of those oppressing our constitution. The truth about JFK's murder is all important.


The issue is actually greater than just political. The issue is whether we choose to abandon reason or not. The fact that one cannot have a discussion on these issues but, rather, that people who do not believe in the official narrative are simply dismissed as irrational and deluded. No discussion is necessary. We either choose to confront the truth or we don't. I believe the vast majority of the left-intelligentsia refuse to face the truth about the assassinations and, I believe, most everything else in favor of comfort. The sad part is that they criticize religious people for doing just that.


Derren Brown demonstrated that Sirhan Sirhan's story of being hypnotised into assassinating RFK was completely, 100%, plausible.

So he probably was hypnotized into assassinating RFK.

I don't think the people who ran the assassination of RFK actually got what they wanted though. If they wanted to stop the Civil Rights movement… fail. If they wanted to promote the Vietnam War… well, the war was lost anyway. Et cetera. Even evil conspirators can be remarkably incompetent when it comes to long-term thinking.


It's worth looking up the Derren Brown show. He hypnotised a random man into assassinating Stephen Fry in a theater. (With a trick rifle, so that Stephen Fry didn't die, obviously). He followed a procedure corresponding tightly to Sirhan Sirhan's memory.

[Mar 28, 2015] Non-Farm Payrolls Next Week

Mar 28, 2015 | Jesse's Café Américain

"We sometimes forget that central banking as we know it today is, in fact, largely an invention of the past hundred years or so, even though a few central banks can trace their ancestry back to the early nineteenth century or before.

It is a sobering fact that the prominence of central banks in this century has coincided with a general tendency towards more inflation, not less. If the overriding objective is price stability, we did better with the nineteenth-century gold standard and passive central banks, with currency boards, or even with `free banking.'

The truly unique power of a central bank, after all, is the power to create money, and ultimately the power to create is the power to destroy."

Paul Volcker, foreword to The Central Banks, 1995

Price stability is not, of course, the only priority of a central bank, depending on how narrowly or broadly one wishes to define it. But I think that the record of the Federal Reserve over the past twenty to thirty years is abysmal enough to cast doubt on their competency and objectivity by almost any other range of metrics, considering the prolonged stagnant real wage, growing wealth inequality, massively fraudulent banking system, and serial asset bubbles interspersed with systemic crises.

What has gone wrong with our great experiment in central banking and fiat money is a good question, but for another day. But history does suggest that no class or organization is worthy of holding such power, without even more powerful safeguards against its abuse.

Gold and silver were capped around the round numbers for the better part of the day, and took a little cheap shot in the after hours as they did in the early open in New York.

Bubbe Yellen spoke at the San Francisco Fed near the close, basically stirring the verbal pot for the Fed's intended escape from the zero interest rate bound while hedging their bets broadly. See Janet Yellen's Pat Paulsen Speech.

That the program has been a failure to stimulate the economy, instead fostering bubbles, speculation, and much greater wealth inequality while failing to encourage organic growth in wages and livable jobs is besides the point.

The wealthy and the Banks are doing great, and look forward to doing even better as they continue to consolidate production and acquiring income producing assets on the cheap and paying for them with inflated paper like stock and bonds.

I have included the economic calendar for next week below, because it is likely to be more of an influence on the metals. Especially so in light of Bubbe's remarks about data dependency and the categories of data which she is setting her eyes upon.

The problem is much more than the Fed. The trade deals being negotiated, TTIP and TTP, are designed to continue to erode the power of people to make choices for their nation in terms of standards of living, social justice, child labor, environment, and so forth.

The bigger picture, which so few really understand, is the ongoing currency war, and the changes that are taking place to progress the post-Bretton Woods status quo. They cannot understand it because they have really known nothing else in their lifetimes, and their knowledge of history is highly selective and often wanting. They grasp on to often self-serving, crackpot theories to reassure themselves that change is not coming, and their pampered places are secure.

Change is coming. It may be entering modestly seated on the colt of an ass, but depending on how it is received, it may be bringing redemption for those who receive it, and a stinging rebuke for the den of thieves that have distorted the courtyards of the markets.

The choice is of course ours, but all things considered, we seem to be a people generally inclined to making very bad choices and building desolate places, and painting the bones of our folly contained therein with a thin coating of whitewash and rationalization. Those who rule those foul places were better off if they had never been born.

"And when he drew near and saw the City, he wept over it, saying, 'Would that you, even you, had known on this day the things that make for peace and prosperity! But now they are hidden from your eyes. For the days will come when your enemies will set up barriers around you, and surround you, and hem you in on every side, and tear you down to the ground, you and your children within you. And they will not leave one stone upon another in you, because you did not know the time of your judgement and redemption.'"

Have a pleasant weekend.

[Mar 28, 2015] The Confidence Witch

Mar 28, 2015 | Economist's View
Gloomy European Economist, Francesco Saraceno:
The Confidence Witch: ...The confidence fairy seems to have turned into a confidence witch. One more victim of the crisis. But this one will not be missed.
It is not shameful to change opinion. Rather the contrary, it is a sign of intellectual courage. Two years ago, the IMF famously surprised commentators worldwide with a rather substantial U-turn on the impact of austerity. Revised calculations on the size of multipliers led them to acknowledge that they had underestimated the impact of austerity on economic activity.
Even at that time it started with a technical paper. But significantly, that paper was coauthored by Olivier Blanchard, IMF Chief Economist. It then served as the basis for a progress report on Greece, in June 2013, that de facto disavowed the first bailout program arguing that austerity had proven to be self-defeating.
Let us just hope that in the ECB new building communication between the research department and the top guys is more effective than in the old one…

pgl said...

Maybe this should be called the Confidence Bitch.

kthomas said in reply to pgl...

The Confidence the Clown.

[Mar 26, 2015] Revealed: how the FBI coordinated the crackdown on Occupy by Naomi Wolf

Quote: "The fusion of the tracking of money and the suppression of dissent means that a huge area of vulnerability in civil society – people's income streams and financial records – is now firmly in the hands of the banks, which are, in turn, now in the business of tracking your dissent."
Dec 29, 2012 | The Guardian

RideAPaleHorse -> bullwinkle 29 Dec 2012 20:13

@bullwinkle - Sorry, but to merely put this down to misleading information on the internet is garbage.

Giving us interest on money is no return at all when inflation is factored in to it. Why is so much energy put into keeping the real inflation rate from the public? Because it shows us how much the money is being destroyed - how little wages go up compared to cost of living.

I haven't the time nor energy tonight to go into this but seriously, anyone who is reading bullwinkles rebuttal and thinking, "yeah, maybe this guys got it figured out. The banks aren't out to screw us over!!" He hasn't at all. Check it out for yourself. There are stacks of viable and credible sources of information online.

The money scam is the most pertinent issues facing us today.

[Mar 22, 2015] Economist's View 'Controlling the Past'

March 22, 2015 |

Simon Wren-Lewis:

Controlling the past: In his novel 1984 George Orwell wrote: "Who controls the past controls the future: who controls the present controls the past." We are not quite in this Orwellian world yet, which means attempts to rewrite history can at least be contested. A few days ago the UK Prime Minister in Brussels said this:

"When I first came here as prime minister five years ago, Britain and Greece were virtually in the same boat, we had similar sized budget deficits. The reason we are in a different position is we took long-term difficult decisions and we had all of the hard work and effort of the British people. I am determined we do not go backwards."

In other words if only those lazy Greeks had taken the difficult decisions that the UK took, they too could be like the UK today.

This is such as travesty of the truth, as well as a huge insult to the Greek people, that it is difficult to know where to begin. ...

The real travesty ... is in the implication that somehow Greece failed to take the 'difficult decisions' that the UK took. 'Difficult decisions' is code for austerity. A good measure of austerity is the underlying primary balance. According to the OECD, the UK underlying primary balance was -7% in 2009, and it fell to -3.5% in 2014: a fiscal contraction worth 3.5% of GDP. In Greece it was -12.1% in 2009, and was turned into a surplus of 7.6% by 2014: a fiscal contraction worth 19.7% of GDP! So Greece had far more austerity, which is of course why Greek GDP has fallen by 25% over the same period. A far more accurate statement would be that the UK started taking the same 'difficult decisions' as Greece took, albeit in a much milder form, but realized the folly of this and stopped. Greece did not get that choice. And I have not even mentioned the small matter of being in or out of a currency union. ...


Cameron's fiscal austerity has been awful for the UK but he refuses to admit his incompetence. So he finds an economy doing even worse than the UK - Greece. Why is it doing worse? Because it was forced to have even more fiscal austerity than Cameron choose to impose. But did I not say Cameron refuses to admit austerity was a mistake? So what does he do - accuse Greece of not doing enough austerity. Hey - incompetent political leaders lie a lot.

Op said in reply to pgl...


You idiot

he's a bald face liar serving the interests of "the city"
He's a demagogue and a shit faced hog in a clean suit
Tory politicians should end with a cabinet full of em hanging from a gallows in trafalgar square

Spluttering about travesty
Hardly encompasses the grotesque inhumanity of these eight legged monstrosities

That said

I blame new labor for all this

They enabled such idery ghouls to regain power

pgl said in reply to Op ...

I see that you flunked pre-K reading comprehension. I said he lied. And he is incompetent too. But do babble on.

Op said in reply to pgl...

He is profoundly not incompetent
He got the results he was after
He deflected blame wiliest cutting back on the recovery rate

You need to use words
as they are customarily used
Or explicitly define your use
To you incompetent is just a slur
Much like shit head

Peter K. said in reply to Op ...

I don't have any problem with what Wren-Lewis and pgl have written.

Cameron says austerity works. It doesn't. That's incompetence. He's also dishonest which makes it worse.

It's also possible he's lying about wanting to be competent, but why speculate? Why bother?

What does it matter?

paine said in reply to Peter K....

The tory cabinet wanted a slow recovery
they have little concern about deficits per se

They use scare tactics

paine said in reply to Peter K....

The pm does not give a wit about austerity working

He wanted a stag

Cui bono

Fred C. Dobbs said in reply to pgl...

Cameron's coalition partner, Nick Clegg of the Liberal Dems, has said Enough With The Austerity already. Not so much that the coalition is threatened,
y'know, but, please...

We can end austerity, Clegg tells activists

paine said in reply to Fred C. Dobbs...

Barrys twin

Fred C. Dobbs said...

I have read that in recent years, Greece has made much progress, increasing exports, etc.

Under austerity, they have also laid off a whole lot of guv'mint employees, resulting in 25% unemployed, a LOT of whom would like their jobs back. Would that also be something the Brits dealt with?

anne said...

January 15, 2015

Government debt and trade balance as shares of Gross Domestic Product for Greece, 2000-2012


January 15, 2015

Government debt and trade balance as shares of Gross Domestic Product for Greece, 2007-2012


January 15, 2015

Government debt and trade balance as shares of Gross Domestic Product for United Kingdom, 2000-2012


January 15, 2015

Government debt and trade balance as shares of Gross Domestic Product for United Kingdom, 2007-2012


anne said in reply to anne...

Where government debt as a share of GDP for the United Kingdom was 44.8% in 2007, debt as a share of GDP in Greece in 2007 was 120.4%. The trade balance was -2.6% in the UK in 2007 and -6.5% in Greece.

Where government debt as a share of GDP for the United Kingdom was 97.2% in 2012, debt as a share of GDP in Greece in 2012 was 163.6%. The trade balance was -5.5% in the UK in 2012 and -9.4% in Greece.

anne said...

August 4, 2014

Real per capita Gross Domestic Product for United Kingdom and Greece, 2000-2013

(Percent change)

August 4, 2014

Real per capita Gross Domestic Product for United Kingdom and Greece, 2007-2013

(Percent change)

November 1, 2014

Total Factor Productivity at Constant National Prices for United
Kingdom and Greece, 2000-2011

November 1, 2014

Total Factor Productivity at Constant National Prices for United
Kingdom and Greece, 2007-2011

mulp said...

"And I have not even mentioned the small matter of being in or out of a currency union. ..."

Yeo, if Greece were to still be on the drachma, then Greece could simply print infinite drachma to buy all the imports, especially oil, that it needs because in a free market, the buyer dictates to the seller the price and terms in all cases.

This is a core principle of free lunch economics!

If housing subsidies and food stamps were eliminated, then the working poor would be able to buy sirloin and prime rib for 10 cents per pound because that is as much as they can afford, but the buyer sets the price and terms for all sellers. If rent subsidies were eliminated, the number of 1200 sq-ft rentals at $200 per month would explode because the working poor renter can dictate the size of the apartment and rent. That's why its called the free market. Market goods are freely available and free in a free market!

The problem in Greece is that too many people believe in free lunch economics. They consider taxes theft and paying taxes to be stupidity. But worse, international bankers believe in free lunch economics where they can loan other people's money to people who can not afford to repay the loans, but the high debt creates wealth and that will create more debt funded spending which will pay for all the past debt.

I don't see any wing of economists willing to reject free lunch economics and return to the principles of capitalism that were established by FDR and then promoted by government until the 70s when conservatives sold Americans on pillage and plunder, on free lunch economics.

And those free lunch economic principles have been sold all over the world, especially to Greece when international bankers told Greece they can borrow and spend to infinite, trust them.

[Mar 22, 2015] That Was The Week That Was

March 20, 2015 | Jesse's Café Américain
"Over a protracted period of good times, capitalist economies tend to move from a financial structure dominated by hedge finance units to a structure in which there is large weight to units engaged in speculative and Ponzi finance. Furthermore, if an economy with a sizeable body of speculative financial units is in an inflationary state, and the authorities attempt to exorcise inflation by monetary constraint, then speculative units will become Ponzi units and the net worth of previously Ponzi units will quickly evaporate. Consequently, units with cash flow shortfalls will be forced to try to make position by selling out position. This is likely to lead to a collapse of asset values."

Hyman Minsky, The Financial Instability Hypothesis

Gold and silver had a very positive day today, running up to their short term overhead resistance intraday, and holding most of those gains.

There was intraday commentary on gold and silver here.

The moves next week will be much more meaningful than this short term run up off a very oversold condition.

I am ready for anything, given that the character of the bucket shop has not been improved.

I have included the economic calendar for next week. There will be the *third* revision to 4Q GDP which, unless it is markedly revised lower to give some headroom for the next 1Q estimate, will likely be a trip to the snoratorium.

The macroeconomics and global situation are much more significant, even if the domestic trade and commentary barely gives it an exceptional nod or acknowledgement.

Remember me in your prayers, as I remember you.

Have a pleasant weekend.

[Mar 21, 2015]  You Think You're An Investor I Think Not by Raul Ilargi Meijer

Mar 19, 2015  | Zero Hedge
Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

Let's start with defining what an 'investor' really is. A reasonable definition of an investor seems to be 'someone who puts money into risk bearing assets that promise to produce financial gains through – increased – productivity'.

If we can agree on that, then furthermore I think we can all agree that investors need markets. And not only that, but they need functioning markets. What defines 'functioning' here is that 'investors' need to be able to discern what the value is of the assets they have already purchased and/or are thinking of purchasing in the future.

But we haven't had any functioning markets since at least 2008. There is no price discovery left, nobody knows the actual value of anything anymore, and 'traders' pour money into all sorts of 'assets' without having one single clue as to what they are really worth. They don't even care about the real value of the 'assets' they purchase. They don't have to, because the game's so obviously rigged and distorted.

There is no risk left in the assets, productivity – i.e. the added value – has long since ceased to be an issue, and that leaves financial gains as the only point of our definition above. But that must of necessity also mean that whoever trades in these non-functioning markets – preferably with 'money' borrowed on the cheap -, is not an investor.

So what are the people who do trade, while still calling themselves investors? Are they then mere 'traders'? That doesn't quite seem to fit.

What are they then? It may sound a bit harsh to claim they are all just plain grifters, but maybe that's not too far off the truth after all.

One might conclude, when looking at the excessive attention 'everyone' paid yet again today to Janet Yellen and the Fed, waiting breathlessly to see if she utters the word 'patience', that those people who call themselves 'investors' are not even grifters, they're nothing but yet another group of lazy bums waiting for government – and/or central bank – hand-outs.

Just much bigger hand-outs than people receive who are on foodstamps (and now you know where that much maligned inequality comes from). But they're still hand-outs.

Nobody puts money into worthy (for lack of a better term), innovative, productive projects anymore, everyone just waits for what the Fed says and plays it safe (hand-outs). The Fed has thus eroded the investment world, and indeed the entire investment market model.

And that will come back to bite everyone. There is no more money flowing into any 'worthy' initiatives, it's all going into whatever makes most money fastest, screw – increased – productivity. And since price discovery no longer exists, worthy initiatives will receive funding only through some freak accident (like a billionaire with Alzheimer's), not by design, not through the inherent benefits of the investment model. Which is all but dead.

This cannot but have far reaching consequences, because we no longer have a model in which the best and brightest and hardest working amongst us can and will get funding to build their dreams. All money goes into either 'Tech Boom The Sequel', or is spent betting against whatever trend looks fit to fall first. Or a combination of the two.

The smarter amongst you, and I have to doubt that there are too many, will understand that the Fed 'protection racket' that has existed for years, is about to come to an end. It's you against Wall Street now, and most of you don't stand a chance in that arena.

A rate hike, any rate hike, or two, is the (re-)start of price discovery, at a time when everyone is 'invested' in 'assets' for which price discovery was never even considered at the time of purchasing. How fast can you unload? Who's going to be the buyer? Are there enough fools greater than you left?

Maybe I should feel better knowing how much y'all stand to lose soon, but I don't, because I also know how much everyone else stands to lose who already don't have anything but debt. Emerging markets are going to get obliterated, all sorts of funds and levels of government, domestic and abroad, are going to get crushed – resulting in more services getting cut for the poor -, and so, whether you like it or not, are most Americans and Europeans who fancy calling themselves 'investors'.

They're not. They're just a bunch of grifters and bums. They couldn't (have) survive(d) in a marketplace that has actual price discovery. They couldn't have borne the losses and recuperated. Not the way real investors do.

I found this a good and somewhat amusing summary of the feeling before Yellen's speech today, as expressed yesterday via MarketWatch:

'Hell Will Break Loose' If Fed Loses Patience

It could go either way, according to the Fly from the iBankCoin blog, who spoke of extremes. "If we find out this Wednesday that [Janet Yellen] is not, in fact, patient, hell will break loose and 66 seals of hell will be broken — paving way for actual centaurs to roam, wall-kicking people in the faces with their hooves," he wrote. "On the other hand, if Janet is patient and says so, we're all going to make an absurd amount of money."

Having a rigged, distorted system that fakes being a market and makes a bunch of grifters a lot of money, is not how you build a functioning society.

Oh, and you know what the worst thing of all is – if it can get any worse -? If the Fed and other central banks, post-2008, would have simply let the markets sort things out, most of the 'money' that has now been so horribly dislocated and mis-invested and debt-riddled, would never have existed in the first place.

The S&P would have been at 500 or so, bonds would have 'normal' prices and yields, actual investors would have taken their losses, and we would have had at least some sparks of brightness to look forward to. As things are, there's only the headlights of that highspeed train coming at us from the other side of the tunnel.


[Mar 20, 2015] Here Is The Reason Why Stocks Are Soaring, Or Farewell Recovery... Again

03/18/2015 | Zero Hedge

Why are stock soaring in response to the Fed statement and latest set of projections? Because, as Bloomberg promptly calculated, the FOMC revised down all forecasts for 2015 since the previous SEP was released on Dec. 17.

The median dot for year end 2015 falls to 0.625% from 1.125% in Dec: a whopping 0.50% cut.

And there goes not only the "recovery" but any imminent rate hike.

The details:

And here is a comparison of the dots since September 2014 courtesy of @Not_Jim_Cramer. The Fed: wrong as ever.

In other words, what the Fed just said is the following: "it wasn't the snow, it was the economy."

End Result: Goodbye recovery, hello stock surge.

Ben Bernanke Was Right No Rate Normalization During My Lifetime

Zero Hedge

With the Fed's credibility terminally smeared across the windshield of the Marriner Eccles-mobile, courtesy of the latest "dots" projection which proved yet again - and beyond any doubt - that the FOMC members are just a pack of chimps throwing darts, and perhaps feces, at a fed funds dart board, we can now honestly say that the one Fed (ex) member who was 100% accurate (if only in this case), and who saw the writing on the wall early on and got the hell out of Marriner Eccles while he could, is Ben Bernanke.

As a reminder, this is what he said (via Reuters):

"At least one guest left a New York restaurant with the impression Bernanke, 60, does not expect the federal funds rate, the Fed's main benchmark interest rate, to rise back to its long-term average of around 4 percent in Bernanke's lifetime. "Shocking when he said this," the guest scribbled in his notes. "Is that really true?" he scribbled at another point, according to the notes reviewed by Reuters."

Yes, it really is.

[Mar 20, 2015] The Fed's Reckless Gamble by Christopher Whalen

But Krugman is wrong. The problem we all face is not runaway wage and price inflation of the type seen in the 1970s, but a more pernicious and deadly form of slow erosion in purchasing power for all people, combined with slow or no real economic growth.
February 23, 2015 | The National Interest
WHEN PICMO founder William Gross coined the term the "new normal," he both stated the obvious and offered a fresh insight. Most people understand in a visceral way that things have changed dramatically when it comes to jobs and economic opportunities since the financial crisis of 2008. But more than something new, the current state of the U.S. economy represents a reversion to the old normal—the price deflation and slack job market that existed in the 1920s and 1930s—which was interrupted by World War II and the subsequent decades of the Cold War and massive government spending.

It is safe to say that everyone wishes for a return to business as usual, at least insofar as "normal" is understood by most Americans. Plentiful jobs, along with rising home and stock prices, worked for most of us. The only problem is that the old normal economy of the 2000s, for example, saw prices for homes, stocks and other asset classes growing at levels that were clearly not sustainable. When we saw annual double-digit increases in home prices in the United States during the mid-2000s, the one thing you could be sure about was that this rate of price change was unsound and probably a function of external factors such as low interest rates and easy credit.

Since the 2008 financial bust, the U.S. economy has been anything but normal. The housing market, for example, rebounded at double-digit rates in 2011–2013, but now seems to be losing momentum rapidly. Near-zero interest rates maintained by the Federal Open Market Committee (FOMC) prevented an immediate apocalypse in the form of a 1930s-style price deflation, but this is both good and bad news. The lack of a true debt deflation commensurate with the degree of excess prior to 2008 has left the U.S. economy hanging in a form of economic stasis. Without price deflation and debt restructuring, there is no economic "bounce" and thus no recovery in demand or jobs.

TODAY, THE U.S. economy is like a cardiac patient on artificial life support. Flat employment, flat credit growth (at least for productive purposes) and falling inflation-adjusted incomes are the attributes of the new normal. Nobel laureate Robert Shiller draws an explicit parallel between today's "new normal" of no or slow wage and job growth and the late 1930s, when the U.S. economy began to sink under the weight of FDR's New Deal experiment:

The depression that followed the stock-market crash of 1929 took a turn for the worse eight years later, and recovery came only with the enormous economic stimulus provided by World War II, a conflict that cost more than 60 million lives. By the time recovery finally arrived, much of Europe and Asia lay in ruins.

Shiller's point about how World War II rescued America from the deflation of the late 1930s is often missed, deliberately, by many economists. FDR's antibusiness rhetoric during the New Deal actually made the deflation of the 1930s worse by chasing private capital out of the U.S. economy. In their classic book A Monetary History of the United States, 1867–1960, Milton Friedman and Anna Jacobson Schwartz documented how private capital formation in the United States essentially went to zero by the late 1930s, leaving the public sector as the only engine of growth into the 1950s and 1960s. Large corporations and banks aligned with the federal government were the most significant source of credit and economic prosperity in that period. It took until the 1970s for private risk taking to truly reemerge in the U.S. economy, driving growth for decades thereafter. After these dramatic swings in growth and demand, however, we still have a muddled view of what constitutes long-term economic expansion.

While politicians and central banks can artificially increase the nominal growth rate for relatively short periods of time—we know this as a "bubble"—such machinations create no real wealth. We feel wealthier for a time, as in the Roaring Twenties and the 2000s. Yet when any significant proportion of the population tries to take its chips off the gaming table, the good times end. Given that an economy only truly grows wealth at the rate of real GDP growth, as Alex Pollock of the American Enterprise Institute observes, why do so many economists and the members of the FOMC call for policies to push higher and unsustainable rates of economic growth? The answer comes down to a basic difference between conservatives and liberals when it comes to inflation, a conflict of visions that has its roots in the dark days of the Great Depression.

Some on the left, like author William Greider, believe that a little inflation is good for working people and debtors, even if it erodes the purchasing power of wages. But just as a steady 2 percent increase in real wealth provides enormous benefits to a society, a steady 2 percent annual inflation rate can rob workers and families of the ability to meet basic needs in a matter of a few scant years. For example, an item that cost $20 in 1930 would cost $283 as of this writing, reflecting a cumulative rate of inflation of 1,315 percent, according to the Consumer Price Index (CPI) maintained by the Bureau of Labor Statistics (BLS).

Remember that because of various adjustments and omissions from the underlying data, the CPI greatly understates the actual rate of inflation experienced by individual consumers. Inflation, after all, is a monetary phenomenon that occurs when the value of money declines relative to the goods and services it can purchase. Small wonder that Americans have seen a steady decrease in real income over the past several decades. And yet the Federal Reserve and other central banks explicitly target inflation levels that are ultimately destroying consumer purchasing power.

WHEN POLITICIANS or members of the FOMC promise growth above that 2 percent long-term average, they are being more than a little disingenuous. Not only will using government policy to stimulate demand and keeping interest rates low create financial bubbles and other problems in the short term, but such expedients will also actually hurt all of us by eroding the purchasing power of wages and income. The housing boom of the 2000s, for example, was supported with public-policy initiatives from Washington and low interest rates from the Fed, but the result was a massive financial collapse and the destruction of trillions of dollars in notional wealth. Meanwhile, the cost of housing has continued to climb, even as real incomes have fallen.

Nobel laureate Paul Krugman is one of the leading exponents of the inflationist view. Week in and week out in his New York Times column, Krugman derides those who spend too much time worrying about inflation and advocates an increase in government spending, fueled by higher taxes or additional debt, as a means of stimulating demand for goods and services, and thus jobs. Krugman ridicules "the wealthy" for advocating low inflation and insists that the road to salvation is to continue the policies of the past half century, which includes using government spending and easy money to increase nominal private demand.

But Krugman is wrong. The problem we all face is not runaway wage and price inflation of the type seen in the 1970s, but a more pernicious and deadly form of slow erosion in purchasing power for all people, combined with slow or no real economic growth. Krugman and his fellow travelers on the left correctly point out that there is little or no wage inflation in the U.S. economy, but that does not mean that inflation, broadly defined, is not a serious problem. The combination of decades of deficit spending and more recent experiments in radical monetary policy has contributed to a slow but steady increase in the cost of living for all Americans, an increase that's caused real incomes and the value of savings to fall.

Krugman and other advocates of secular inflation point to the period after World War II as proof that deficit spending and a large national debt help economic growth. But such views are myopic. The massive government spending during and after World War II helped to pull the United States out of the debt and deflation of the 1930s, much of which was worsened by the excesses of FDR's New Deal. But you cannot treat the period immediately following the Second World War as "normal" in any dimension.

In fact, the key driver of prosperity following World War II was not government spending but demographics. Johnny came marching home, got married and had lots of babies. Between 1950 and 2000, the civilian labor force grew by an average of 1.6 percent per year, according to the BLS. This may not sound like a big number, but over fifty years that meant that the cohort of working-age Americans more than doubled in number from 62 million to 141 million by the start of the twenty-first century. The BLS estimates that, between 2000 and 2050, the working-age population will grow just 36 percent, or about 0.6 percent annually.

With a smaller demand "pull" from shrinking demographic growth, a slower economy is hardly surprising. If we recall that the real, long-term growth of wealth is a function of increases in population and production, then the fact of slower U.S. population growth in the twenty-first century suggests that we will also see more modest growth in GDP. Under such circumstances, what is normal? More important, with nominal GDP growth in the 2–3 percent range absent shocks from external factors, and the Fed targeting similar levels of price inflation, will Americans see any improvement in their real inflation-adjusted income or wealth?

Sadly, you will never hear Federal Reserve chair Janet Yellen and the members of the FOMC admit that the real, long-term growth rate for wealth or GDP is just 2 percent. Because of the dual mandate given to the U.S. central bank of encouraging employment and ensuring price stability, the FOMC has tended to focus policy on trying to encourage job growth while pretending that inflation is not a problem. Indeed, over the past two decades, as real growth prospects have waned, the FOMC has used progressively lower interest rates to both stimulate growth and rescue the economy from the aftereffects of the latest Fed-inspired boom. Whatever concerns the Fed still harbors regarding long-term price stability have been overwhelmed by the political imperative to achieve short-term job growth.

Economists in both private and public life make a living by talking about levels of potential growth that are far above the long-term average increase in real wealth. One reason for this is that suggesting that the long-term average growth rate will not exceed 2 percent implies a future of limited job opportunities, something that's hardly popular with voters or elected officials. The remarkable growth rates claimed by China's authoritarian regime illustrate the political imperative behind such efforts. As a result of the one-child policy, China's population is growing at just 0.5 percent annually, according to the World Bank. When you see official Chinese GDP growth rates of more than ten times the rate of population increase, the one thing you can be sure about is that the claimed rate of "growth" is unsustainable and driven by politically motivated government spending.


OVER THE past several years, members of the FOMC have maintained ultralow interest rates, ostensibly to boost economic activity in such areas as housing and job growth. But despite low interest rates and massive purchases of government debt and mortgage securities by the FOMC, volumes of residential mortgage lending have plummeted down to decade-low levels, and job growth remains anemic and of poor quality. Instead of stimulating a recovery in the real economy, the policies followed by the FOMC under first Ben Bernanke and now Janet Yellen have only created new asset bubbles in sectors like real estate, public equities and the corporate bond market. With interest rates and commodity prices now falling around the world and the dollar soaring against other currencies, the FOMC seems to have created a "deflation trap" whereby investors are unwilling to put capital at risk as they await higher interest rates. Meanwhile, job creation and spending suffer due to a lack of investment.

Some Fed officials are increasingly uncomfortable with the Fed's policies. Richard Fisher, president of the Federal Reserve Bank of Dallas, dissented from his colleagues on the FOMC, saying he'd like to see rates begin to go up in 2015. Philadelphia Fed chief Charles Plosser also dissented on similar grounds. But both Fisher and Plosser no longer vote on the FOMC. A decidedly left-wing majority on the Fed's policy-making body continues to support the extraordinary low-rate policies in an effort to boost job growth. In the European Union, the European Central Bank is pursuing a similar policy.

But the sad fact remains that the use of interest rates or fiscal policy to stimulate nominal growth is of limited utility today. In the 1970s and 1980s, when the children of the post–World War II baby boom were starting families of their own, a little bit of push in the form of low interest rates or increased government spending resulted in a substantial increase in job creation and economic activity—along with higher inflation. Today, with lower population growth rates and relatively high levels of public debt in most industrial nations, the utility of fiscal or monetary policy in boosting growth rates is very limited—but inflation remains a problem that affects all consumers, rich and poor.

In the Fed's most recent report to Congress, Yellen repeated the Fed's explicit embrace of a 2 percent inflation rate, in order to help the employment picture, all the while paying lip service to the Fed's responsibility to ensure stable prices. She stated:

The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee reaffirms its judgment that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate.

What Yellen is saying explicitly is that it is not possible for the FOMC to achieve the legal mandate of "maximum employment" without tolerating a 2 percent inflation rate. But a 2 percent rate of inflation, compounded over twenty years, will rob American consumers of half of the purchasing power of their wages and savings. Not only do the Fed's publicly stated policies doom many Americans to poverty in the future, but they are also an explicit admission that the Fed's dual legal mandate set by Congress in 1978 is unworkable. The Fed cannot both pursue "maximum employment" and safeguard against inflation. Indeed, there is a growing doubt that the Fed can truly change the employment picture. But the political attraction of promising people higher wage and job growth, it seems, is so powerful that members of the FOMC and central bankers around the world cannot help themselves. Ultimately, using low interest rates in an attempt to boost demand and job creation will fail.

Christopher Whalen is senior managing director and head of research at Kroll Bond Rating Agency. He is the author of Inflated: How Money and Debt Built the American Dream (Wiley, 2010) and the coauthor, with Frederick Feldkamp, of Financial Stability: Fraud, Confidence, and the Wealth of Nations (Wiley, 2014).

[Mar 19, 2015] The Central Banks Will Not Be Able to Control This by Phoenix Capital Research

Mar 19, 2015 | Zero Hedge

The biggest issue facing the financial system today is the US Dollar rally.

The Fed and other Central Banks are trying to maintain the illusion that they have everything in control by talking about interest rates, but the reality is that the US Dollar carry trade is ABOVE $9 trillion in size. That is almost as big as ALL of the money printing that occurred between 2009 and 2013.

And it's imploding as we write this.

Globally, the world is awash in borrowed money… most of it in US Dollars. The US Dollar carry trade is north of $9 trillion… literally than the economies of Germany and Japan COMBINED.

When you BORROW in US Dollars you are effectively SHORTING the US Dollar. So when the US Dollar rallies… you have to cover your SHORT or you blow up.

And the US Dollar has been rallying… HARD. Indeed, the move that began in July 2014 is already larger par in scope with that which occurred during the 2008 meltdown.

Moreover, this move has occurred with little to no rest. The US Dollar barely corrected 2% after rallying a stunning 16+% in a matter of months before beginning its next leg up.

You only get these sorts of moves when the stuff hits the fan. CNBC and the others are babbling about the Fed's FOMC changes, but all of that is just a distraction from the fact that a $9+ trillion carry trade, arguably the largest carry trade in history, has begun to blow up.

Rate hikes, QE, all of this stuff is minor in comparison to the carnage the US Dollar is having on the financial system. Take a look at the impact it's having on emerging market currencies.

... ... ...

[Mar 19, 2015] How Many Shale Oil Plays Make Money At $37 Per Barrel  by Jim Quinn

Mar 19, 2015 | Zero Hedge


"How Many Shale Oil Plays Make Money At $37 Per Barrel? (Spoiler Alert: None)"

Ah, but the Big Fish still get to eat the Little Fish (via bankruptcy fire sales) -- thanks to the Fed and its QE: "Money for nothing, and checks for free!"

Sing along now... "Money for nothing... easy, easy money..."

Note that Big Fish control Big Gov. Little Fish do not. Place your bets accordingly.

p.s. "Ditto" for AU and AG mines: "Con-so-li-da-tion", i.e. hostile takeovers and bankruptcy sales.

You should know by now that it is in the very Fabric/DNA of the current Monetary System (fiat currency + FRB + Derivatives) to culminate in Socialism for the Western Oligarchs (asymmetric Benefits that privatizes profits, and nationalizes debts/losses).

Amschel Meyer Rothschild must be glowing in his grave, and toasting with Lucifer.


"Socialism for the Western Oligarchs (asymmetric Benefits that privatizes profits, and nationalizes debts/losses)" is a great description.

It's what Mussolini referred to using the word "Fascism."

Fascism isn't about marching around shouting in cool uniforms, nor about having people lecture you on behavior. Those are surface characteristics that can be found elsewhere. It's about allowing corporate power to take over and subsume state power, for the benefit of the corporate elites. That's why "Islamo-Fascism" is a nonsense term. The Islamists are religious fanatics bent on a repressive and violent theocracy, which is something I want no part of, but it's not "Fascism."

Same with American Liberals; they're not inclined toward fascism because a lesbian might lecture you on pronouns, or a vegan might lecture you on eating meat. That's annoying, but what makes American Liberals tend toward fascism is that they support measures which put more and more public and state interests into the hands of corporate interests, for the benefit of the corporate interests first and anybody else second if at all (examples being "ObamaCare" with is a bailout of corporate insurance and medical interests which have otherwise priced themselves out of business; "HAMP" which uses public/government money to bail out corporate finance housing lenders who would otherwise lose on investments they never should have made; Any student loan program, which will use public/government money to bail out corporate finance education lenders and their collaborators in the Education industry who have also priced themselves out of business; among many other available examples).

I hate to get pedantic about word choices, but words have meanings and when the subject is important, it's critical to use the right word to refer to what you're talking about. America's political vocabulary has been very intentionally drained of meaning, and words are used to refer to things other than what the words mean. That has the eventual effect of preventing us from communicating with each other on political topics, and I don't have to tell you who benefits from, and desires, that outcome.

Thanks for the good, concise description.

Buckaroo Banzai

Sorry, but you're wrong. Words do have meanings, and you are misusing the word "fascism". Fascism is defined as NATIONAL SOCIALISM. Under fascism, corporations do work closely with the State, but they maintain a separate identity, and are subsidiary to the State.

What we have today in this country is an entirely different system. Corporations have evolved into INTERNATIONAL entities, not national entities as they were in the 1930s and 1940s. Furthermore, corporations don't work closely with the State, rather, Corporate EXECUTIVES have been wholly integrated into the ruling elite, which is a class that now consists of corporate executives, national politicians, and SES-level federal bureaucrats. The modern publicly-traded International Corporation has been reduced to a privileged legal entity that is looted by the entire elite class via stock options, stock buybacks, political contributions, lobbying expenses, and the associated revolving doors between the corporate suite, K Street, and capitol hill. Corporations are still nominally owned by the "public", but the wealth and power they generate have been completely co-opted by the Elite class.

What most people miss is how dramatically corporations have evolved over the last century, and how the role of corporate executive has changed. That is where the confusion lies.


Nice explanation. Still, the State hands out benefits to some corporations and punishes others. In that sense, there remains a measure of the classical fascism. Obviously, the international corporations can do some level of moving around, shifting to more favorable State environments. However, that is becoming more difficult as "global governance" moves forward on various levels. I have a hard time sorting out these ruling elite relationships but lean toward the State still maintaining ultimate dominance.

Buckaroo Banzai

"Still, the State hands out benefits to some corporations and punishes others. In that sense, there remains a measure of the classical fascism."

Not really. A better way to look at it is an internal political struggle between competing factions of the elite. And don't forget, if you are a corporate executive at a corporation that is on the losing end of lobbying or politics, you will get paid regardless. Ultimately it is the shareholder that will get screwed, not the executive.

[Mar 18, 2015] Here Is Why The Fed Can't Hike Rates By Even 0.25%

Mar 18, 2015 | Zero Hedge
There was a time when Zoltan Poszar was the most important person at the Fed (and Treasury), because he was likely the only person in the government's employ who grasped the enormity and complexity of the then-$30 or so trillion US shadow banking system. A quick refresh of his bio from the Institute for New Economic Thinking:

Mr. Pozsar has been deeply involved in the response to the global financial crisis and the ensuing policy debate. He joined the Federal Reserve Bank of New York in August 2008 in charge of market intelligence for securitized credit markets and served as point person on market developments for senior Federal Reserve, U.S. Treasury and White House officials throughout the crisis; played an instrumental role in building the TALF to backstop the ABS market; and pioneered the mapping of the shadow banking system which inspired the FSB's effort to monitor and regulate shadow banking globally. Prior to Credit Suisse, Mr. Pozsar was a senior adviser to the U.S. Department of the Treasury, where he advised the Office of Debt Management and the Office of Financial Research, and served as Treasury's liaison to the FSB on matters of financial innovation. He also worked with the Federal Reserve Board on improving the U.S. Flow of Funds Accounts.

While Zoltan is currently working in the private sector at Credit Suisse, he is perhaps best known for laying out, back in 2009, the full topographical map of the US shadow banking system in all its flow of assets (or is that contra-assets when it is a repo) beauty.

Which is also why we bring him up, because in a much welcome follow up to his previous work title "A Macro View of Shadow Banking" which we will discuss further in the coming days because it is not only Zoltan's shadow banking magnum opus and must read for anyone who wants to get up to speed with all the latest development in the unregulated shadow banking space, but because Poszar also provides perhaps what is the most important chart which explains why the Fed is so very terrified of even the smallest possible incremental rate hike of 0.25%.

Specifically, we look at Poszar's findings about the implied leverage within the fixed income asset space in America's just a little levered buyside community. This is what he says:

Although no precise measures are available, the presence of leverage among hedge funds with credit and fixed income strategies has been recognized since the LTCM crisis (see Figure 21), as is leverage in separate accounts in the asset management complex.

While hedge funds and separate accounts are allowed to use leverage liberally – in fact, leverage is the sine qua non of these investment vehicles – it is widely underappreciated that bond mutual funds that are typically thought of as unlevered and long-only also have considerable room to use leverage.

The extent to which this room to use leverage is utilized is up to bond portfolio managers to decide, and it is not uncommon for the largest bond funds to maximize the leverage they may bear in their portfolio within the limits allowed by the Investment Company Act of 1940, and the SEC's interpretation of the portfolio leverage and concentration incurred through the use of derivatives.

However, the creep of leverage into what are traditionally thought of as long-only bond funds was missed by the mainstream economics literature and textbooks entirely. For example, recent works that identify asset managers as the core intermediaries behind the "second phase of global liquidity" focus solely on indirect forms of leverage (FX mismatches) embedded in bond portfolios through holdings of dollar-denominated emerging market sovereign and corporate bonds (see Shin, 2013).

Other works state even more explicitly the widely-held assumption that fixed income mutual funds are unlevered, and analyze episodes of market volatility induced by redemptions without any regard to how direct forms of leverage embedded in fixed income mutual funds may amplify volatility during periods of rising redemptions (see for example Feroli, Kashyap, Schoenholtz and Shin, 2014, Chapter 1 of the International Monetary Fund's October 2014 Global Financial Stability Report, Chapter 6 of the BIS' 84th Annual Report, and Brown, Dattels and Frieda, 2014 (forthcoming)).

But all of these views sit uncomfortably with the hard evidence presented above, and recent revelations about "perceived" alphas (see Gross, 2014b) and price action in the interest rate derivative markets amidst soaring redemptions from the largest bond portfolio in the global financial ecosystem – the PIMCO Total Return Fund (see Mackenzie and Meyer, 2014). More concretely, a look at the portfolio of this specific fund provides good examples of the forms of leverage discussed above.


More broadly, the above example demonstrates the evolution of the traditional core product of the asset management industry – long-only, relative-return funds – as it came under pressure from two directions: from hedge funds, offering absolute return strategies, and from passive index-replication products in the form of low-cost exchange traded funds (ETFs). Core-satellite investment mandates became the trend, with hedge funds providing alpha and index-replication vehicles delivering beta at low cost. Traditional asset managers responded to this challenge a number of ways: some by launching their own, internal hedge funds, and some by incorporating into their core products many of the alternative investment techniques used by the hedge funds. These industry trends were the sources of competitive push that drove the above-mentioned creep of leverage into the industry's traditional, long-only, relative-return bond funds (and hence the rise of levered betas), all designed to stem the flow of assets to the hedge fund competition and command higher fees as the profitability of traditional core products was squeezed (see Bank of New York, 2011 as well as Haldane, 2014).

And visually:

In short, what Poszar is saying is that in a world in which the traditional broker-dealers and banks have indeed reduced leverage and instead use $2.5 trillion in Fed reserves as fungible collateral against which to buy credit derivatives (for example as in the case of JPM's CIO office and its attempt to corner the IG9 market) the buyside community, which as we have long discussed has largely avoided equities due to fears of a spectacular market implosion (and certainly minimized levered exposure in the space with the exception of several prominent HFT participants) has instead been forced to chase after fixed income products. And chase with leverage that would make one's head spin as can be seen in the outlier chart above.

And while Poszar may be quite correct in stating that most have missed the leverage creep he observes above...

Perhaps the key reasons why economists have missed the creep of leverage into the traditionally long-only world of fixed income mutual funds are the conceptual gaps in the way in which the U.S. Financial Accounts (formerly the Flow of Funds) depict the global financial ecosystem, and by extension, the limited mental map it gives to economists who use it to understand asset prices.

... one entity that does understand all this and grasps the momentuous implications of even the smallest quantum of interest rate increase, is the entity where Poszar previously worked: the US Treasury and the Federal Reserve itself.

And so, the next time someone asks "why is Yellen so terrified of even the smallest possible rate hike", show them this chart above and explain that the Fed vividly remembers what heppened when LTCM blew up. What the Fed doesn't want, is not one but one thousand LTCMs going off at exactly the same time in what is now the world's most levered trade...


So the dollar isnt going up because of America's sound fundamentals? But rather because its newly minted QE is being used to make leveraged, unhedged gambling bets in derivatives markets (ie. CDOs that cant be paid by counter parties like AIG to losers like MF Global) by primary dealers as repo collateral instead of being released into the economy and increasinging the money velocity?

So the Fed is lying when they say they will soon raise interest rates? Even though raising interest rates .25 % would add 100s of billions in interest to the over 18 trillion dollar debt?

So there is a quadrillion dollar hidden -shadow- banking system beyond the site of Congress and investors at large? That is potentially worse than a 1000 Lehmans?

So then shouldn't we be using our overvalued dollars to buy suppressed under valued gold


I found this helpful:


Crap... It's just like the movie SPEED with Sandra Bullock and Keanu Reeves back in '94 when a former banker rigs a bus loaded with muppets to explode unless he get's paid a million$$ ransom.

If Yellen let's the speed fall below 50 MPH then the bomb goes off and everyone dies.

Meanwhile she's desperately looking for an off-ramp called ECONOMIC GROWTH but it ain't there... and now she's running out of road and there's a hole in her gas tank...


we look at Poszar's findings about the implied leverage within the fixed income asset space

Do you have any idea what the avg rate on the 10 year bond is?

Of course it is about leverage, it has always been about leverage. There are two ways for control freaks to fight a deleveraging: 1) print money, and 2) re-lever. And since the fixed income markets are by far the largest, guess where the leverage (mostly in the form of swaps) was placed?

And in order to keep this leverage from blowing up, interest rates have to stay zero, forever. This is not rocket science. Neither, however, is it reality, but that is what they are trying to do.


1. Average all-time historical return is 0 or negative. Inflation beyond a few tenths of a percent only became a standard phenomenon during the industrial age. This is one of the key points of metallism and one of the reasons monetarists and chartalists (more like charlatans) hate metallism.

2. Savers should not have their money in the bank (or brokerage) if they don't want the banks to use it.

To my knowledge the long-run average coupon on government debt in all places was 3%-5% or less, it was the preferred asset class (in addition to farmland, of course) of the rentier parasites of recent centuries. This high rate is part of why we got national income taxes; careful what you wish for.

There is no point in calling fiat currency stolen, any more than there is in calling a unicorn stolen. It is all debt, not money. The theft begins as soon as it is loaned into existence. Beyond that, the interest means it by nature requires theft from the future.


Fun fact,

The mean 'seed' fund runs at around 120% gross and you would think one would do a 'hedged' book, you know, at best 100% leverage, maybe 120% gross in extreme periods right ?

Saw a fund yesterday, small, about XYZ MM under management, running on 197% gross and 300% net. Yes, you are reading that correct. US Institutional qualified, with more than 10 accounts.

Now either I'm getting really old, or my idea of risk management is totally shot to shit at this stage in my career, but this guy was balls deep in fixed credit and swaps. Refused to give over his VaR metrics, or altman score, but had a stupidly great sharpe ratio. Some days, when I think about how some junk companies inflate by 20% a day, I think about this guy, and his fund.

And I wonder, what if this is the new normal. If Bill, Leon, George.... old crew is working away, and there are a whole bunch of wingnuts like this ZYZ nutter who are chasing yield with every risk hedged to keep below your Prime guidebook, but in reality are running at ratios Myron Sholes would have shit himself at.

Just a food for thought.

Toten is 100% correct, risk free is a economic concept derived from post-war 1918 sov. growth rates vs. the real 400 years of economic history; While Case Shiller's often trot out CAPE model works great at predicting rate moves using smoothing, that whole thing assumes underlying growth conditions which are not normal; namely a baby boom, accretive fixed capital rates, technical revolutions every 5 to 10 years and monetary stability. Throw CAPE into some funky currency wars, like the 1750's with only 3 varables ? busted like TRIPS.

Fed policy is going to give stability, which we expected

Now the rest needs to come from the rest of the world. Arguably the US technocrats are more inclusive and forward looking than the fractionalized govts in Japan (no offense Abe!) so Fiscal policy, has a fighting chance of at least respecting the structural reforms required by US gov, lest major allies switch to RNB; creating the bi-material system Austrians badly want. Where RNB is the 'silver' and UST is the 'gold standard'.

If they fail to act, and US corps/US Trading partners will continue to plan outlays for tax management & accretive ROE's to optimize their USD purchasing power, and will invest abroad. Which is pretty much what happened when economic powers dropped gold or bi-standard switching the last time this happened; when the world had a band of iron to every corner of the globe.

In this scenario, US investors can certainly rely on price stability, but as Janet Yellen said in press scrum today: the world is responsible for their own portfolios and yield valuations. Fed does not promise a risk free rate, nor does it target a risk free rate; only inflation & job growth.

As ZH has spoke about ad nausum, job quality is shit, and projected tax planning & wage growth, when millennials hit 40 is going to be nowhere close to sustaining the AA rating of the USA, let alone its G8+7 trade allies. So until we see 57% of U-5 semi-attached workers actually get with something approaching post-war wage & family formation rates, achieving a 8% risk free world is beyond us. Which is where a Fiscal & technocratic solution comes into play; and requires a global coordinated effort which is inclusive of all the key countries. The alternative ? They'll just fuck off and hit up China, turning a blind eye to middle kingdom 2.0, which was a key behind the dead global growth post- 1 AD, and likely even pre-1AD given Chinas total inability to govern that cesspit since the Bronze Age.

In this scenario, I think back to that tool, and his reach for yield hyper-LTCM trading vehicle. When that martingale hits zilch, what happens to them? Will it matter at that point ? Will credit origination matter at all when NIRP becomes accepted as a cost of trade, and we simply trade in 1 oligarchy and swap in UST? where the UST becomes a scarce form of barter like gold was in 1500 ?

Will Primes and Institutional investors be able to tell the difference between technical and productive growth at that point ? Or will the fear of risk, or perhaps the lack of education on industry specific risk lead to a total lack of interest in exploration & moonshot capital ?

Fun fact, the cotton gin is thought to have been 'invented' in at least 5 instances in history, but it only was when some Jews with a some funny names decided to arb their trade float for a merchant capital fund. This was amid a raging stagflation enviroment, and it worked out well for us since 1680.

If we are staring down the barrel of another 40 year stagnation ecosystem (at least), and if we assume Washington/NATO gridlock extends as long as the Holy Roman Empire's decline; we could be in for a good long time of NIRP.

On an end note. ZH lobbied for 'healthy' deflation for 4 years, and now its happening. You cant have a rate hike, and price deflation at the same time. We are done with the Keynsian real time lab study, and now we're onto the Austrian study:

Austrians propose that Federal reserve money printing is the bane of all evil, and the Fed is the sole originator of all credit default which starts the busines cycle. The fed is now accomodative, and neutral, as 'the market' desired. Now its time for the Austrian system to prove money is all locked into one closed economic system; and fixed capital can thrive in a liquidity moderating system.

Our current economic model based on the 1929-1941 experiment proved flawed, so lets see what happens. Ball is in 'the market' and ZH's court to prove this works, in my view.

And for the little meth-Myrons out there, lets hope this NIRP works. If 92/95 happens (it still could with the natural move in rates down by currency flight to USD; esp if ECB is limit bound by QE assets), that is our best solution out. And Gold is at best, a marginal utility vehicle for wealth preservation; which makes Goldbugging a moot point if we're arguging (happily I might add) for creative wealth destruction to prosperity.


- Credit risk is a passing fad, they will flame out if growth is going to its pre-1880 level of stangation to -3% for most of Europe; without Antilla's creative destruction no less. Its about 10x worse today than when Rockstar did his very well done study on shadow risk, and how its warping leins & economic momentum.

- USA's trade partners will eventually conclude its a bad trade partner due how a strong dollar is killing both domestic wealth effects, and the USA's increasing protectionism, USA global policy becomes inert as the USA Dol & T's become a Giffen good

- Last time something barbaric happened, large debts and a useless Technocratic fiscal govt. had their way with the world, we ended up with a badly FUBAR Europe, and all 14 eras of Chinese society.

- Settle in, unless the last 2 generate something constructive; you are all fucked. But thats good for doom porn lovers.

- Yellen looks at the same shit as ZH. In fact, she straight up said she knows it just as well as TD1, and until you see the same numbers they do, which they do, and real time u-5 wages and job quality improves, forcasts changed, because Saudi Arabia had a Taper Tantrum, and while inflation is one part of the puzzle, data dependance is just as transparent as a post on ZH.

And to hike rates would bail out wall st. Pensions, at the further expense of 'the middle class', and pretty much the entire world. As predicted.


wake up! look at the jefferies numbers of the other day. it is nearly impossible for banks to make money under these conditions. sure they saw some MTM on their rates books back in '10/11/12, but the rest of "earnings" for years running has been from mark-to-fantasy, headcount reductions, buybacks, offshoring, and loss avoidance (delaying foreclosures and repossessions on NPLs). this the-Fed-is-saving-the-banksters meme, while popular, doesn't fit the observable realities. fed policy is--as tiny timmah geithner confessed--the best progressive economics in action.

it is direct monetary financing of our bloated federal government. when you see a person doing something most people infer the motivation for the action is the reward for the action. in the case of the fed we need to adjust our optics to understand they are doing things not to be rewarded but to avoid consequences (like the Dutch boy with his finger in the dike, no Yellen pun intended). what would happen if they allowed a return to market economics?

the federal government would have to fund its ever growing shortfall in the rates market. that would probably be possible at first, but the higher rates would slow the remains of the "economy", which would increase demand for services AND retard tax receipts, which would increase the funding shortfall, which would push up rates, which would choke the economy, which would...well, you get the picture. without the Fed, the overlevered federal candy machine would quickly tear itself apart.

I think the Fed is going to try to raise in order to re-set the shock absorbers before the coming sell off in order to maintain at least the illusion they can stimulate the economy. but it is too little, too late. we will quickly be back to the Fed protecting the politicos by trying to slow the collapse. (to keep this simple I have avoided the obvious asset-inflation scheme as a tool to keep large donors happy, but even analyzing that will bring you back to the same place: the Fed must protect the politicians or die trying.) this is the slow motion death rattle of America's nanny state.


This is a very popular view, but it is wrong. We are talking about fractions of a percent. Declining oil prices have given them an undeserved window, in which to begin normalization.

It's true there is no exit strategy. There never was. This is their one last chance to let market rates emerge without complete chaos. They are too stupid to take it. Unfortunately, the consequences will fall on us all.


The FED has over 4 Trillion on their balance sheets now compared to 852 billion in 11/08.. The US Government has over 17 Trillion dollars of debt compared to 9.23 Trillion in 11/08... need I say more? That is unless they don't have to pay interest> Were all Japanese now and if inflation forces the 0% interest Ponzi to raise interest rates you might just as well bring the whole herd of deer out Tyler because it will be carnage


9/11 Truth: Judges shocked by first time seeing video of WTC 7 collapse in Denmark court


"Magic" number 7

US is run by gangsters. Greatest criminal enterprise ever conceived in the history of man.


The hellicopters will come but they won't be dropping money.

Some folx ain't waitin till September..

coming to a theater near you.

Frankfurt (AFP) - Violent clashes between anti-capitalist protesters and German police left dozens injured and a trail of destruction in Germany's financial capital as the European Central Bank opened its new headquarters Wednesday.

Draghi, addressing some 100 invited guests at a low-key ceremony, rejected blame for the suffering brought by budget cuts and austerity policies amid the financial crisis in Europe.


um...those are europeans rising up against their masters. Not americans.

Americans are cattle and will never do so. At least white americans never will.


"There was a time when Zoltan Poszar was the most important person at the Fed (and Treasury), because he was likely the only person in the government's employ who grasped the enormity and complexity of the then-$30 or so trillion US shadow banking system."

The FedRes is NOT a part of the governmnet, but a PRIVATE branch of the PRIVATE Zionist banking cabal that owns and controls the DC US.

The FedRes only wants to comprehend the ramifications of their actions the same as a thief does. And like a thief, they wish to keep their loot, and to remain free to thieve more in the future.

The banksters need to repay us. Guillotine the Fed. Audit the heads.


LOL, the Federal Reserve can't raise rates.

Just BS the markets for months and later years.

The markets may have just figured it out.

[Mar 16, 2015] List of countries by oil consumption

Mar 16, 2015 | Wikipedia, the free encyclopedia

This is a list of countries by oil consumption based on the [2]

Rank Country/Region Oil consumption
1 United States 18,840,000 2011 est.
2 China 9,790,000 2011 est.
3 Japan 4,464,000 2011 est.
4 India 3,292,000 2011 est.
5 Russia 3,196,000 2012 est.
6 Saudi Arabia 2,817,000 2011 est.
7 Brazil 2,594,000 2011 est.
8 Germany 2,400,000 2011 est.
9 South Korea 2,301,000 2012 est.
10 Canada 2,259,000 NA
11 Mexico 2,133,000 2011 est.
12 France 1,792,000 2011 est.
13 Iran 1,709,000 2012 est.
14 Italy 1,454,000 2011 est.
15 Spain 1,384,000 2011 est.
16 Singapore 1,380,000 2012 est.
17 Indonesia 1,322,000 2011 est.
18 United Kingdom 1,217,000 2013 est.
19 Australia 1,023,000 2011 est.
20 Netherlands 1,010,000 2011 est

World Crude Oil Production by Year (Thousand Barrels per Day)

year production change
1980 59,420.56 NA
1981 55,904.87 -5.92 %
1982 53,312.60 -4.64 %
1983 53,130.85 -0.34 %
1984 54,379.94 2.35 %
1985 53,843.26 -0.99 %
1986 56,202.61 4.38 %
1987 56,536.07 0.59 %
1988 58,593.86 3.64 %
1989 59,694.83 1.88 %
1990 60,404.45 1.19 %
1991 60,112.96 -0.48 %
1992 60,093.48 -0.03 %
1993 60,157.95 0.11 %
1994 58,805.19 -2.25 %
1995 59,949.60 1.95 %
1996 61,282.65 2.22 %
1997 63,317.67 3.32 %
1998 64,468.21 1.82 %
1999 63,322.39 -1.78 %
2000 66,268.41 4.65 %
2001 65,865.38 -0.61 %
2002 64,973.32 -1.35 %
2003 67,327.29 3.62 %
2004 70,706.05 5.02 %
2005 72,176.09 2.08 %
2006 71,945.59 -0.32 %
2007 71,611.84 -0.46 %
2008 72,581.54 1.35 %
2009 71,317.64 -1.74 %
2010 73,216.29 2.66 %
2011 73,485.09 0.37 %
2012 75,063.80 2.15 %
2013 75,239.91 0.23 %

File Under Improving Economy, Not

If the US is at Full Employment and the Economy is at full steam ( as Obot lackeys keep telling us), then why is the Fed Funds rate still at 0%. Isn't 0% Fed rate an indicator of an Economy On Life Support. Tell me why I'm wrong.

March 14, 2015 | naked capitalism

participant-observer-observed, March 14, 2015 at 5:19 am

This is int'l but insofar as City sleeps with Wall St, it may be relevant to see that City has a new boyfriend, getting front page coverage at the Taipei Times

Beijing yesterday hailed Britain's announcement that it would seek to join a Chinese-led development bank, after Washington voiced caution about the move.

. . . .

London's move drew a cautious response from Washington, a rare note of discord in their "special relationship," which follows criticism from the US about Britain's cuts to defense spending.

China and 20 other countries signed a memorandum of understanding to establish the Beijing-headquartered bank in October.

"We believe any new multilateral institution should incorporate the high standards of the World Bank and the regional development banks," US National Security Council spokesman Patrick Ventrell said.

"Based on many discussions, we have concerns about whether the AIIB will meet these high standards, particularly related to governance, and environmental and social safeguards."

The bank has support from countries including India, Singapore, Malaysia, Cambodia, Pakistan, the Philippines, Uzbekistan and Vietnam.

China's official Xinhua news agency rapped the US for its skepticism, writing in a commentary yesterday that Washington "exhibited nothing but a childish paranoia towards China."

"It seems that the US government needs to be reminded that bias and a deep-rooted strategic distrust towards China are by no means helpful in forging a healthy relationship with the country," Xinhua wrote.

"It's imperative for Washington to change its mindset," it said.

World Bank president Jim Yong Kim yesterday also welcomed the setting up of the China-backed bank.

Llewelyn Moss, March 14, 2015 at 8:51 am

If the US is at Full Employment and the Economy is at full steam ( as Obot lackeys keep telling us), then why is the Fed Funds rate still at 0%.

Isn't 0% Fed rate an indicator of an Economy On Life Support. Tell me why I'm wrong.

cassiodorus, March 14, 2015 at 5:02 pm

Employment-population ratio: 59.3%, where it was in July of 2009

Employment-population ratio, 25-54: 77.3%, about where it was at the beginning of 2009

There has, then, been only a limited recovery.

[Mar 15, 2015] North America Crude Oil Production Remains Strong

Mar 15, 2015 | Zero 6Hedge


North America Crude Oil Production Remains Strong
Let's give that statement some numbers and context:

Yet US continues to import at least 7.3 million barrels a day. So does China (7.3 mbd). India imports about 3.9 million barrels a day. World oil production is between 92 and 93 million barrels a day - say, 92.5 million barrels a day

post turtle saver

The US and China import because they're the #1 and #2 refiners in the world, respectively. Not everything that's imported into the US and China ends up being used in the US and China... just to add some context to your context...


US consumes about 19.5 million barrels a day and produces about 12 million barrels a day from all sources (actual oil production about 9.5 million barrels a day). So imports have to be about 7.5 million barrels a day. It is not as if the US is exporting millions of barrels of oil per day.

China is using about 10.7 million barrels a day and producing about 4 million barrels a day. So it needs about 6.7 million barrels a day of imports for domestic consumption.

The oil price decline is mainly due to economic warfare:
The Engineered Decline in Oil Prices: Economic Warfare is the West's Main Weapon
For Russia, exports of oil and gas equate to 68 per cent of Russia's total exports, and 50 per cent of its federal revenues


Considering the US peaked in the early 70s and the world peaked in about 2004 things are a mess. If oil was in abundance how come all the oil seems to live with bad guys wherever we aim our weapons.

How come it makes skyscrapers defy gravity.

weird that is


One year from now the current wells will start showing the rapid exhaustion typical for fracking sources, and production will decline abruptly. By then a lot of companies will be pretty fucked up, will minimal resources for new exploration.

The whole industry will become another un-holly debt mess... just in time for elections ;)


Most of the increased production is from the already drilled, but uncompleted wells that are decreasing in number as they are completed and not replaced by more drilling. The stock of uncompleted wells will be exhausted in the not too distant future, leading to radically decreased production as fracked wells enter their steep decline. Meanwhile, drilling companies are disappearing as prices are well below the break even point of fracked wells.

BTW, great irony with the pic of "bomb trains" that are exploding all over the North American continent. Funny stuff.


Makes one wonder about opportunity costs. Even if producers are producing at a loss, wouldn't their losses be greater if they were not producing at all? Thus: Oversupply.

Winston Churchill

Slow motion bankruptcy, is still bankruptcy. A lot of the long term oil hedges start dropping off in April. The counter parties have already been taking a bath, once those hedges have gone, look out below.


It's interesting to see how this is happening. Oil is a magnificent example to show how the entire economic and banking system is predicated on continuous growth only. There is an automatic system in place for growth, but not for shrinkage.

Oversupply into any market would normally result in lowering productivity of goods. If you can't sell all your widgets, you start to crank out less. It all works out OK if you are still profitable to pay your overhead and debt, or you have no debt. Here's the perfect trap going forward for most businesses: only up works. How can the oil system go backward evenly in an ordered fashion with so many suppliers to keep profits where they need to be at margins dictated by supply and demand?

With constantly dropping consumption on this scale, even if all the producers worked together, the price/margin math would eventually still not work. This is exacerbated by the fact that there is so little leeway regarding how all this is financed (big time loans to the max!). It might be easier to do if no loans existed against the rigs, but that is the stick poking the bear for sure. At some point, rigs are going to have to be shut down.

If they were owned outright with no financing, then only the rig owners are impacted. But the loans go way beyond the rigs, to the paper that everyone is holding and all the other crap the banks attach to it. We're about to get a lesson in going backwards, but it isn't going to be a fun one.


It's going to be a lesson about things to come... full speed ahead, then forced stop !


Yes. It's all about cash flow. It it were textbook theory, they'd just quit, shut down. But this is reality. Debt service and payrolls need to be met, structure run or ruin. It's about cash flow. A lot of rigs can be idled, but production form others gets ramped up. Over simplified, but gets the point across.

And probably ain't a gonna change at current prices. If we get to, just picking a number, say $20, then things get shuttered for good. Equipment old off, leases sold, etc.

Youri Carma

Can Canada's oil sands cope with $50 crude?, Mar 13, 2015 Financial Times

Oh regional Indian

Looking at the Crashing BDI etc., I checked and found that global shipping accounts for only 4.5% of annual oil consumption. That is way lower than I thought and thus the shipping slump clearly does not impact demand THAT drastically.

Americans are still going high on the SUV hog. So there is that. And all the ships (tankers etc.) that are not sailing are storing.

In short, this oil production constant to increasing and price plummeting looks good for a few months more. When global storage gets full, the bombs will start to fly and we'll see $150 oil in short order again. Turn the other (ass) cheek...


Deflationary depressions present economic situations that are hard to understand out of context. Regardless of production levels (which are being financed with borrowed money), crude prices are a function of the deflationary vortex consuming every asset class today.

Falling crude prices should take a short break and correct somewhat in the near future, but the long-term picture remains down...


Low oil prices are helping auto-related sector.....temporarily

Jack Burton

The recent wave of US oil production was heavily leveraged and this oil is on the margin. Oil producers are heavily in debt for the costs of production, thus they must produce full out to try and meet payment schedules to banks and investors. If they cease producing due to low prices, they immediately face bankruptcy. The real fall out of low oil prices is not NOW, it is in the following months down the road when producing at a loss, and trying to meet interest payments catches up with high cost of production US oil producers. You gotta face the fact, Saudi oil comes out of the ground at a small fraction of the price of new US and Canadian sources. 1/10th the cost of Tar Sands mining.




Of course oil production is strong. US gov't figures show demand outstrips production world wide by about 15Million bbls!

This is all about the US$

Specifically, the US$ is being re-priced relative to DC "gold" ( what you and I call "oil" ) in response to the activation of the SCO. A nice suckers rally in US$ is having all sorts of follow on effects in the US$ denominated world. Even makes oil look like a disaster.

Oh, and it makes the economies in the SCO look like they are faltering or failing. Problem is, that with a large chunk of the worlds economy running through the SCO ( and by definition entirely outside the US$ financial system ) we make a huge mistake assuming the late great US$ based financial system actually indicates anything real in the world economy...

Wonder if this is why our allies ( like the UK !!! ) are looking at entry into the SCO...???

[Mar 12, 2015] The Rape of the American Mind
"He who dictates and formulates the words and phrases we use, he who is master of the press and radio, is master of the mind. Repeat mechanically your assumptions and suggestions, diminish the opportunity for communicating dissent and opposition. This is the formula for political conditioning of the masses.

The big lie and monotonously repeated nonsense have more emotional appeal in a cold war than logic and reason.

The continual intrusion into our minds of the hammering noises of arguments and propaganda can lead to two kinds of reactions. It may lead to apathy and indifference, the I-dont-care reaction, or to a more intensified desire to study and to understand. Unfortunately, the first reaction is the more popular one. Confusing a targeted audience is one of the necessary ingredients for effective mind control."

Joost Meerloo, The Rape of the Mind

There is going to be another financial crisis within the next two years, and it will be global, and it may be much more consequential than the other two or three we have seen since the Fed embarked on this course of its long and checkered career.

It is also avoidable, and in their quiet, private moments the really good economists can see it coming. Why don't they say anything? Ennui of the bureaucrat, entropy of an inability to change, and the credibility trap of failed ideologies in a failing empire.

They did not get to where they are by 'rocking the boat.' And so they will be quiet, unless they see some advantage in it for them, most ordinarily in a pay for say.

Not so for the financiers and their minions. They will not be quiet, alas. The more badly they behave, the louder they seem to become.

They are short term, and almost infantile in the self-centered reasoning. Although a child is limited by lack of faculty and experience, the speculator is hampered by vanity, a self-imposed lack of human development, and an almost obsessive preoccupation with drinking, favorite objects, and teats.

They see something and they want it, they know only what they can feel in the desire of the moment, morally they are undeveloped, and when they make a mess they cry loudly, until an adult comes to clean it up for them. But unlike a child they have no gratitude, no sense of their own dependency, or natural affection for others.

Have a pleasant evening

[Mar 11, 2015] The Gathering Storm

Mar 1, 2015 | Jesse's Café Américain
"I hope I am over wary; but if I am not, there is, even now, something of ill-omen, amongst us. I mean the increasing disregard for law which pervades the country; the growing disposition to substitute the wild and furious passions, in lieu of the sober judgment of Courts; and the worse than savage mobs, for the executive ministers of justice...

At the close of that [revolutionary] struggle, nearly every adult male had been a participator in some of its scenes. The consequence was, that of those scenes, in the form of a husband, a father, a son or brother, a living history was to be found in every family-- a history bearing the indubitable testimonies of its own authenticity, in the limbs mangled, in the scars of wounds received, in the midst of the very scenes related-- a history, too, that could be read and understood alike by all, the wise and the ignorant, the learned and the unlearned.

But those histories are gone. They can be read no more forever. They were a fortress of strength; but, what invading foeman could never do, the silent artillery of time has done; the leveling of its walls. They are gone. They were a forest of giant oaks; but the all-resistless hurricane has swept over them, and left only, here and there, a lonely trunk, despoiled of its verdure, shorn of its foliage; unshading and unshaded, to murmur in a few gentle breezes, and to combat with its mutilated limbs, a few more ruder storms, then to sink, and be no more.

They were the pillars of the temple of liberty; and now, that they have crumbled away, that temple must fall, unless we, their descendants, supply their places with other pillars, hewn from the solid quarry of sober reason. Passion has helped us; but can do so no more. It will in future be our enemy. Reason, cold, calculating, unimpassioned reason, must furnish all the materials for our future support and defence.

Let those materials be moulded into general intelligence, sound morality, and in particular, a reverence for the constitution and laws: and, that we improved to the last; that we remained free to the last; that we revered his name to the last; that, during his long sleep, we permitted no hostile foot to pass over or desecrate his resting place; shall be that which to learn the last trump shall awaken our Washington.

Upon these let the proud fabric of freedom rest, as the rock of its basis; and as truly as has been said of the only greater institution, 'the gates of hell shall not prevail against it.'"

Abraham Lincoln, Lyceum Address, January 27, 1838

Gold and silver did very little today, despite the brisk sell off in equities. The denizens of the bucket shops were busy picking pockets in other markets.

The global economy is in a very difficult circumstance, and the Fed is at the heart of it. I have no sympathy for them whatsoever, because they have placed themselves there, repeatedly, by their actions and omissions as manager of the world's reserve currency and key regulator of one of the world's most influential financial markets.

Will the Fed raise rates as they have now led the world to expect, or will they do nothing, and essentially cut them by once again kicking those who believe them in the expectations?

Most Americans do not understand what is going on in the rest of the world. It is not pretty. Europe is hanging by a much thinner thread than I think the plutocrats in Frankfurt and Brussels realize.

The emerging markets are absorbing a great deal of inflation being generated and exported by the US. It would be extremely interesting to have access to a reliable estimate of Eurodollars. I think we are experiencing yet another Eurodollar short squeeze as the debts contracted for by overseas companies in dollars feel the stress of a disjointed global financial system.

It took a little over twenty years for the unease that Lincoln describes above to explode upon the landscape in a bloody civil war. It might be worth reading his entire Lyceum speech. It surely does not describe what we might think of as domestic tranquility and pastoral bliss. The republic endured, but at a terrible cost.

In our age reason and morality and honour have fallen to the despicable cheapness of 'greed is good' and the foul god of the market.

Have a pleasant evening.

[Mar 11, 2015] U.S. oil production still surging

Mar 11, 2015 | | 26 Replies

The EIA is now reporting that U.S. field production of crude oil averaged almost 8.7 million barrels a day in 2014. That's up 1.2 mb/d from 2013, and is only 0.9 mb/d below the all-time U.S. peak in 1970.

Production of oil by means of fracturing shale and other tight formations is the main reason. The EIA drilling productivity report estimates that production from the Permian, Eagle Ford, Bakken, and Niobrara– the main tight oil producing areas– was 1 mb/d higher in 2014 compared to the previous year. I used that estimate to update my graph of U.S. production by source. The tight oil story is pretty dramatic.

U.S. field production of crude oil, by source, 1860-2014, in millions of barrels per day.  Updated from Hamilton (2014) based on data reported in [1], [2].

U.S. field production of crude oil, by source, 1860-2014, in millions of barrels per day. Updated from Hamilton (2014) based on data reported in [1], [2].

And it seems to be continuing. The February drilling report estimates production from those 4 regions will be almost 0.3 mb/d higher this month than it was in December. That's leading to record levels of U.S. inventories.

Source: EIA.

Source: EIA.

How much longer will production keep going up? Much of the new production can't be profitable at current prices, and the number of drilling rigs operating in the tight oil areas has fallen 12% since September.

Combined oil rig count for Permian, Eagle Ford, Bakken, and Niobrara, January 2007 to January 2015.  Data source: EIA.

Combined oil rig count for Permian, Eagle Ford, Bakken, and Niobrara, January 2007 to January 2015. Data source: EIA.

That presumably means less than a 12% reduction in production from new wells, for two reasons. First, it is the least promising new prospects that will be cut first. Second, there has been a learning curve improving productivity of new wells.

Average oil production per rig (in barrels per day) across Permian, Eagle Ford, Bakken, and Niobrara, January 2007 to January 2015.  Data source: EIA.

Average oil production per rig (in barrels per day) across Permian, Eagle Ford, Bakken, and Niobrara, January 2007 to January 2015. Data source: EIA.

Working against these is the fact that production from existing wells continues to decline. But at the moment, it seems further adjustments on the part of drillers will be necessary in order to bring the supply of oil in balance with the demand.

This entry was posted on March 8, 2015 by James_Hamilton.

Selected Skeptical Comments
Jeffrey J. Brown March 8, 2015 at 10:25 am

Because of declining production, Mexico no longer has sufficient domestic light, sweet crude oil production to meet the domestic demand from refineries designed to process light crude, so they are going to have to start importing light crude, although they remain a net oil exporter.

In any case, the Pemex official quoted in the following article had an interesting comment about condensate (which is basically natural gasoline that is not of much use as feedstock for producing distillates like diesel fuel).

As I have previously noted, in my opinion it is very likely that actual global crude oil production (45 and lower API gravity crude oil) probably peaked in 2005, while global natural gas production and associated liquids–condensate and NGL's–have so far continued to increase.

And when the EIA refers to "Crude Oil," they define it as actual Crude Oil + Condensate (C+C). Just as we don't know for sure what the Condensate to C+C ratio is for US production, we don't know what the ratio is for US C+C inventories, but in both cases, I suspect that the Condensate to C+C Ratio has increased substantially in recent years.

In any case, US imports of crude oil remain relatively high, at about 44% of the C+C inputs into refineries. I suspect that refiners continue to import a lot of crude oil, because they have to, in order to get the product output that they need.

Mexico's Pemex aims to start importing light crude this year (2014)

Aug 28 (Reuters) – Mexican state-owned oil company Pemex wants to launch light crude oil imports later this year, potentially reaching up to 70,000 barrels per day (bpd) and aimed at boosting refinery output, the head of its commercial arm said.

The imports would mark an abrupt shift from a decades-old devotion to crude oil self-sufficiency in Mexico, long a major exporter to the United States. It also comes after a sweeping energy sector overhaul which seeks to reverse many years of declining output and export volumes.

"Our objective is that (crude imports) will begin this year," said Jose Manuel Carrera, chief executive officer of PMI Comercio Internacional, Pemex's oil trading arm. His comments are the strongest signals to date on both the timing and potential volumes of light crude imports to Mexico. . . .

While U.S. companies Pioneer Natural Resources and Enterprise Products Partners have secured permission to ship a type of ultralight oil known as condensate to foreign buyers, Carrera all but ruled out the possibility.

"Condensate is not necessarily what Mexico needs. It needs crude," he said.

Jeffrey J. Brown March 8, 2015 at 10:30 am

A product yield by gravity chart follows, which explains why Pemex, and other refiners, need crude oil, not condensate. Note the substantial decline in distillate yield, just going from 39 API gravity to 42 API gravity (labeled as "Condensate" on the chart):

And a graph showing API gravity versus sulphur content for several grades of global crude oil (note that the chart scale tops out at 40 API gravity):

Jeffrey J. Brown March 8, 2015 at 1:46 pm

EIA Forecast for US Crude + Condensate Production by Type

Note the forecast for the very modest increase in 40 API gravity and lower crude oil production, versus the total increase in US C+C production:

2slugbaits March 8, 2015 at 11:12 am

Second, there has been a learning curve improving productivity of new wells.

The standard learning curve formulae and learning curve tables that I know and use typically show a very sharp increase initially and then the curves go very flat very quickly.

rjs March 8, 2015 at 1:29 pm

so, i've got a question…if oil inventories are at a record high 444.4 million barrels, up 22.2% from the same period a year ago, as your EIA graph shows, then why did we continue to import 7.4 million barrels a day during the last week of February, 89,000 barrels a day more than we imported during the previous week?

Jeffrey J. Brown March 8, 2015 at 1:49 pm

Perhaps because the bulk of the increase in US Crude + Condensate production and inventories consists of condensate?

SPENCER March 9, 2015 at 6:09 am

We are probably importing more oil because speculators are to bring home and selling stocks that had been held in tankers offshore as a bet on higher prices.

They have to cut their loses at some point.

rjs March 9, 2015 at 6:51 am

i answered my own question above here:
in a word, contango

Randall Parker March 8, 2015 at 10:11 pm

Jeffrey J. Brown, Peak oil has been delayed by technology for extraction of tight oil. The future is uncertain. The doomsters of 10 years ago were excessively pessimist. Care to own up to excessive pessimism? I'm guilty.

The $100 trillion dollar question: can tight gas extraction be made to work outside USA?

Jeffrey J. Brown March 9, 2015 at 6:46 am

To be clarify slightly, in my opinion tight/shale plays have delayed Peak Liquids, while the trillions of dollars spent on global upstream capex since 2005 have just kept us on an undulating plateau of actual crude oil production.

Note that when we ask for the price of oil, we get the price of actual crude oil (45 and lower API gravity crude), but when we ask for the volume of oil, we get some combination of crude + condensate + NGL + biofuels.

Following is a chart showing normalized values for global gas, global natural gas liquids (NGL) and global Crude + Condensate (with 2005 values = 100%), through the year 2012 (similar trends for 2013):

The following chart, posted up the thread, really tells the tale. It shows the EIA's own projection for the composition of US C+C. As noted up the thread, the distillate yield from 40 and higher API gravity liquids drops tremendously, and what refineries need, in order to meet refined product demand, is mostly 40 and lower API gravity crude (as expressed by the Pemex CEO), while the vast majority of the increase in US liquids production is from 40 and higher API gravity liquids.

Condensate & NGL are byproducts of natural gas production, and in my opinion the only reasonable interpretation of the available data is that actual global crude oil production (45 and lower API gravity crude oil) effectively peaked in 2005, while global natural gas production and associated liquids, condensate and NGL, have so far continued to increase.

The end of civilization as we know it March 9, 2015 at 7:44 am

@ Jeffrey J. Brown

Great charts!

They go a long way in explaining why, in many parts of the US, gasoline now sales for more than low-sulfur diesel. Fifteen years ago that never happened.

I'm no refinery expert, but I believe many, if not most, of the myriad petroleum byproducts we depend upon also come from the lower-gravity crude oils. See, for example, A partial list of products made from Petroleum (144 of 6000 items). "One 42-gallon barrel of oil creates 19.4 gallons of gasoline," the heading reads. "The rest (over half) is used to make things like:"

I would add a caveat to your discussion. The decision to send Mexico's low-gravity, high-sulfur Mayan crude to the Gulf Coast for refining also has to do with the high-sulfur content of the crude. It's not all about gravity. Like I said, I'm no refinery expert, but I remember reading that Mexico's current refinery infrastructure lacks the capability to refine high-sulfur crude oils. The Gulf Coast refineries, on the other hand, have a surfeit of this type of refining capability. I do not know how much of the decision to send much of Mexico's low-gravity, high-sulfur Mayan crude to the Gulf Coast has to do with gravity, how much has to do with sulfur content, and how much has to do with other factors, such as US geopolitical exigencies (as is the charge frequently leveled here in Mexico). However, these factors are worth looking into.

Jeffrey J. Brown March 9, 2015 at 10:43 am

To clarify slightly, my analysis suggests that gasoline may be in surplus*, relative to distillates like diesel, and the most recent data put the US average retail price for gasoline at $2.46 versus $2.93 for diesel. *Or to be more accurate, refiners don't need any more condensate input.

I think that the following EIA chart, which shows that US 40+ API gravity C+C liquids increased from 1.4 mbpd in 2011 to an estimated 4.2 mbpd in 2015 (an increase of 2.8 mbpd), versus a projected increase of only about 0.7 mbpd in 40 and lower API gravity crude from 2011 to 2015, really tells the tale, especially when combined with the refinery yield chart that shows that Cat Feed + Distillates drops from about 52% at 39 API gravity to about 20% at 42 API gravity:

40 API and lower crude accounted for 75% of US C+C production in 2011, but the projection was that it would only account for 54% of US C+C production in 2015.

And as noted elsewhere, it took about half the global rig fleet (targeting oil and gas reservoirs) just to show a projected increase of about 0.5 mbpd in quality crude oil production (40 API gravity and lower) from 2011 to 2014.

Jeffrey J. Brown March 9, 2015 at 8:25 am

Re: The $100 trillion dollar question: can tight gas extraction be made to work outside USA?

In areas where tight/shale plays may be commercially feasible outside the US and Canada, the key question is whether operators in a given play can drill and complete wells fast enough to offset the declines from existing wells and add new production. Early last year, US rigs accounted for about half of the total global rig count, which gives one an idea of the scale of the drilling and completion effort that it would take to replace the output from giant declining global oil and gas fields with the output from high decline rate tight/shale plays.

It's interesting to look at some regional declines in US oil and gas production, e.g., marketed Louisiana natural gas production (the EIA doesn't have dry processed data by state).

According to the EIA, the observed simple percentage decline in Louisiana's annual natural gas production from 2012 to 2013 was 20%. This would be the net change in production, after new wells were added. The gross decline rate (from existing wells in 2012) would be even higher. This puts a recent Citi Research estimate in perspective.

Citi estimates that the gross underlying decline rate for overall US natural gas production is about 24%/year. This would be the estimated year over year decline in production if no new wells were put on line.

Based on the Citi report, the US would have to replace 100% of current natural gas production in about four years, just to maintain current gas production for four years*.

*Of course existing production would not decline by about 100% in four years at a 24%/year decline rate, but I am stipulating a "What if" steady state production scenario.

The end of civilization as we know it March 9, 2015 at 7:04 am

This is an extremely bad example of reporting. Does it get any worse than this?

What it does is to take the official spin being evangelized by the EIA and other members of the "drill baby drill" crowd — folks like ExxonMobil's chief executive Rex Tillerson — and faithfully and uncritically parrots it.

It's the same old boilerplate, for example, that we got a couple of days ago from the Financial Times. In its drive to perpetuate what Michael Klare calls the "Reign of Carbon," the Times sublimely reported that:

Oil production in the Eagle Ford is not going to fall away any time soon: with the benchmark West Texas Intermediate at about $50 a barrel on Friday, it is profitable to keep pumping from most established wells. On Wednesday, Rex Tillerson, ExxonMobil's chief executive, said US shale production would be more resilient than many had expected.

If the crude price rebounded to $80 or $100, the good times could return.

Those not enamored of being part of Karl Rove's defactualized "create-your-own-reality" universe, however, might want to go over to the Texas Railroad Commission's Online Research Queries to see what is actually going on in the Eagle Ford shale play.

Those who do so will make a shocking discovery: Crude oil and condensate production from the Eagle Ford peaked in August 2014 at 356 million barrels (total production for the entire month). By December 2014 it had fallen to 319 million barrels for the month. And this was well before the precipitous decline in the number of drilling rigs operating in the Eagle Ford. In the first week of September 2014, Baker Hughes reports that 202 drilling rigs were actively drilling in the Eagle Ford. That number by the first week of March 2015 had dropped to 149.

For those skeptical of the future carbon Utopia being touted from inside the Beltway, being spun by the likes of the EIA and Rex Tillerson, IHS has done significant research, and offers a dissident point of view:

IHS study suggests U.S. oil production to halt by mid-year

The end of civilization as we know it March 10, 2015 at 9:14 am

That should read:

Crude oil and condensate production from the Eagle Ford peaked in August 2014 at 356 35.6 million barrels (total production for the entire month). By December 2014 it had fallen to 319 31.9 million barrels for the month.

AS March 9, 2015 at 9:12 am

The End
Could you repeat your comments is a more succinct way (bullet points?) perhaps without sarcasm. If readers are busy, it is difficult to determine your point without reading all the citations. I am interested in what you have to say, but find it difficult to follow your thread without a lot of clicking.

The end of civilization as we know it March 9, 2015 at 12:00 pm

@ AS

Well I'm not sure that the complexity of the human condition or the universe can be reduced to bullet points. However, I'll give it my best shot:

  • The need to slay the energy vampire (and Russia, Venezuela and Iran at the same time) for fun and profit is great.
  • The US right-wingers have their preferred silver bullet to slay the energy vampire: the US's fabled and highly touted shale gas and oil resource plays. (US left-wingers also have their preferred silver bullet to slay the energy vampire — the envisioned future Green energy Utopia — but that is a topic for a different discussion.)
  • Because the need to slay the energy vampire is so great, there's a lot of lying and wishful thinking going on when it comes to shale gas and oil.
  • As it turns out, the right-winger's silver bullet is a blank. It is little more than a flash in the pan.
  • The Barnett Shale play was the first major US shale play.
  • In 2013, the world was shocked when the Bureau of Economic Geology at the University of Texas concluded that the average EUR from the 16,000 wells in the Barnett Shale would be only 1.44 billion cubic feet.
  • This was a time when industry, and those advocating for US full-spectrum dominance, were still touting average EURs from wells in the Barnett at between 2 and 3 bcf per well.
  • When the University of Texas released its study in February 2013, many felt that even it was too optimistic. Jim Fuquay, for instance, asked in the Fort Worth Star-Telegram, "But what about producers' estimates of 2 or even 3 bcf?"
  • Fuquay pointed out that at that time, even though many of the Barnett shale wells had already been producing for years, "Only 512 wells in the Barnett Shale, or less than 3 percent, have produced 2 bcf in their lives." He added that "A mere 70 wells, less than 1 percent, have hit 3 bcf or more."
  • As it turns out, the University of Texas study was too optimistic. If one takes a pen and traces actual production from the Barnett Shale for the past four years over the graph of the study's production forecast, what we see is that production for a couple of years exceeded the forecast, but then production went into a steep nosedive and has declined much more rapidly than the researchers had predicted.
  • Average EUR from a Barnett Shale well now looks to be well below 1 bcf, or a half, a third or even less of what producers had hyped.
  • There is a long history of distortions and exaggerations, which find fertile ground with true believers in American exceptionalism and full-spectrum dominance, being perpetrated by shale oil and gas producers.
  • There exists considerable evidence which suggests that these distortions and exaggerations have not stopped, and that they continue unabated to this very day.
  • As I said, the need to believe in a silver bullet to slay the energy vampire, despite all factual evidence to the contrary, is great.
AS March 9, 2015 at 12:39 pm

The End

Thanks for your comments. If I understand you correctly you agree with Jeffrey Brown and I think Professor Hamilton that we are past peak oil and that world oil harvesting is in decline, since the harvesting of tight oil is not going to rescue an energy hungry world. What now then for energy sources?

Nick G March 10, 2015 at 10:52 am

Well, personal transportation accounts for the majority of oil consumption.

Personal transportation is easily done with EVs – a Chevy Volt costs less to own and operate than the average US passenger vehicle, and gets 200MPG. A Nissan Leaf is the lowest cost vehicle on the road.

EVs can be ramped up pretty quickly – They're 3-4% of sales right now (including hybrids). Production volume could be doubled essentially overnight, and doubled every two years thereafter. In 8 years you could be at 80% of new vehicles, and in another 5 years they'd account for 50% of vehicle miles driven. In another 6 years they'd account for 75% (vehicles less than 6 years old account for 50% of VMT). Ethanol accounts for about 10% of passenger transportation fuel, so a fleet of Chevy Volts could be powered with no oil at all.

There's a pretty straightforward path forward, if we needed a short term fix to get us through a period of fast depletion, or another oil shock while we were transitioning to EVs. The US could reduce passenger fuel consumption by 50% essentially overnight by raising the average passengers per vehicle from 1.2 to 2.4. Look at Uber, look at smartphones for connectin with people. There are very, very few destinations in the US that no one else is going to. On almost any road, look around: there are other people on the road, going in the same direction.

With an ad hoc smartphone based system, you could find someone going in your direction almost anywhere. And, even with old-fashioned employer-based systems, about 10% of Americans carpool to work right now.

Carpooling – the horror.

Mason Inman March 9, 2015 at 4:42 pm

Dr. Hamilton—I was curious where you got the data points for offshore oil production statistics during the early years (~1950 to 1980).

The EIA pages that are cited as the sources of the data appear to only have data separated into on-shore and off-shore going back to 1981. Elsewhere, I've seen EIA data showing this split, going back to 1970, but not any earlier than that.

James_Hamilton Post author March 9, 2015 at 7:05 pm

Mason Inman: See Annual Energy Review, Table 5.2.

Mason Inman March 10, 2015 at 1:27 pm

Thanks so much! I hadn't seen that data set before.

Steven Kopits March 10, 2015 at 3:16 pm

Are we surprised there's corruption and incompetence?

Anonymous March 11, 2015 at 4:29 pm

I wonder if it is possible to do an econometric analysis of fuel prices and actual consumption levels.

We've seen very modest appreciation in fuel efficiency and less driving in the passenger transportation side considering the near tripling of real costs, i.e, how much households spend on gasoline as a percentage of their income.

So, at what price point does elasticity of demand really kick in, and can we do any realistic quantitative projection, controlling for such factors as employment levels and necessity costs (those households who have no alternatives but to pay more – they can't don't have any substitutes in transit or can't afford to buy more efficient vehicles) .

[Mar 10, 2015] Alan Greenspan Warns Of Explosive Inflation Tinderbox Looking For A Spark

Mar 10, 2015 |
Zero Hedge

Last month it was revealed that former federal reserve Chairman Alan Greenspan, the architect of U.S. monetary policy under four Presidents, is anticipating a significant market event as a result of the trillions of dollars that have been pumped into the system over the last several years. According to Greenspan, something big is coming.

His comments were shared by well known resource analyst Brien Lundin, who joined Greenspan for private discussions at last year's New Orleans Investment Conference. In his latest interview Lundin further clarifies Greenspan's private thoughts on current economic and monetary policy and sheds light on the former Fed Chairman's suggestion that 'something big is coming.'

Greenspan made some good points to me… He was concerned about inflation… He was specifically concerned in relation to the outstanding, or excess, reserves which are close to three trillion dollars being held on the Fed balance sheet now… That money is just hanging over the U.S. economy like a big water balloon of liquidity and it's just searching for a pin.

In fact, Greenspan referred to it as a tinderbox of explosive inflation looking for a spark.

Watch the full insider interview:

[Mar 07, 2015] How America Added 17 Million People In 7 Years... And Zero Full-Time Jobs

Mar 07, 2015 | Zero Hedge

Submitted by Chris Hamilton via Hambone's Stuff blog

Amazing Math from the Bureau of Labor Statistics

According to the most recent Bureau of Labor Statistics release, the UE (unemployment) rate fell to 5.5% as of February. The last time the UE rate was this low was May of 2008.

What I'm fascinated by is the fact that the US population grew from February 2008 to February 2015 by 16.8 million persons, or a 5.5% increase in total population, and on a net basis, not a single one of those 16.8 million persons got a FT (full time) job… while a net 2.7 million were lucky enough to get a (or multiple) PT (part time) job.

This means that 14.3 million persons, or 4.4% of the current US population, were added without a single job among them (chart below). This makes for fascinating math when a 4.4% increase of the total US population without jobs can nearly halve the UE rate down to 5.5%, equal to 2008's UE rates?!?

The recent BLS data are considered "strong employment reports" and are taken as such booming harbingers of economic accomplishment that the Federal Reserve feels rates need to begin their long awaited hikes.

Just to avoid some confusion on this 16.8 million population growth…this does not mean there was a baby boom over this period…quite the opposite as a flat birth rate has been offset by an even faster declining death rate (the baby boom and older generations are living much longer than previous generations…thus the pig through the python population growth).

And just to make sure this isn't cherry picking data…below is non-seasonally adjusted raw data from the Bureau of Labor Statistics back to '08 showing rising PT jobs and declining FT jobs.


The point isn't so much that BLS fakes its numbers. The point is the futility of believing ANY self-reporting - by government or anyone else, but especially by government. (Because they also have power of decree enforcement, their 'statistics' should be treated as propaganda and assumed to be lies as a matter of course.)

[Mar 05, 2015] Angry Bear " Why Liberals Keep Losing by Steve Roth

The problem is that a large part of Democrats are 100% pure neoliberals who might be even worse then Republicans. At least Republicans are less hypocritical. From comments: "The Democrats couldn't round up enough solid votes to pass card check, a significant amount of the caucus is neo-liberal."
March 4, 2015 |

James Carville was certainly right: "It's the economy, stupid."

And under Democrats (compared to Republicans), the economy kicks ass:

Screen shot 2015-02-23 at 8.41.56 AM

This is GDP growth, but that kick-assness is blatant in any economic measure you look at, from job growth to stock-market returns to household income to government deficits. And it's true over any lengthy period (say, 30+ years) over the last century. I could post fifty graphics here that tell exactly the same story. (Here's a favorite: even the rich get richer under Democrats.)

But now ask yourself: how many Americans know that Democrats make them richer? (Lots richer.) One in ten? Maybe? Now ask yourself why liberals keep losing.

The Republicans have successfully branded themselves as "the party of growth," and Democrats have just let them do it, for decades — even though it's completely contrary to reality.

Democrats have the strongest possible political argument sitting in their rhetorical holsters, but for whatever reasons, they just won't draw.

There is one and only one story that Democrats need to be telling, and they need to follow the Republican political playbook: repeat it endlessly, for years on end.

We will make you richer. We've been doing it for decades, and we'll keep doing it.

"Equality" is important (especially because it does make people richer). But really: Americans just change the channel.

"Opportunity" is important. But it's just a proxy for, a chance of, getting richer.

"Getting the rich" (truly progressive taxes, a more-level playing field, reining in finance) is necessary and important. But Americans get only visceral satisfaction from that message – it doesn't speak to personal, direct, material benefit that they're going to experience.

Americans want to hear how Democrats are going to make them more prosperous. Full stop.

And Democrats have a loud-and-clear story on that subject. They just need to 1) tell that story constantly, repetitively, ad nauseum, like the Republicans do, and 2) put aside other stories (like, identity politics) that dilute, confuse, and distract from that story.

Start with that lede — "we make America prosperous" — and a whole litany of talking points emerges. And they're the very talking points that have driven Republicans' (otherwise inexplicable) political success over the last thirty years.

But there's one key advantage for Democrats: In their mouths…the story is true.

Democrats could be stealing Republicans' best Frank Luntz/Grover Norquist talking points and riding them all the way to the ballot box. Here's a sampling to start with:

Take the graph from the top of this post and put it on billboards all over America. It's time for Americans to understand who makes them richer.

Cross-posted at Asymptosis.

Denis Drew , March 4, 2015 2:52 pm

I saw an idea in the Washington Post yesterday that might be the — no candidate could invent any excuse to oppose it/no candidate should dare — perfect Democratic win issue: a law requiring a vote for or against having a union in every workplace. This vote would take place in every workplace every so many years. How can a pol tell us we cannot vote?!

Laws that decimate unions may be inevitable. Here's how labor can survive.

Mark Jamison, March 4, 2015 4:51 pm

Denis, I love your idea but it isn't going to happen and I doubt it would be as cut and dried as you suggest. The Democrats couldn't round up enough solid votes to pass card check, a significant amount of the caucus is neo-liberal.

One example, Senator Tammy Baldwin from Wisconsin. She has bent over backward to carry water for a large printer in her state and for the paper industry with respect to postal issues. She hasn't shown a bit of concern for all the jobs lost at the various processing plants in Wisconsin, real job losses not the anticipated kind Quad Graphics and the paper companies say will occur with modest increases in advertising rates (losses that aren't supported by any economic analysis).

Baldwin's one expression of concern for labor was to demand that the PMG make sure the same percentage of managers lost their jobs as craft employees.

As for the general claim of this piece, it's hard to disagree but Democratic growth hasn't led to increases in wages. It hasn't led to a system where productivity gains are shared beyond the 1%. There's no question that at this point in time any nominal Democrat is better than any nominal Republican but quite frankly that isn't saying much. Bill Clinton's economic team helped set the table for a whole lot of pain for a whole lot of folks. Was Clinton's triangulating better than what any Republican would have done? No doubt but that doesn't mean that what Clinton did was all that good.
There's a world of difference between Democrats like Warren, Brown, and Whitehouse than a good deal of the caucus. We need to return to ideas that value public goods, that create an even playing field for workers and labor while reining in the excesses of the technocratic watch state.

Thornton Hall, March 4, 2015 7:00 pm

If you want to know why something worked in the time of FDR but not in the time of Clinton, you might ask yourself: what has changed?

Have politicians changed? FDR was a rich scion of the Northeast. Congress was full of lawyers, doctors, and other wealthy people. Big banks used their cash for maximum influence. None of that is any "worse" now than it was then.

There has been a dramatic change, though. The media used to be produced by the working class, for the working class. Pulitzer and Hearst employed high school graduates who wrote things that other not-well-educated people wanted to read.

Today, our journalists have masters degrees and write breathy inside baseball stories that are all based on the (ruinous) Watergate formula of professional news: access, access, access.

The "left" bitches and moans about leadership and messaging and a long list of things that haven't changed. Just because you're educated, don't mean you're smart.

[Feb 27, 2015]  The EU’s plan for an energy union would call Vladimir Putin’s bluff by Natalie Nougayrède

Neocon cause is lost cause. No amount of propaganda can change this fact. This pressitute sings Anglo-American official tune with a little bit too much zeal...  Even for Guardian pressitute...  From comments: "A military empire (US + EU + NATO) with an hegemonic agenda which conquers territories either peacefully (the 28 EU countries) or violently when there is resistance by destabilization leading to war (Yugoslavia, Libya, Syria, Mali, Central Africa, Palestine and now Ukraine) or overthrow elected governments (Ukraine, Latin America), or both in total disregard of international law. "
Feb 27, 2015  |

... ... ...

It’s easy to understand why the proponents of an EU energy union would use slightly grandiose language to sell their ideas. They have cast this plan as the “most ambitious European energy project since the Coal and Steel Community” of the 1950s. After all, energy solidarity is what Europe was all about at the start. Having France and Germany share their coal and steel was seen, in the words of Robert Schuman, one of the founders of the European project, as the best way to “make war not only unthinkable but materially impossible”. Peace and prosperity were to flow from regional integration.

Last year, war broke out in the country (Ukraine) through which most of Russia’s energy exports transit on their way to many of our homes. A key feature of Putin’s Ukraine strategy has been to make sure this country of transit would never quite escape Moscow’s domination – and that Gazprom would never lose the possibility of directly controlling Ukraine’s gas pipelines to Europe.

The Brussels commission is right to push for a new union. Energy should be, along with freedom of movement for people, goods and services, a key dimension of the EU. It would help in dealing with Russia’s behaviour as well as in tackling climate change. It is of huge strategic importance. Yet it has not happened – so far – because it is so difficult to build politically, and it will be expensive.

Energy is run nationally – not at EU level – at present. Key countries, especially the UK, France and Germany, have their own views on how energy policy should be run, and they are all different. The UK has a deregulated market, many private players, and no dependency on Gazprom. France is highly centralised, with a handful of , state-controlled big players and 75% of electricity generated by nuclear power (which is anathema to the Germans). Germany dislikes nuclear energy and wants to get rid of it, preferring to burn coal if they run out of gas or renewables. And they have had historically good relations with Gazprom. Poland burns a lot of coal (it prefers that to Russian gas), but Poles also want to look for shale gas. They don’t worry that much about greenhouse gases. The list goes on.

There is a disorderly patchwork of energy policies across Europe. But questions that have been important for years need to be re-addressed. It is too late to settle scores over who wrecked Europe’s previous chances of setting up a common energy policy. But Germany does have a special responsibility here. Its large and powerful energy companies, E.ON and RWE, were the first in the early 2000s to carve out long-term contracts with Gazprom without much consultation with European partners. Later, Germany unilaterally signed up to Russia’s North Stream pipeline which the Baltic states and Poland could only perceive as an attempt to pressure them geopolitically.

The new EU plan doesn’t aim to dismantle such realities but is pragmatic enough to try to deal with some of Europe’s obvious weaknesses. Because energy has been mostly a domestic issue there are very few, interconnecting pipelines and grids. The plan is to build more. This would allow compensation for energy cut offs – such as the ones that Russia created in 2006 and 2009, causing thousands of eastern European homes to be left without heating for weeks.

Another idea is to diversify energy supplies by working on a southern gas corridor linking Europe to Turkey and Central Asia, or by setting up liquified natural gas hubs in northern Europe that could act as back-up in case of another gas crisis with Russia.

The complexities are numerous. Some energy business insiders point out that negotiating with a Central Asian country such as Turkmenistan is like landing on another planet. One told me about a meeting with 30 Turkmen government officials sitting immobile behind long tables in the Hall of the Peoples of Turkmenistan’s capital, who didn’t say a word but just stared. Turkmenistan is a big gas producer whose operatives have been known to sell the same quantity of gas several times over to various buyers (Russians, Chinese, etc).

... ... ...

Bosula  -> Fencewalker 27 Feb 2015 21:39

How am I an obvious Putinbot because I'm critical of neo cons and journalists who trot out one article after another on the same themes? Follow what this smiley faced right winger writes and you'll see.

These journalists should be criticised and that is the purpose of free speech and posting on this site.

Just because you disagree with my posts doesn't make me a Putin bot.

My family connections are with Ukraine - not Russia.

irishmand  -> JamesPl 27 Feb 2015 21:31

"I can't blame you for demanding Putin that pays you in a hard currency! Thanks to him, a rouble isn't worth using as toilet-paper, now.
A user name 'Irishmand' who only comments on Russian issues and always with a pro-Kremlin view - you know that Astroturf always looks fake, right?"
1. I am in Canada. Hence, Canadian Dollars.
2. Read my profile. It explains a lot.
3. Yes, I love Russia and I like Putin. What is wrong with it? I see the western media lies. Your media became a shame of this "free democratic" society.

sparrow10 -> joem 27 Feb 2015 20:36

I also think the US is desperately trying to 'take out' sources of energy not under their control: for instance Russia and Venezuela.

We don't have sanctions on Russia because of trouble with Russia, we have trouble with Russia in order to have sanctions. Who do the sanctions hurt? Russia and the EU. Who do sanctions help and not hurt? The US. Cui Bono.

I see Joem, talking to yourself, is that because no-one else will listen.

Paul Greenwood ,  27 Feb 2015 20:31

Britain should pay for Ukraine's gas by imposing VAT on newspapers. It seems unfair that Naftogaz should have to pay for gas when it is a natural resource. Britain gets gas free from Qatar shipped in charity tankers so people in Britain do not have energy costs, it is only fair that the EU guarantee free gas EU-wide and that energy be a free good in Greece as well as Britain.

Bosula  jezzam,  27 Feb 2015 19:00

The US has no issues talking with many right wing undemocratic regimes. I don't follow your point.

Since WW2 the US have meddled in, waged war against or directly overturned popular and democratically elected countries in 69 UN member nations.

Bosula -> omasta, 27 Feb 2015 18:49

I've attending many Holodomor commemorations, but why I stopped going was that many other Ukrainians did not like hearing that millions of other Soviet citizens from across the Union were also starved and sent to Siberia. At this time a few million Russians also starved. With a Ukrainian family I agree the Ukrainians were affected the most, but you should recognise the millions of other Soviets including Russian people who also starved. The problem is that acknowledging Stalin's plans were not just against Ukraine weakens some of the propaganda that has kept into Holodomor.

Another point - not sure how this is relevant to greed and corruption in Ukraine by the Oligarchs, stealing Russian gas and not paying bills?

irishmand -> Polvilho, 27 Feb 2015 18:37

What do YOU know about Chechnya, my little far right ultra-nationalist buddy?
Also, why do you pretend to be Irish?

I was born in Russia lived there until 2004. I lived in Moscow when Chechens were blowing up residential buildings, buses and subway stations there. I lived in Moscow when Nordost happened. My farther was a high rank police officer, I also worked in the force myself. I worked in the office in Moscow and when Chechens didn't like something in the contract two Mercedeses full of Chechens with AK's came to the office. Chechen criminal group is one of the strongest in Moscow.
I know people who went to that war. It was a war, yes. It was horrible, yes. This war was going on for 300 years, with more or less intensity.

Bosula ,  27 Feb 2015 18:29

Why does this neo con reporter not raise any questions about our Saudi oil friends and their support for Islamic extremism not to mention involvement in 9/11?

It is a pity is that the US State Department will give her another briefing this week and then we will receive another of her anti Russian sermons.

Any bets on her next topic?

Perhaps a critique of the EU for its diplomatic focus on East Ukraine rather than taking a hardline arming Kiev to the hilt, even sending in NATO troops.

Maybe her briefing by the State Department is still to blacken, demonise and soften up the public about everything Russia being awful and a threat.

irishmand -> Polvilho,  27 Feb 2015 18:25

Also, classy display of chauvinistic nationalism just to prove how "not a fascist" you are.
Heads up, your lot have shot Nemtsov, in a typically cowardly dick move.

1. I don't anything chauvinistic nationalism in what I said
2. There is a principal in Russia: when you speak about a dead person you either say goods things or nothing. I don't think Putin decided to eliminate Nemtsov, he was not a threat to him. It might have been a business issue.

irishmand -> Polvilho , 27 Feb 2015 18:22

No you didn't, unless you're over 80.
Also, why are you pretending to be Irish?

1. My grandfather died in the war.
2. I am not, please see my profile. It is just a nickname. I love Cranberries.

irishmand -> LinneaBorealis,  27 Feb 2015 18:19

It is a geographic fact that Russia EU/Europe a neighbours but you are totally deluded if you believe EU wants to be partners with a Russia that throws its military power about, bullies and threatens, annexes parts of a neighbouring country. Can't you see what damage Russia has done to itself bringing war and distruction to Ukraine? EU wants to co-operate as equal partners, not being bossed about, lied and dictated to.

You put too much blame on Russia. Turn around and look at US/EU who installed a fascist regime in Kiev.

Russia also wants to deal with the partners it can trust. But after what happened in Kiev, who will trust US/EU, only a madman. US/EU clearly demonstrated that the only way they deal with anybody is everybody has to accept US/EU's point of view, otherwise he is hitler, fascist and dictator. US/EU is also ready to lie through thier teeth to get what they want. Is it a democracy?

Bosula -> Tikibarwarrior,  27 Feb 2015 18:17

And he doesn't appear to have any links with Ukraine so my guess is he is working in some paid capacity for one of the US agencies that undertake this soft propaganda role ( there are many so it is not obvious which one it might be).

irishmand -> Rudeboy1,  27 Feb 2015 18:10

Putin can't afford to cut the gas off. Russia is completely reliant on gas exports. LNG shipping cannot replace pipelines efficiently. Any Russian moves to decrease reliance on supplying Europe dovetail roughly with how long Europe would take to be weaned off Russian gas.

1. Russia can't afford not to supply gas.
2. Europe cannot afford not to buy gas.
3. US wants to sell shale gas in Europe.
4. Hence, Maidan... US problem solved

It would take Europe 3-5 years to find an alternative for Russian gas. It will allow Russia to build pipes and LNG terminals to re-direct gas flow to Asia. Everybody is happy.

irishmand -> dropthemchammer, 27 Feb 2015 18:03

For those saying Russia has not used gas as a weapon :

Yes, the whole theory here is the western media are saying truth, when they are not. So, all you links are just reference to another lie.

Tikibarwarrior -> maureen mcmillan ,   27 Feb 2015 18:03

I'm in the same boat as you Maureen. I voted for Obama twice but this past year I had my eyes opened. I never thought I would see what I have seen on video in regards to Ukraine.....and I never thought I'd see the US back murderous neo-Nazi fascists. It is has been a truly horrifying, eye opening year.

mikedow -> ID5868758,  27 Feb 2015 18:01

This operation has been underway for decades. It's probably been in the planning stage ever since Western Europe made the gas deal with Russia in the beginning. Carter and Reagan both didn't like it back then.

irishmand -> Gangoffour,   27 Feb 2015 17:59

The Indians are tiny customers in comparison to the EU. Regardless, there are closer suppliers who easily undercut Gazprom on price.

1. 1.1B people it is definitely smaller market than EU one, no doubt.
2. Who is closer and cheaper supplier for India?

Polvilho -> irishmand,  27 Feb 2015 17:58

What do YOU know about Chechnya, my little far right ultra-nationalist buddy?

Also, why do you pretend to be Irish?

irishmand -> jezzam,  27 Feb 2015 17:57

Russia has lost the West as a market at a time when there is a glut of oil. It is now set to become China's cut-price gas station. I understand the deal with China was at such a low price that Russia will actually lose money on the deal. Another triumph for Putin's foreign policy. China will be a much worse master for Russia than the West would have been.

1. Have you seen the contract between Russia and China.
2. Europe partially lost Russian market. Few people in sane mind will trade with you and trust you after what US/EU did.

irishmand -> dropthemchammer, 27 Feb 2015 17:55

My point is that number is not bigger then the 30% of europes gas meaning Russia will be out of pocket.

You should try it, so far it was only empty words.

Tikibarwarrior -> omasta,  27 Feb 2015 17:55

New Ukraine, deserves the criticism. They are a failed fascist state (that is economically imploding due to mismangement and corruption) that has spent the last year bombing it's own citizens and killing over 10,000 of those citizens. Don't embarrass yourself.

Chirographer -> ID5868758,  27 Feb 2015 17:53

It's called a business decision. Based on a net profit. Even more than common sense, it's arithmetic.

Common sense comes under attack when political calculations are put into the equation.

irishmand -> dropthemchammer,  27 Feb 2015 17:53

all the pipes have the option to flow from other directions.

1. What direction?
2. How much the gas flown from another direction costs?
3. If Russia is so bad, you should stop dealing with Russia completely. Close your borders to Russians and break all the existing ties.

ID5868758 -> mikedow,  27 Feb 2015 17:50

And the US Congress votes to give Obama another $500 million tax payer dollars to arm and train those "moderate rebels" he's been arming and raining since the beginning of the phony "civil war" in Syria.

Tikibarwarrior -> psygone,  27 Feb 2015 17:50

Psygone, why should you care if they break ties, you've campaigned against Russia at the Guardian for the entire past year?

irishmand -> jezzam ,    27 Feb 2015 17:49

"You miss the point. The EU is not unwilling to buy oil from Russia because it is a fascist dictatorship, but because it is an unreliable supplier. Other suppliers do not threaten to cut off supplies to further foreign policy aims."
1. Please provide the examples of Russia being "fascist dictatorship"
2. Please provide examples of Russia being "an unreliable supplier".

irishmand -> dropthemchammer,  27 Feb 2015 17:47

None of them have invaded their neighbors.

No they didn't. They had and have corruption, civil wars and genocide, but it is irrelevant, because their governments are loyal to US/EU. So, they are goods guys.

Don Scott,  27 Feb 2015 17:45

Maybe the US should have thought about the consequences of undertaking a coup in Ukraine and installing an anti-Russian government there.

irishmand -> dropthemchammer, 27 Feb 2015 17:43

He will not be in power next year. there is a general feeling that he will not win elections. THus he is not a dictator.

You are rrght, he is not, he is a brainless puppet. The puppeteers are not visible. In one year they will install another puppet. It is what's called "illusion of democracy". You an elect a president, but he or she is of no importance and in reality don't make any decisions.

Polvilho -> irishmand, 27 Feb 2015 17:41

Also, classy display of chauvinistic nationalism just to prove how "not a fascist" you are.

Heads up, your lot have shot Nemtsov, in a typically cowardly dick move.

irishmand -> Polvilho,  27 Feb 2015 17:33

"What, you fascists? I'm not surprised."
Another snappy answer.
We Russians, who standing united with other nations of USSR stopped german fascists and their ukrainian friends Bandera and Shukhevich. The Germans have learnt their lesson, but ukranians have not. Now ukranians fascists are back for another lesson, which is being taught to them as we speak.

irishmand -> Alderbaran, 27 Feb 2015 17:26

1. Exactly, this is what I was talking about: "Kievan Rus' begins with the rule (882–912) of Prince Oleg, who extended his control from Novgorod south along the Dnieper river valley..."

2. I would be stupid to argue that there is full blown democracy in Russia. However, Inet is not filtered, there are some opposition newspapers, TV channels and radio stations. You can also install a satellite dish and watch whatever you want. The only thing they will come on you very hard and quickly for is if you start calling for the change of government by force. But nobody in Russia will support this topic seeing what happened to Ukraine after Maidan. Nobody wants Maidan in Russia.

Also the meaning of the gay regulation law was twisted in the western media. The only thing it prohibits is promotion of gay values in public, which, I am sorry, I support.

irishmand -> Polvilho, 27 Feb 2015 17:12

Wow, snappy answer. You have no idea about manners, do you? Well, it is typical. It is how I see people of your kind.

1) You first, twinkle.
If it is my choice, then I say there is no funding and arming.

2) Russian fascists. In Ukraine. Lots of them. Hard to miss. One was Prime Minsister of the DPR before Zakharchenko, who's attitude towards Jews suggests he is also a fascist, despite not being Russian.
Again, no proof, empty words. No value.

3) You're right, Russia is clearly not financing the FN and other fascist parties. They must just all support Putin because they see in him a man after their own heart.

We love Putin. He finally slapped on the face people like you. You are pissed off, of course, but if you keep messing around, he will slap you more.

Gil Matos-Sequí  -> psygone 27 Feb 2015 09:21

It is too early to say what the results of the suit will be. I think the suit has as much if not more to influence the power of the EU over it's constituent members in negotiating gas prices and contracts. Russia does not stand to loose much in negotiating one price for a huge block as opposed to smaller contracts. This will affect the price of course but it will most likely mean that smaller countries end up paying significantly more than they are paying. As far as the accusations about over pricing by Gazprom, it is ridiculous. The price of Gas is tied to the price of oil and each contract devises a formula relative to the specifics of the deal. Gazprom already envisages itself selling gas to Europe from gas hub via Turkey and Turkey already envisages itself a the major gas hub and transit point for Europe, wether it be gas from Russia, or Azerbaijan, or Turkmenistan, or wherever. This lawsuit will have very limited bearing on geopolitics or real-politik over which the EU frankly has little influence.

RVictor  -> caliento 27 Feb 2015 09:18

former Chancellor Schroeder

It is due to Schroeder Germany has now uninterpretable gas supply through the Nord Stream.

RVictor  -> elti97 27 Feb 2015 09:16

Solar energy, for example, already accounts for 6% of German electricity

Wow! 6%! Amazing! Especially in winter time on north parts of Germany - solar energy will for sure cover heating needs!

AtMyAge 27 Feb 2015 09:11

A key feature of Putin’s Ukraine strategy has been to make sure this country of transit would never quite escape Moscow’s domination – and that Gazprom would never lose the possibility of directly controlling Ukraine’s gas pipelines to Europe.

OH come on! This is a key feature of the EU's policy - to force Russia to transit gas across Ukraine in order to force Russia to supply Ukraine at below market rates or face losing the EU market.

Russia has been doing EVERYTHING possible to bypass Ukraine and supply Europe by other routes - but the EU keeps blocking it. Russia fires up the south stream pipeline project and Brussels bullies Bulgaria to stop work on, so Russia announces an alternative route via Turkey, but again the EU refuses to commit to making the connections.

In short, the EU is using energy policy to attempt to bully Russia - not the other way around.

Asking to be paid for supplying gas is NOT bullying nor using energy as a weapon. Its called business. When you go to work, you expect to be paid at the end of the week/month the salary that you were promised not insulted and accused of bullying when the money you are owed is not paid and you are reluctant to continue to work for nothing...

Simon311  -> psygone 27 Feb 2015 08:58

"It's strategically important to see Gazprom lose its market share in the world's richest and largest trading bloc."

Is it? Does it make strategic sense to mix economics for a recovering economy with power politics?

Does it make strategic sense to provoke a nuclear power?

Tikibarwarrior ->  Jeremn 27 Feb 2015 08:55

The EU is in the process of falling apart due to the misguided policies implemented in Ukraine. This article is past tense. It may have made sense previously but the Greeks are on the edge of leaving due to the huge austerity/ECB rip offs. What people need to understand is that Russia isn't the enemy of the European people. The real problem in Europe is the increasing poverty and growth of right wing extremism/neo-nazism due to crippling austerity policies conducted by the ECB/IMF/EU vassal leaders. The goal for the 1% has been to keep the publics eye on the left hand while it moves the money into their right hands.

Like the US bailout of 2007, the take a massive chunk of change from 'we the people', they then distribute that money to the banks and the 1%ers who run those banks. They loan it out and put countries into debt slavery. I recommend watching the film "The International" (with Clive Barker) to fully understand how this is done. It is a form of money laundering. The money doesn't trickle down after they create a bailout like the recent EU 500 billion euro self award. The debt is passed on to the public who pay it back ten fold over time. The countries, like Greece, are then trapped and held in debt slavery to the banker 1%. The EU vassals continue the cycle and send in their resource/utility extractors to buy up the assets of the countries, such as what is now going on in Ukraine.

The US destabilized it, then the EU/IMF give it massive loans it can't pay back, then the big corps/hedge funds come in and buy up all the assets/utilities/farming and fracking land. After the rape is complete the people are stuck in poverty, such as Greece is.

Look at Spain. Look at the UK these days. Germany has 12% of the population in poverty, but you will never hear this from the compliant, vassal media whose job it is to keep the people in the dark and never address the real root cause of the problem, the greedy 1% who rule us all.

For the EU, Russia is the least of your worries. Energy independence isn't the problem, sovereign nations and human independence is. The EU needs to break apart so people can be free again.

Simon311  -> psygone 27 Feb 2015 08:55

What a ridiculous remark. The last thing the EU needs is a trade war and a hostile stand off with Russia,

SHappens  -> Havingalavrov 27 Feb 2015 08:40

There is a quiz about Russia on this site you should take.

I suppose we could say pretty much the same about the EU:

A single party (bipartisanship hides identical policies) that monopolizes power and denies opponents access to the power.

Leadership either unelected or elected in "rigged" elections, all deeply discredited in the eyes of people who no longer have any confidence in them as they are almost all at worst crooks or puppets, and, at best, incompetent and uneducated technocrats who have lost touch with reality.

Elected leaders (parliamentarians), co-opted (EU Commission) appointed (senior) and selected (CAC 40) all from the same "aristocracy" which repeats itself and that has nothing to envy to the one that had generated the Party in the USSR.

So unpopular leaders that they can not meet the true population. All press conferences and all "errands" of the rulers out of their bunkered palaces are all staged with "extras and accessories" mounted with the complicity of subsidized state media.

Paralysis of 'governance', incapable of reforming itself as it is mired in its heaviness, its incompetence, corruption, immorality and privileges apparently attempting to binge themselves as much as possible before everything collapses.

More separation of powers, but almost complete collusion between the executive, legislative, judicial, media, financial and thus criminalization and corruption powers, all accompanied by impunity.

A military empire (US + EU + NATO) with an hegemonic agenda which conquers territories either peacefully (the 28 EU countries) or violently when there is resistance by destabilization leading to war (Yugoslavia, Libya, Syria, Mali, Central Africa, Palestine and now Ukraine) or overthrow elected governments (Ukraine, Latin America), or both in total disregard of international law.

Media propaganda lying as they breathe and producing "evidence" sometimes even gross, to deceive and manipulate the public. With less and less success, which promises the collapse of the system.

The demonization of past victims (Serbs, Libyans, Afghans, Iraqis, etc.), present (Syrians, Ukrainians Autonomist, Palestinians, etc.) and desired (Russians).

Laws that dictate the story (Law memorial) with imprisonment to those who question the "official version." Liberal laws and laws drafts to prohibit meetings or shows that displease the "device" as well as control the Internet.

The witch hunt of dissidents, even the most peaceful, who are sometimes forced to flee Russia for having told the truth; this country has in fact become a heaven for dissidents of our system as we welcome former dissidents of the USSR.

Hatred of religion: slander and defamation attacks of all kinds against two religions in particular, Catholic and Muslim, seen as hotbeds of resistance to the proposed overhaul of liberal-libertarian society pursued by the regime.

The militarization of riot police used to repress peaceful demonstrations and dissenting, discredit the protesters by provocation under false flags.

The attack by the army of its own people (Ukraine for example).

Laxity towards real criminals protected by a corrupt "elite" and towards troublemakers.

Introduction of a "police of thought" (the equivalent of Soviet political commissioners) to give the power and the means to various groups and pro-system associations to denounce, discredit, sue and even physically attack dissidents.

Mass spying (NSA-Stasi) and encouraging denunciation.

And unlike the USSR this time, many things were completely free (health, culture, education, etc.) and where there was no unemployment, destruction of social rights and workers' rights in Europe.

Back in the USSR.

[Feb 27, 2015] Over-Confidence on Steroids

"We run carelessly to the precipice, after we have put up a façade to prevent ourselves from seeing it."

Blaise Pascal

Gold and silver were hit by selling in NY this morning.

Hey, why not? Things are just what we say they are, especially when they have an increasingly tenuous connection to reality.

There was intraday commentary about 'Debt Is Just Money That We Owe Ourselves Here.'

This is beginning to feel a whole lot like 2006, where a few were just about crawling out of their skins with the nonsensicalness of what they were hearing, and the looming disaster which they saw coming.

No one really listened. I remember vividly making noise on economic chatboards, with participants saying things like 'what does he want' and 'what is he saying?' After all, Greenspan had assured us that housing was invincible and incapable of being in a bubble, and Bernanke had things well in hand, with theory triumphing over all.

And then as it is now, the herd was just blithely rolling along, following Wall Street into the next unforeseeable financial crisis.

We are there again. And like then, they know it. But they think they can manage it to their benefit, so why would they care?

And given the chance, they will do it again. It is the pleasant cycle of financialisation and accumulation. We are diverted by bread and circuses, the media's sturm und drang that anesthetizes thought.

Economists-Say-Dumb-Things Chronicles: 'Debt Is Money We Owe To Ourselves'

11 February 2015

Like so many sloppy discussions of economics to make an important policy point, but badly, this one diverges from common shared reality fairly quickly.

Let me strike the key hypothesis in this, that prompts a leap of faith, over a cliff and into the abyss of fantasy.

"Debt is money we owe to ourselves."

Something on which Mr. Krugman can agree with Dick Cheney who said, 'Reagan proved that deficits don't matter.' How is that for a twist?

From an accounting standpoint and within the realm of theoretical identities this is true. Each debt is someone else's asset.

The key of course is how we define 'ourselves.'

If 'we' are the entire planet, equally and without distinction of interests and property, then perhaps one might say, ok, although it loses all meaning and significance. I would not mind pooling my household books with one of the Banking billionaires and to be able to step up to the Fed's free cash window anytime to do my business, with the assurance that I have a government guarantee underpinning my ledger, but alas.

And this is a problem because the paramount issue we are facing today is the historically extreme concentration of capital assets in a relatively few hands, and the burden of unpayable debts being imposed upon a large segment of the people by a system that has been hijacked by the moneyed interests.

If you take this pithless observation by Mr. Krugman down one level of detail in the States for example, one finds that the debt is an asset on the books of a increasingly small number of wealthy people, with much of it controlled for them by a handful of Banks.

This system is not sustainable, and I see no sign that it will even cohere, without substantial reform.

I wonder if the average American who is losing their car and house, and who is being hounded by debt collectors for whom those debts seems to matter a great deal, can use that argument with the Banks.

Putting aside private debts, let's just stay in the realm of sovereign debt, where the economic imagination can more easily take its flights of fancy.

Debt is just money we owe to ourselves is similar to the flat pronouncement that a sovereign that issues its own currency can never default. Money is just an accounting entry so why the fuss? And from this comes a Pandora's Box of muddy thinking, a selective myopia towards history, and Trillion Dollar Platinum coins.

I wonder if Greece can use this argument, that debt is just money that we owe to 'ourselves,' when they meet with the Germans this week.

But no, the US is different. Every other country may fail, and many have including that insubstantial nation of Russia not all that long ago, but not us. We are young and immortal. Our benchmark for virtue is power, and we are virtuous enough to be able to say that when things are not working out as we planned, we are able to decree that 'money is whatever we say it is,' and God help anyone who does not agree.

And so we might presume that the mighty US is going to be able to make that case about debt forever to its creditors who are outside the direct thought control of its monetary system, a short list of which is contained below.

It is funny how the moneyed interests and their courtiers are always saying, 'debt doesn't matter,' especially when they want us to assume their gambling debts which they incurred by frauds using our own money. Until, that is, they decide to call in the loans and the debts, and impose their will upon the people with foreclosures, garnishment, austerity, and debtors' prisons.

I agree wholeheartedly that the rhetoric around the discussion of spending priorities gets silly and overheated and quite frankly disgusting. That has more to do with a society in the grip of a greedy few, corrupt public servants, sophistical theoreticians, and boisterous minions than it does with the need to expand our economic theories into existential irrelevance. Madness is certainly attractive perhaps in a land going mad, but it is unlikely to be productive.

Arguments like those from the MMT crowd, both right and left, and economists like Paul do us no favors in concocting some fantastical solution to what is primarily a problem of governance, justice, transparency, and power gone horrible wrong.

The 'debt' and the 'budget' are not an economics argument but a policy argument. What is important to us? What do we continue to hold as these truths? And how do we resolve those disagreements? Avoiding that policy and priority discussion enables those who are caught in the credibility trap to continue to beg the question entirely, and the real task at hand, which is reform.

We cannot discuss reform until we expose the corruption. And therein lies the problem, because quite a few powerful hands have been dipping into the largesse, and quite a few courtiers have a vested interest in continuing to propagate the lies and myths of a failing system.

I am not a 'hard money' guy. I am certainly not in favor of a domestic gold standard as a remedy for our current set of problems.

What I am saying, and I think it has been consistently so, is that the system that we have now is so fundamentally broken that no matter what incidental things that we do, no matter how much stimulus is provided under whatever rationales, that all good will be turned to ill, the gap of inequality will keep widening, and that the situation will continue to worsen, lurching from crisis to crisis.

Is this not what we have seen since all the programs were put in place since the crisis of 2008? That the rich are getting richer, because all we have really done is prop up an unjust, broken, and unworkable system. And I think that this is the point that is being made by Greece in Europe today.

You cannot keep a game running when the insiders that control it are making up the rules as they go along, hiding their assets, dictating the judges' decisions, dipping into the other players money at will, and generally cheating and doing whatever they wish when they wish, because they can.

The system is too flawed to be sustainable, and must change in order to cohere.

NY Times

Debt Is Money We Owe To Ourselves

By Paul Krugman

February 6, 2015

Antonio Fatas, commenting on recent work on deleveraging or the lack thereof, emphasizes one of my favorite points: no, debt does not mean that we're stealing from future generations. Globally, and for the most part even within countries, a rise in debt isn't an indication that we're living beyond our means, because as Fatas puts it, one person's debt is another person's asset; or as I equivalently put it, debt is money we owe to ourselves — an obviously true statement that, I have discovered, has the power to induce blinding rage in many people...

More than that, as Fatas points out, rising debt could be a good sign. Think of my little two-classes model of debt, where some people are less patient than others — perhaps (to step outside the model a bit) because they have better investment opportunities. Moving from a very limited financial system that doesn't allow much debt to a somewhat more open-minded system should, in that case, be good for growth and welfare...

And the problems with public debt are also mainly about possible instability rather than "borrowing from our children". The rhetoric of fiscal debates has been, for the most part, nonsense.

Read the entire piece here.

Posted by Jesse at 3:10 PM

[Feb 27, 2015] Sturm und Drang

" is the most alarming example of cheap demagoguery you are likely to have seen."

George Monbiot, on Rick Santelli

February 10, 2015 |

I watched CNBC today, which is unusual.

When Adam Johnson left Bloomberg the quality declined markedly, wavering between screechy and vacuous, with lots of gossipy and giggly segways. A few notable exceptions like Julie Hyman, Tom Keene, and Eric Schatzker, but not as many since Adam Johnson left.

CNBC is not much better, again with a few notable exceptions like Bill Griffeth and Kelly Evans. It was pretty much the 'same old' as it was when I stopped watching it a few years ago.

But Rick Santelli was quite the sight.

His eyes became very open and wild as he pressed his face to the camera, his nostrils were flaring, and you could see the spit flying out of his mouth. Network for the one percent. Maybe time for a teeth cleaning.

I have seen him good naturedly gooning it up with his pit trading cronies several times before, who seem to be a dying breed by the way, and it was something you could just take in stride.

But this was something different, chewing-the-scenery-wise. Is there an inverse relationship between bombast and ratings?

It is 'financial television' after all. Infomercials interspersed with country club crudité infotainment. But today he had the persona of a park bench lunatic, and it was decidedly unattractive, if not disturbing.

And it was clearly an act.

Is he supposed to be the bad guy or the good guy? Or just the extreme guy, like George 'The Animal' Steele? Is this some new twist in broadcast journalism? Are they getting their production values from professional wrestling these days?

Who is doing their casting, Vince McMahon? And their directing, Ed Wood? Are they just following the fashions of the day? Are we all Bobby Heenan now?

Do we even know what genuine human life is all about, anymore? Do we even care? Living life in stereotypes and spin is simpler and more pliantly digestible. Is life imitating art, in caricature?

The saddest part is that this is becoming a tone for not just finance but 'the real news,' led by Fox and CNBC's sister, MSNBC. And the very serious Sunday morning shows are going off-the-hook as well, as they grapple with a credibility gap that prevents the political and media elite from acknowledging the decline in the average person's reality.

Speaking of unattractive and disturbing, the SP futures managed to rally solidly up to the top of the big resistance around 2065 for the fifth time since mid January.

The big tickle is going to be Greece this week, with maybe a nod from the Ukraine. If we get a surprise settlement on Greece by some miracle tomorrow, the markets will do a moonshot.

It is hard to tell. Most of the local (US) commentary is either hopelessly slanted or incredibly naïve. It is sad when very good financial commentators decide to be political analysts too. Or when financial commenters decide to embark on flights of fantasy. I have enough actual experience to know what I do not know, and that is quite a bit. At least I'll admit it. But speculating about what is happening or what might happen is fun when you are unconstrained by facts.

One has to tune out the sturm und drang with which the players are filling the airwaves as they prepare to get serious. This is the oh yeah, yeah! portion of the prototypical schoolyard encounter.

So let's keep an eye on the geopoliticals, because I do not think the stock markets will unleash the rally monkeys until they are more sure that something disruptive is not coming. Even if the talks completely break down and Greek says they will exit, I suspect we *might* see a relief rally after an initial plunge. Remember the mistaken optimism prior to the crushing reality of Lehman Brothers?

Have a pleasant evening.

[Feb 26, 2015] EU Warns of Debt Dangers Facing Ireland and Euro Zone – "Emperor Has No Clothes"

- High "structural" unemployment, high levels of public and private debt and a still vulnerable banking sector are weighing on the Irish economy

- Report further casts doubt on the "recovery" narrative being touted by governments, banks and vested interests across the world

- Levels of spin and denial not seen since before the crash of 2008

[Feb 26, 2015] The Technical Fundamentals

Feb 26, 2015 | Jesse's Café Américain

This market feels heavier than it looks.

It is hard to judge 'sentiment' because the market is being almost totally dominated by a few institutions, a handful of very large trading desks, and a swirling crowd of HFT hit and run predators.

So given this concentration of power, the market can move in just about any direction that external events, or the lack thereof, may permit.

The 'fundamentals' are not in play, at least for now. And so the markets may continue to diverge from the real economy, until they cannot. And then the reckoning comes.

The Fed is absolutely NOT blameless in this exercise, as they were not blameless in the past. They publicly denied there was a stock bubble, while discussing it in private.

They just let it run its course without even taking the minimal actions which they possessed then as a regulator, which are much greater now.

Have a pleasant evening.

Ex-Plunge Protection Team Whistleblower Governments Control Markets; There Is No Price Discovery Anymore

Feb 23, 2015 | Zero Hedge

Conspiracy 'Theory' becomes Conspiracy 'Fact.

"There's no price discovery anymore by the market... governments impose prices on the market." - Pippa Malmgren, former member of the U.S. President's Working Group on Financial Markets.

In this 38 minute interview Lars Schall, for Matterhorn Asset Management, speaks with Dr Pippa Malmgren, a US financial advisor and policy expert based in London. Dr Malmgren has been a member of the U.S. President's Working Group on Financial Markets (a.k.a. the "Plunge Protection Team"). They address, inter alia:

Full interview:

See also

[Feb 23, 2015] What's Next For Oil And Gold Thoughts From Eric Sprott, Rick Rule And Marc Faber

Feb 23, 2015 | Zero Hedge
" How can we have an economic recovery when there is barely any discretionary disposable income for 40% of the population? As we have shown above, those that have seen their incomes grow are not the ones most likely to spend, while the bottom 40% of households still rely heavily on government assistance, have had stagnant incomes and have been faced with increasing inflation for "non-discretionary" goods that constitute a very large share of their incomes. There is clearly no recovery…"

- Eric Sprott, Chairman and Founder of Sprott Inc., July 2014

" Most developed economies have consumed and borrowed at worrying levels. The US federal government has on-balance-sheet liabilities of over $16 trillion and off-balance-sheet liabilities estimated at about $70 trillion. These numbers do not include state and local government liabilities, or the likely liabilities from underfunded private pensions. Not to mention increased costs associated with more comprehensive health care and an aging population!"

- Rick Rule, Chairman of Sprott US Holdings Ltd., July 2014

"This is the second longest bull market in the last 100 years. I wouldn't buy shares here. I'm not interested. Now can the market go up another 20 percent? I wasn't interested to buy the NASDAQ in late 1999, but between January 2000 to March 2000, the NASDAQ went up another 30%. Afterwards people were crying when they realized their losses. The markets go up and down. I think that the upside potential now for the general stock market is very limited and there is considerable downside risk. Probably more downside risk than investors realize."

- Marc Faber, Board of Directors of Sprott Inc., February 2014

Below are some further perspective on what may be next for oil and gold from Eric Sprott, Rick Rule and Marc Faber.

* * *

Weakness Around the World

The oil price is driven by the same dynamic that underpins the case for most commodities, such as copper, uranium, or iron ore.

As people get richer, especially in emerging markets, they tend to consume more metals with which to build houses and cars, and more fuels to generate energy and power machines.

Yet commodities have been flat since the Great Recession ended, suggesting, once again, that economic growth is slowing down.

The price of copper is at a four-and-a-half-year low of $2.60 per pound. Uranium sells for $36 per pound today, down from around $65 in 2011. Iron ore for delivery in 2015 trades for below $60 per tonne on the futures market, down from over $180 per tonne in 2011.

The price of oil, meanwhile, had not declined substantially over the last three years. Perhaps its recent price collapse is not as sudden and inexplicable as many believe.

Indeed, a low oil price is consistent with the price action we've seen in other commodities. It also dovetails with economic data we're seeing from around the world, which suggest that global growth rates are simply decreasing.

The Eurozone is trudging along more slowly than the US, according to statistics from the European Central Bank. In the third quarter of 2014, its GDP was nearly flat at 0.3% in growth. Inventories were being dis-hoarded, falling by around 15 billion euros over the last 6 months. This suggests that fewer goods are being produced and stockpiled – a response to weak demand. Employment grew by 0.2% over the quarter, meaning that unemployment levels are still high for the developed world, and industrial production increased by only 0.1%.

The situation is similar in Japan. Despite sustained ultra-low interest rates and activist policies meant to stoke growth, the country is mired in what isn't far off from being a depression. Its GDP shrank 0.5% in the third quarter of 2014, right on the heels of a more than 1.5% contraction in the second quarter.

Developed-world economies are not the only ones that are experiencing weakness now.

China's annual growth rate has slowed from around 10% in 2011 to around 7.5% as of the third quarter of 2014. 11 Its domestic consumer market appears subdued. In the third quarter of 2014, the Consumer Price Index (CPI), which measures the average change in the prices of consumer goods and services, was its lowest since February 2010. The real estate market has been weak and domestic investments in fixed assets – which includes new building projects – grew by only 16.1%. That number was above 21% in early 2013, and has been declining steadily ever since.

Weak economies around the world offer weak demand for commodities and for capital. The effect is to keep interest rates extremely low and to push commodity prices down.

The same logic applies to oil, which has long been priced with the expectation of ever-increasing demand and ever-declining supply. We can therefore view the oil price as a symptom of poor global economic growth, which is a long-term problem – and not just as a short-lived consequence of a slight oversupply of oil.

Falling oil prices are yet another sign that the world economy may be more fragile than before the Great Recession.

Why is this important? Well, many write off the oil price drop as merely the machinations of Saudi Arabia to throw a monkey wrench in the wheels of the US shale industry – or perhaps a market that's over-reacting to a slight supply and demand imbalance. You would then naturally expect a quick recovery after the market worked through the problem of oversupply, or once OPEC and Saudi Arabia had adequately bludgeoned its rivals. On the other hand, if you attribute the oil price decline to a more significant underlying issue within the world economy, then the oil price drop starts to look like the harbinger of a more long-term trend.

[Feb 20, 2015] No Tech Bubble Here, Says CNN This Time It's Different

when Uber is given a valuation of $40 billion, can a crash be far behind?

February 20, 2015 | Slashdot

ErichTheRed writes

I saw this on the Money page of CNN today. Apparently, various stock analysts have declared that this run-up in stock prices is different than the 1999 version. OK, we don't have the sock puppet, Webvan or anymore, but when Uber is given a valuation of $40 billion, can a crash be far behind?

Anonymous Coward

...Fool me twice, shame on me.

This is wise advice when discussing the Wall Street crowd.

[Feb 10, 2015] This Man Will Never Be Invited Back On CNBC

Feb 10, 2015 | Zero Hedge

And now for something completely unexpected: 2 minutes of pure truth (courtesy of Mizuho's Steve Ricchiuto) on CNBC...

148 seconds of awkward uncomfortable truthiness...

While Steve had a number of hard to hear quotes for the CNBC anchors - such as:

"There is no acceleration in underlying economic activity," and

"There's this wrong concept that I keep on hearing about in the financial press about the acceleration in economic growth... It's not happening!"

A stunned Simon Hobbs rebuffs, "That's a long list of non-ideal situations we find ourselves in," to which Ricchiuto snaps back "and we can keep on going!"

"After a string of dismal data on durable goods, retail spending, and inventories, we get a good jobs number and everyone saying the economy's good - it's not good!"

It was Sara Eisen that had the quote of the brief clip... (which has unbelievably been edited out since we posted it seems at around the 1:40 mark) when faced Steve's barrage of facts about the real economy, replied:

"but the key is that's not what The Fed is telling us."

Summing up the unbelievable 'faith' (misplaced beyond all reputational loss) that so many have in the central planners of the world.


Nobody 'listens' to MSM. They have either turned it off or they zonk out. If people listen to MSM they would realize that it is all propaganda!

We all know that the Fed can't raise interest rates. Look at the housing market! It's terrible. What would it look like if interest rates were to rise? The economy has not and will not improve until it crashes completely and resets (hopefully with real free markets).

Until then, stop going in debt. Only buy what you can afford. Use cash as much as possible. Better yet, use silver where its possible. Friend helps you move, give him a silver eagle. Need a lift to the airport give them a few silver dimes. If your friends won't accept these as payments maybe these candles with silver coin prizes would be better appreciated:

Now, Jim Clifton is back stating that not only is BLS wrong in its assumptions about employment activity, but also that the 5.6% unemployment number is "extremely misleading."

"The official unemployment rate, as reported by the U.S. Department of Labor, is extremely misleading.

Right now, we're hearing much celebrating from the media, the White House and Wall Street about how unemployment is 'down' to 5.6%. The cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market.

None of them will tell you this: If you, a family member or anyone is unemployed and has subsequently given up on finding a job -- if you are so hopelessly out of work that you've stopped looking over the past four weeks -- the Department of Labor doesn't count you as unemployed. That's right. While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news -- currently 5.6%. Right now, as many as 30 million Americans are either out of work or severely underemployed. Trust me, the vast majority of them aren't throwing parties to toast 'falling' unemployment."

Of course, Jim is once again correct. Many arguments of low labor force participation rates have focused on the retirement of the baby-boomer generation. Therefore, to exclude that argument, even though those over the age of 65 that are currently employed is at the highest level on record, we can look solely at the group of individuals that should be actively employed (16-54 years of age.) The following chart, which is the labor force participation rate of solely 16-54-year-olds, shows the real problem with the BLS's employment figures.


Considering that only 46% of that age group are currently employed suggests that an unemployment rate of just 5.6% is highly misleading.

Of course, you already knew that didn't you?

Dividend Cuts To Impact Personal Incomes

Political Calculations brought out a very interesting point recently discussing the rise in dividend cuts due to the deteriorating economic backdrop. To wit:

"Going by the number of publicly-traded companies that acted to cut their dividends in January 2015, the U.S. economy didn't just experience recessionary conditions during the month. Instead, it outright contracted."


"Or perhaps a better description of what happened is that the U.S. oil industry's efforts to push its luck as far as it could has run out of good luck to push.

By that, we're referring to the consequences of falling oil prices, which are forcing an increasing number of companies tied to oil extraction activities in the United States to take the dramatic step of slashing their dividends. With 57 U.S. companies taking that action in January 2015, the number of companies taking that action in a single month is consistent only with previous months in which the U.S. economy either experienced contraction or in response to major dividend tax rate hikes.

January 2015 saw no major tax rate hikes on dividends, so contraction it is."

Importantly, another impact of the decline in dividend payout will be a reduction of the amount of dividend income that makes up part of the personal income and spending reports. The chart below shows the monthly net change of a few components of the personal income figure. Notice that in the most recent month personal interest income is negative due to the plunge in interest rates and dividend income was marginally positive.


Considering that the decline in oil prices is supposed to good for the consumer, even though personal spending declined in the most recently reported period, the decline in dividends will certainly have a negative effect on those depending on those dividends. As I showed recently, the current detachment between spending and the stock market will likely be corrected rather harshly at some point.


2nd Most Overvalued Market In History

I recently gave a presentation at the 2015 World Economic Conference (see full slide deck here) in which I discussed varying aspects of the market that should have investors fairly concerned. High yield spreads on the decline, extreme deviations from the long-term mean, and margin debt levels should all be at the top of the list.

One point I did not include, but should have, was noted recently by my dear friend Doug Short.

"The peak in 2000 marked an unprecedented 147% overshooting of the trend — nearly double the overshoot in 1929. The index had been above trend for two decades, with one exception: it dipped about 13% below trend briefly in March of 2009. But at the beginning of February 2015, it is 91% above trend, down from 95% above trend the month before. In sharp contrast, the major troughs of the past saw declines in excess of 50% below the trend. If the current S&P 500 were sitting squarely on the regression, it would be around the 1060 level. If the index should decline over the next few years to a level comparable to previous major bottoms, it would fall to the low 500 range."


"Incidentally, the standard deviation for prices above and below trend is 40.6%. Here is a close-up of the regression values with the regression itself shown as the zero line. I've highlighted the standard deviations. We can see that the early 20th century real price peaks occurred at around the second deviation. Troughs prior to 2009 have been more than a standard deviation below trend. The peak in 2000 was well north of 3 deviations, and the 2007 peak was above the two deviations -- as is our current level."

As I stated during my presentation, we can certainly "hope" that the markets will continue to march endlessly higher. However, "hope" has never been an effective portfolio management strategy.

[Feb 05, 2015] Price of oil and the disruption of flow of oil dollars to the USA coffers

Additionally, low oil prices have blocked the flow of petrodollars in the United States. Oil exporters have invested their profits in US bonds. Now OPEC need to reduce state budget and spend some of those bonds that the US is holding. Well, the USA have debts to pay and now it just can't print the money as freely as before.
  1. On the amount of oil that costs $1 accounts there are more then $10 of all kind of securities.
  2. It turns out that the price is determined by Wall street mafia, large funds and holders of those securities, not so much by the producers or consumers of oil.
  3. Low oil prices have an obvious advantage: they inhibits Russia economic growth.
  4. But low oil prices have costs. They already starting to cause bankrupcy of companies extracting shale oil. And again, no so much companies as such, but all the mess of securities (shares, derivatives, insurance, insurance of insurance, etc) connected with them. If things begin to crumble, it might be something like a mini repetition of 2008, which was triggered by the collapse of mortgage giants.
  5. Additionally, low oil prices have blocked the flow of petrodollars in the United States. Oil exporters have invested their profits in US bonds. Now OPEC need to reduce state budget and spend some of those bonds that the US is holding. Well, the USA have debts to pay and now it just can't print the money as freely as before.
  6. Finally, low oil prices make China extremely happy. Strong dollar undermines the US exports.

In General, the conclusion is as following. Oil is a geopolitical resource and the USA financial cartel is powerful enough to set any price for oil. $30 or, may be even $20 per barrel. But the problem is that at such a low price several problems arise.

In fact, the oil price is a compromise between the elite U.S and the elite of OPEC designed "to deal with" Russia. But somebody might not be able to endure described economic war for long and associated costs..

[Feb 02, 2015] Gold Daily and Silver Weekly Charts - Carry On

Feb 02, 2015 | Jesse's Café Américain

People who follow price alone, and believe that this is the truest indicator of future value, have a point. And it is valid, based on a very short timeframe, most likely appropriate to a day trader.

And it is no coincidence that most day traders go broke.

Most traders overall go broke. They may have great runs for a time. I have seen runs at the crap table that were amazing. I had a run at poker that was astonishing, and that lasted for a couple of years. I had one night at the tables that was almost exhilarating. I made some short term profits playing the futures that were almost jaw dropping.

But they passed. And then came the steady losses. The most enduring profits I have made were done over a long time with a steady position, being right and sitting tight. The key to that is 'being right.' It is never easy.

People have different styles as traders. Some like the thrill of the short term, and others prefer what is called 'value investing' and the longer term. You have to pick what suits you.

But at the end of the day, most everyone loses except the casino, unless you can find and exploit some kind of edge.

That is the best that I can and will say regarding a commentator about the precious metals who might say that all that matters is price, because it does not matter who is buying or selling. Or why.

You don't need to know that. You do not need to know the players or their possible motivations. It is a point of view. And a good one if you wish to be a price follower and a day trader, and not have a real clue about the opportunities one may have to make some serious money.

The market makers and professionals all too often paint 'pictures' with price action. To somehow say that price contains all useful information and the truest picture at that moment is a corollary of the efficient markets hypothesis. And I would like to think after umpteen price rigging scandals, that we would reflexively know that this is all rubbish. And enough about that nonsense.

There are great changes underway in the world of money. And you will either understand them now, or understand them later. True, all sellers become buyers and all buyers become sellers given enough time. But that is the kind of timeframe about which Keynes remarked that 'in the long run we are all dead.' Someday will come. But its an odd logical fallacy to take the extremely short and the extremely long and reason from those examples, ignoring the great bulk of experience which is in-between.

As you may have noticed, most of the antics from yesterday's markets were erased today. The sharp rally in stocks dissipated, and the big hit on gold was largely erased.

As I had said, we had a real test for the precious metals this week, most notably gold, which is the metal of controversy. We had an option expiration, a first position day on a new active contract, an FOMC meeting, and a first estimate of 4Q GDP.

So far so good. If gold wanted to find a place to bounce, today's was about as good of a bounce as any.

The bounce in stocks with the subsequent flop was not surprising. The Fed hates to leave the market feeling like it has failed, perception management-wise.

Follow through is absolutely everything for gold and silver here. We are now in an 'active month' and the first delivery reports have reflected that. Deliveries were coming out of 'customer accounts' and the house accounts were the takers. But you don't need to know that.

What you do need to know is that gold bullion is flowing steadily and heavily from West to East. And that we are nearing the natural end for a currency cycle. And that the price of gold and silver are based on leverage, and rehypothecation, and that these things have failed in the micro level, such as at MF Global, and can fail at the macro level, as in the failure of the London Gold Pool.

Please remember the poor. Their lives are very hard, and they are easy to forget. And not just the people who are poor in things, but also those who are poor in spirit, and unable to love. Don't just worry and count your money, although that is practically important.

Remember the only things that really endure, that will stay with you, as you truly are, a soul that happens to have a body, for now. And that is measured not in dollars, but in love.

Have a pleasant weekend.

[Jan 31, 2015] The Bond Market Has Reached Tulip Bubble Proportions

Looks like Fed lost credibility...
Jan 30, 2015 |

Fed Officials Trying to Send Signals to the Bond Market

James Bullard on Friday noted that the Bond Market was far too dovish in relation to where the Fed is in regard to raising rates in June, and this might be the understatement of the year so far. For example the U.S. 2-Year Bond Yield is 0.45 or 45 basis points, think about this for a moment. Even if the Fed fund`s rate finishes the year at 50 basis points which is well below the Fed`s most conservative forecasts, and we use a conservative annual inflation rate of 1% (I know oil has dropped but there are more inflation categories than just the energy component). Moreover, the overall annual inflation rate is well above 1% right now, and you factor in that this bond is paying a 2-year risk premium for tying up one`s capital with all kinds of inflation risks over that 2-year time frame, this has to be the stupidest investment of all time.

2-Year U.S. Bond Yield is 45 Basis Points

To buy the 2-Year Bond when the Fed has practically stated that after two FOMC meeting`s they are liable to raise rates at least 25 basis points at the earliest (think April) and June at the latest so that is 25 basis points right there added to the Fed Fund`s rate, and needs to be added to the 2-Year Bond calculation so the current Fed target rate is 0.00 - 0.25 with the daily rate on 1/29 of 0.11 or 11 basis points, so add the June 25 basis rate hike to the current daily rate of 11 basis points and you get a 36 basis point starting point for borrowing money, add an annual inflation rate of 1%, and we are at 136 basis points for evaluating the 2-Year Bond given this rather charitable and conservative analysis.

Thinking About the New Greek Crisis
... ... ...

5. Ideals aside, the consequences of playing hardball with Greece over its banks could very easily be immense. Up until now, the euro has proved very durable, largely thanks to the point Barry Eichengreen emphasized: any country that even hinted at the possibility of leaving would face the mother of all bank runs. But as I worried some time ago, this argument becomes moot if the banking system has already collapsed. Grexit — the often speculated about, never so far materializing Greek exit from the euro — becomes a very real possibility if European creditors try to exert leverage by taking away the safety net for Greek banks.

6. And if Greece really does leave the euro — if it turns out that the single currency is not irreversible — do you really think there would be no contagion? Wanna bet on it?

7. In particular, think about what happens if Greece leaves the euro and then manages to find its footing — which it probably would after a chaotic year or two. The EU could prevent that by deliberately undermining the post-euro Greek economy. But that would be a betrayal of European principles.

8. At the moment, Germany is talking as if it intends to follow the Michael Corleone strategy. But do we really think that Syriza will or even can retreat with its tail between its legs immediately after winning a dramatic election victory? Again, wanna bet on it?

Daniel Davies tells us that “European policy makers aren’t stupid.” But they do say stupid things, still talking about expansionary austerity, still treating debt as a purely moral issue. Can and will they be realistic, accept that they can’t extract blood from a stone — at any rate not at the rate of 4.5 percent of GDP — in time to avert a spiral into disaster?

Selected comments from Economist's View Links for 01-29-15
Darryl FKA Ron
RE: Whitewashing the Crazy, Fed Edition

[Krugman is just knocking them out of the park today.]

How does one report on politics when a significant wing of the political spectrum is, not to put too fine a point on it, stark raving mad? I appreciate that it’s hard to do without attracting accusations of bias; on the other hand, there’s a temptation to soft-pedal the crazy, to make it seem as if politicians were less out there than they really are...


[So, is it Ron's be kind of Krugman day? Well any day that Krugman addresses financialists' dogma head on and skewers idiotic Republican politicians without lapsing into Dembot apologetics is Ron's be kind to Krugman day.]

pgl said in reply to Darryl FKA Ron...
In the meantime John Taylor is defending this Rand Paul bill over at his blog. How you ask? First Taylor brags about his now (in)famous rule. And then he states this bill does not really require anything more than the FED being clear about its actions. Of course the FED has been clear. So why do we need a law if it does nothing?
Darryl FKA Ron said in reply to pgl...
Sorry, but I did not read about that. Don't feel bad though because I did not read the articles about Ted Cruz or Rick Perry either. I don't think of them as alternative viewpoints. Actually, I don't even think of them as viewpoints. So, I don't really think of the technocrats that serve them as economists either.
ilsm said in reply to Darryl FKA Ron...
Romney is Crazy; life coaches, charter schools, blame the single parent and backbone is funding the wars (more drone strikes, star wars and aircraft carriers to haul around broken F-35's with money taken from schools and kids' preschools).

You fix under funded schools, and kids who don't get remedies for lacking 3 year and up pre schooling by giving the money to charter schools run by amateurs wanting to teach how wrong the theme song to Big Bang Theory is and break up the NETU...........

Everyone is scared Nobel Prize winner Shiller

The human race has deep underlying fears about technology and the lives their children will lead and this can be seen - in all places -- in the negative yields in bond markets, Nobel Prize-winning economist Robert Shiller told CNBC.

"I think fears have been growing for years that represent the willingness of people to bid up bond prices," he told CNBC Wednesday." They are worried about their future. They are worried not just about next year, they are worried about the next twenty years, the next forty years. So they are desperately trying to provide for that, they'll even accept negative yields."

Shiller won the Nobel prize for economics in October 2013 for his research that has improved the forecasting of long-term asset prices and helped the emergence of index funds in stock markets. He was awarded the 8 million crown ($1.25 million) prize alongside fellow economists Eugene Fama and Lars Peter Hansen.

In London after a trip to the World Economic Forum, he said that the Davos event had helped him understand that there is not just pessimism about the global economy, but worry.

"There's this increasing fear of technology, information technology, artificial intelligence, robotics, 3-D printers, the internet and all these different forms," he said. Technology, he added "seems to be changing life in such a fundamental way and what it's leaving people thinking is 'where will I be in 30 years? Look how fast everything is changing now. Where will my children be? I want to leave something for them because they could be in terrible straits'."

The World Economic Forum's (WEF) Global Risk Report, released to coincide with last week's event, warned of people designing "bespoke viruses as murder weapons" and that computers could turn rogue.

In Davos, Yahoo chief executive Marissa Mayer told delegates that she expected internet privacy to swing further into the hands of governments over the coming months.

At another seminar, the Daily Mail reported, a panel of academics warned of mosquito-sized robots flying around and stealing DNA samples.

Responding to Shiller, Edmund Shing, the global equity portfolio manager at BCS Asset Management, told CNBC that he often wonders whether the world is not in the throes of a second industrial revolution but rather a technological revolution. He was concerned that a whole class of jobs could either disappear or become deflationary.

"You (might not) see any more wage increases because of the pressure from technology," he said. Shiller added that Davos had taught him that people are trying to make sure they are in the top 1 percent of global earners. "This is desperation for many people," he said. "The problem now is we are going through a technological revolution, unlike any in history because we seem to be getting right to core abilities that people have, that's the ability to think, to know."

He added that knowledge from humans was becoming even more absolute because of technology. The example he gave was that astronomy is becoming more redundant with the advent of mobile applications. "They just whip out their phone and they can beat you," he said.


It is a bit ironic that technological advances have actually made people less happy. Numerous surveys have shown that people feel more detached and depressed than ever before.

We are bombarded with more information that our brains can handle. Some of the information involves the wealth and success of others (which makes us feel like failures). Other information involves crimes, death and terrorism (which make us feel scared and insecure). Furthermore, one small misstep becomes instant social media news in which you're penalized for your intolerance or insensitivity. Finally, people now socialize by playing video games and texting friends.

Jesse's Café Américain European 'QE' In a Nutshell - Propagating the Western Trickle Down Policy Errors

EU disparately trying to avoid recession caused by creaking economic ties with Russia.
This is about it in a nutshell. 'Stimulus' American style comes to Europe.

Printing money and giving it to your cronies inflates asset prices, lines the pockets of the well-heeled heels, but does little for the real economy.

But it doesn't produce broad inflation (or aggregate demand) so we can do it many times! Success!

"At last the euro’s lords and masters have accepted that something must be done about their zone’s lamentable growth. They will unleash a massive bond-buying programme totaling a reported €1tn. The former BBC economic pundit Stephanie Flanders told the world it was “Santa Claus time”; the European Central Bank (ECB) has ridden to the rescue.

No it has not. Europe’s great and good, partying on the slopes of Davos, are like courtiers at the Congress of Vienna. They are blinded by snow and celebrities. Santa Claus gives presents to people; the ECB gives presents to its banks. It is merely tipping large sums of money into the vaults of precisely the institutions whose crazy lending caused the crash of 2008, and which have been failing Europe’s economy ever since.

Quantitative easing is a gigantic confidence trick. It was promised that it would yield new investment. It has not. It was promised that it would “pump money into the economy”. It has not. It was also feared that printing money would lead to hyper-inflation. It has not, for the simple reason that no one gets to spend the money. It is a bookkeeping transaction between a central bank and a commercial bank. It means nothing as long as banks are told to build up their reserves.

Money in circulation matters. The whole of Europe, including Britain, is chronically short of demand, which is why deflation is such a menace. If no one can afford to buy anything, no one will sell anything or invest money in making anything..."

Simon Jenkins, QE for the eurozone is a gigantic confidence trick. It should fool no one

[Jan 22, 2015] Greek Elections, Europe's Identity Crisis

Jan 22, 2015 | Jesse's Café Américain
"Every man has a right to his own opinion, but no man has a right to be wrong in his facts...

Gold has worked down from Alexander's time. When something holds good for two thousand years I do not believe it can be so because of prejudice or mistaken theory."

Bernard Baruch

“What is a cynic? A man who knows the price of everything and the value of nothing.”

Oscar Wilde, Lady Windermere's Fan
I think you might replace the word 'cynic' in Oscar Wilde's famous quote with the word 'trader.' Especially the traders we have out and about in today's markets, who are better conmen than policy advisors. Of course one might say the same thing about our esteemed Congressmen, so perhaps it is better to say nothing, except to grasp your wallets more firmly.

President Obama will be giving his State of the Union tonight. Expect to hear some nice headline making proposals that will not have any impact on real legislation or policy. And this is by intent.

The plutocrats of Europe will be watching the Greek elections carefully on January 25. You may wish to keep an eye out for them as well. The EU is concerned that a left leaning government may be voted in that will buck the austerian trend.

American leadership has dementia, and is going to keep blundering around doing the same old, ineffective things, until something happens to change the situation.

Middle class income has been stagnant for forty years. Expect this to get a little attention, talk-wise. But little will be done.

[Jan 22, 2015] Financial TV Wasteland

The intellectual poverty of financial television is appalling:

Jan 22, 2015 |

... ... ...

After the bell, both Netflix and IBM beat their earnings estimates, but missed on top line revenues.

Both are fine examples of low growth companies using accounting games to provide the appearance of vitality. IBM has been shrinking for quite some time, and Netflix, while it has potential, needs to change its model badly.

Or perhaps it would be more correct to say it should expand its portfolio of activities. But not being a true content provider, or a supplier of the pipe that carry its products, it is an interesting strategic position.

Let's see how the wash and rinse cycle proceeds. The Street would like to see stocks move higher now.

I turned to CNBC for relief from Trish Regan's pretty but nasal banality.

I noticed that CNBC had Rick Harrison, the purveyor of a Las Vegas pawn shop, and reality show star on as a guest commentator on macro-economics, providing policy advice. He may know the retail trade, but public economic policy, not so much.

I kept waiting for Steve Liesman to come on and provide the comic relief that Chumlee ordinarily delivers to give some entertainment value to Pawn Stars. Larry Kudlow was doing his schtick earlier on as 'Pops.'

The intellectual poverty of financial television is appalling: five miles wide, and an inch deep. No wonder the ratings were plummeting. See the quote from my friend Arby at the top of the page. Our elite ruling class is in the throes of cultural dementia.

[Jan 22, 2015] The Data Doesn't Lie - Here's What's Really Driving Interest Rates! Submitted by Thad Beversdorf via First Rebuttal blog,

Jan 22, 2015 | Zero Hedge
So Hilsenrath claims a little birdie (Fed insider) told him that rates will be raised later this year. I expect the Fed is just jerking him around. There is nothing fundamentally or otherwise to suggest rates will move up. I’m not sure if Hilsenrath is part of the game or just a gullible fool who is being used to keep the market off balance. Why would the Fed want the market off balance? The Fed does so intentionally because theory suggests such a strategy will improve the effectiveness of monetary policy (refer to rational expectation model).

Regardless of what the Fed says, the reality is that interest rates are not moving up anytime soon. It is shocking to me how arbitrarily economists make certain predictions. I mean don’t get me wrong, I’m not a fan of ZIRP or NIRP. I see them as theft in the same way I see inflation as theft. Both effectively destroy the time value of money by way of politics and, these days more than ever, politics is simply another word for skullduggery.


The Fed will raise rates because they can't stop themselves.

They are arrogant, ignorant, out of touch, and out of ammunition. They see themselves as managers of the economy. No one else does, but at the moment they have no levers to pull, or buttons to push, except ONE.

Therefore, the idiots will push the button.


The Fed will raise rates because [they can't stop themselves].

That statement alone has no significance to me.

The question is if they would raise in a meaningful way, so more than 0.5% overall (not necessarily in one step) and without some new rule bending such as govt bonds are exempted from the rate rise.
I'm sure the answer is NO (short of an impeding currency collapse, then they might raise rates as a last fruitless effort to save the dollar.)

falak pema

God forbid if the FED were put in the same conundrum as the SNB :

To choose between the real economy and the financial, casino "economy".

That's what the SNB retreat was about. It hurt the real economy to protect the franc against being inundated by bigger cousin Euro to which it was linked. "Can't afford an inflow of 100 B euros/month, no way! We will be drowning in devalued euros!"

If King $ is now harassed in similar fashion --as whispers and grumbles the US secretary of commerce-- : "We are being clobbered (think Boieng vs Airbus) by a STRONG $ in our export business"...

Then Potus will have to revise his book, caught between a rock and a hard place : If the $ continues to climb as FED tightens bond rates to accompany the so called virtuous spiral of US growth, -- "I am saying we are now in a growth cycle --- it will condemn the trade balance even more. And that cuts the ground under our feet!"

That is exactly where the SNB found itself last week....

Basically this means that Pax Americana is finding itself more and more stretched in this crisis to play Unilateral hegemon and ASSUME the consequences of its acts.

USA is no longer a young giant that towers like a colossus, more an old, aging baby boomer who needs to watch his gall bladder or liver.


Borrowing to buy cars we shouldn't have, borrowing to get an education that is malaligned with the economy, borrowing to keep the dividends and EPS numbers where they need to be, borrowing to pretend that the Fed is propping up Main some point, the numbers will be unfudgeable and the day after that David Tepper will be on CNBC telling us he is short everything and the economy is in freefall.

Wait What

banking establishments are more dangerous than standing armies... and the spending of money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale... bank paper must be suppressed, and the circulating medium must be restored to the nation to whom it belongs.

Thomas Jefferson

Fuck you Central Banks!


“I’m not sure if Hilsenrath is part of the game or just a gullible fool…”

It doesn’t really matter: “part of the game” or “just a gullible fool”.

A very large fraction of Americans are that way; and the main thing you need to know about them is that they will die, or kill, rather than correct their self-destructive habits.

And the problem, from our perspective, is, ‘How do we protect ourselves from their murderous political system?’

First, a person in this “large fraction” is doing battle with a conscience riddled with guilt (for crimes committed or a life wasted). He will seek to control/destroy any action or word that might give power to his conscience; he will even destroy his own child for such end. And, when he is given political power, he will seek to control/destroy every such action or word within his power.

You can find these people by the millions: as family members, neighbors and, of course, thru-out every level of government, not to mention non-stop indoctrination machines (education systems, churches and media).

When you have millions of such people who use this power within their families, you have the political foundation for a nation-wide tyranny.

One of the co-relatives of this condition is that they will be led only by those who feed them a steady diet of pleasing lies. Let me make this clear: they will only be led by cutthroats and thieves: people who know they can obtain what they want only by falsehoods.

We live, in other words, in a system dominated by criminal and useless classes; and they know that their safety lies in crimes ever more numerous and heinous. As far as they are concerned, if destruction of the American economy – and, thus, the world economy – is necessary, so be it.

What is the solution?

We need to give them EXACTLY what they want: rule by thieves – and make sure they pay for it.

And that will be the problem, ‘How do we protect ourselves from their rule by thieves?’

Protection from their tyranny WILL NOT COME simply by wishing to be left alone. For, to win their struggle against their conscience, they, by the millions, secretly long for the day when they will have the power necessary to “permanently” rid the earth of those who ask too many questions or describe too many crimes. For those who doubt this aim, let them explain the all-too-many death squads established across the planet. Such death squads were trained at Academy of the Americas in the American state of Georgia. In America they go by several names, FBI, CIA, local police, the DHS – especially the DHS (Department of Homeland Security); for, the DHS was specifically modeled after French committees of terror (1792-4), the Judeo-Bolshevik Cheka (aka NKVD, KGB et cetera) and the Nazi Schutzstaffel.

The primary purpose of these organs of terror was to protect rule by thieves by eliminating all dissent. If the DHS is modeled after those historical instruments of terror, what possibly could be its purpose?

Isn’t that a silly question?

After all, what does the DHS plan to do with 2-3 billion rounds of ammo… an amount sufficient to wage an Iraqi War, at its highest rate, for 25 years? Remember, so-called terrorists do not travel as armies; but, rather cells of 5-10… and the DHS needs 2-3 billion rounds of ammo for these tiny cells… you know, the ones established by the CIA or FBI? Try again.

The real purpose of the DHS is to secure rule by criminal and useless classes by literally exterminating large numbers of productive and thrifty classes. Those in the productive class provide market-related goods and services; those in the thrifty class include all those who have accumulated an earned savings (opposed to a plundered savings). Such savings can be in the form of physical gold, or ownership of a business, stocks or bonds, among others.

Do you think you will survive this extermination merely by sitting back and waiting for the crash? You’d better reconsider your posture.

This is the warning that comes from reading the act of Congress that established the DHS. This Act created a system by which informers could make false allegations against anyone they please with near-total impunity. Of course, such informers aren’t described as informers; rather they are given the title “submitting person” and their falsehoods will never be examined by any court or legislature or law enforcement agency. The legislation even specifies how this immunity is obtained. The “submitting person” only has to give an “express statement” that his lies were “voluntarily given” and that he expected “protection from disclosure”. It’s all there, in the act that created the DHS.

I’m sorry guys, but silly season is over.

If you want to survive, you have to combine with others of like mind for the purpose of mutual protection, among other purposes. The big question now is, ‘HOW is this to be done?’ And the quick answer is, ‘You must establish First-Amendment assembliesthe only historically-proven method by which men have made their lives and property secure from rule by thieves.’

The American Revolution, you see, was powered by a large network of such assemblies: from town meetings, county meetings, state conventions and, ultimately, Continental Congresses.

I’m sorry, again: but I seem to be the only source for this information – despite all my efforts to distribute such knowledge.

Real, effective, protection is only possible by knowledge of the law and procedures of redress – and actions based on that knowledge.

[Jan 20, 2015] IMF says economic growth may never return to pre-crisis levels

Oct 7, 2014 | The Guardian

World economic outlook expects global growth to be 3.3% in 2014, down from its April forecasts as countries fail to recover strongly from recession

gtggtg -> dubium 10 Oct 2014 00:40

"Growth is the need for ever perpetually bigger profit. Nobody needs that."
Well, the capitalist system needs that.

"It does not even make sense."
Agreed, the capitalist system does not even make sense.

Dave Gardner 9 Oct 2014 09:48

IMF and this story make the Wall of Shame today at Growth Bias Busted:

ruffsoft 8 Oct 2014 21:12

In a 3d world economy, which the world is devolving towards, high profits for corporations are matched with falling wages. The rich get richer, the working class gets pooer.

In the US, for over 30 years, median wages have fallen 40%, 15% since 2000.
Meanwhile, GDP is at record highs and CEO salaries are higher than ever.

Growing profits and GDP is not a recovery if wages continue to fall; it is just the signature of a 3d world economy, with fabulous wealth at the top and rising poverty among the working class.

Only shared prosperity is recovery; growing inequality is not economic recovery but successful class warfare.

Cynndara -> Mohammed Karim 8 Oct 2014 14:43

Don't worry. America is chock-full of salesmen. It's our specialty. Anyway, when the voters are faced with a choice between Tweedle-Dum and Tweedle-Dumber, it hardly matters whether they're sold or not. There are only two candidates for any job, and they are both owned and operated by the Big Banks. Americans no longer have an effective democracy, only the illusion of one. So if Goldman-Sachs feels that your recipe will do the trick, it will be rammed down our throats regardless of votes.

Cynndara -> Beginner20 8 Oct 2014 14:27

Right. The "developed" economies are no longer even producing enough to cover their own needs, let alone enough to create a positive net balance. With the interconnection of the world through mass communications, they can no longer plunder the smaller nations of the world and claim the loot as "productivity". So of course there can't be real growth. The idea that we could produce more and more every year was always an artifact of trading "free" goods from the natural and undeveloped world for the costly products of industry. When those "free" goods come with a pricetag, capitalism collapses.

Cynndara -> ID5088152 8 Oct 2014 13:52

Unionized manufacturing workers in the 50s made EXTREMELY good pay, on par with middle-management jobs. Remember that these were one-income families, with an employed male supporting a wife and several children from one salary. Also, immigration limits, lack of robotics and the residual labor-shortages of WWII made trained heavy-industry workers scarce and valuable.

GoddessOFblah -> hermanmitt 8 Oct 2014 13:30

There is actually nothing wrong with capitalism, but we have not had it for over 60 years.

What we now have is corporatism which, in short, can be described as financial fascism.

Don't agree with capitalism but that's very well said. Like with all ideologues - starts off great until the 1% horde the power/wealth for themselves.

simplevillageexpat 8 Oct 2014 12:08

Can't understand why all these economists are surprised that the Eurozone isn't recovering. Tied in the straight-jacket of the euro means EZ countries can do nothing for themselves except impose the slow death of austerity. With Germany racking up massive payments surpluses using the euro to avoid the otherwise inevitable currency appreciation for themselves. Other EZ countries cannot export within the Euro Zone as their prices are held too high. With Germany in the Euro the Euro itself is higher than they need to export outside the EZ (although they are doing a remarkable job in the circumstances). There is nothing left to fuel a recovery. Surely we are close to the end of this crazy game of Monopoly where the well placed get stronger and the others go bankrupt. Like a game of Monopoly the eventual winner now has no one to buy their products so they too are not recovering!

Its all been very predictable and predicted since Maastrict. But then, I'm just a simple ex-pat from the village. I know nothing!

AmandaMatthews 8 Oct 2014 10:11

The IMF is half our problem. They backed the financial terrorists who brought down half the world's economies. Their policies of rewarding rich at the expense of everyone else is one of the things that guarantees 'no growth'. The Austerity programs that they cursed so many nations with have caused nothing but chaos and hardship for everyone but our Wall Street/'City of London' financial terrorists.

Contrary to what the whizbangs of finance tell you, the true financial health of a nation isn't predicated on how well the stock market is doing, but on how well the people are doing.

SirTalbotBuxomly -> Gelion ,7 Oct 2014 9:59

As does Osborne in the UK where the Right Wing media and the Tories talk about a "Recovery" but for most people there is no such thing.

The recovery isn't measured by 'what most people think or feel' or whether their wages have gone up. Growth is measured objetively not anecdotall which is why the article says...

The Fund said the outlook was brighter in the US and the UK, which were “leaving the crisis behind and achieving decent growth”. Britain is forecast to see its gross domestic product increase by 3.2% in 2014 – up 0.3 points from the April WEO and the fastest of any G7 nation.

And that's why people trust the Tories much more than Labour with the economy and that's why Labour are behind int he opinion polls.

Investing Quotes

..“In a narrow market, when prices are not getting anywhere to speak of but move within a narrow range, there is no sense in trying to anticipate what the next big movement is going to be. The thing to do is to watch the market, read the tape to determine the limits of the get nowhere prices, and make up your mind that you will not take an interest until the prices break through the limit in either direction.”..

Jesse Livermore

My experience has been that in successful businesses and fund management companies, which performed well over the long-term, some courageous decisions were taken. Courageous fund managers reduce their positions when markets become frothy and accumulate equities when economic and social conditions are dire.

They avoid the most popular sectors, which are therefore over-valued, and invest in neglected sectors because being neglected by investors they are by definition inexpensive.

The point is that it is very hard and that it takes a lot of courage for a fund manager to avoid the most popular sectors and stocks and to invest in unloved assets.

Finally, every investor understands the principle ‘buy low and sell high’, but when prices are low nobody wants to buy.

Marc Faber

Michael Roberts Blog

Indeed, that is the story for most capitalist economies in 2014 (Europe, Japan, the US and the UK): weak economic growth, poor business investment and falling real incomes for the average household.

The global economy remains in a crawl and will do so in 2015 for one good reason: the failure of business investment to leap forward. Goldman Sachs reckoned this time last year that there would be a global investment boom in 2014. That has proved to be a mirage in Europe, Japan, the UK and in the major so-called emerging economies of China, India, Brazil and Russia, where investment growth has slowed markedly or collapsed, as in the case of Russia (see my post,

The emerging markets of Brazil, Russia, India and China collectively known as the BRICs — will likely grow in 2015 at their slowest pace in six years, according to Oxford Economics. Only the US has shown some pick-up in investment.

As I said last year, the reason that business investment has not boomed is that in most economies average profitability remains below levels before the Great Recession and below levels reached in the late 1990s. Most economies are still experiencing the downwave in the profitability cycle, as explained above. Coupled with the downwave in the Kondratiev cycle, that is why the global capitalist economy is in what I call a Long Depression, with some years to run.

Daniel de França, December 31, 2014 at 12:01 pm

You said one of these days that to recover profitability a world war would be necessary. Or maybe I am confused?

michael roberts, December 31, 2014 at 1:11 pm

Not every depression has been ended by war. But there have not been many depressions to judge! Perhaps the first capitalist depression of the early 1800s was ended by the Napoleonic wars. And the Great Depression of the 1930s was ended when America entered the war in 1941 and built up arms before hand. The Long Depression beginning in 1873 did not end in a world or even European war so it actually lasted longer and with varying degree of severity in different countries up to 1896. The current Long Depression is only seven years old. I think it might end around 2018 if there is a sufficient destruction of capital values by then. All this is a calculated guess – but calculated. I have said the opposite to what you think I said. I dont think this current depression will be ended by a world war, although there is permanent war – regional and local ones.

Philip Ferguson, December 31, 2014 at 2:14 am

Hi Michael,

you might be interested in this:

We re-blog a lot of your articles – mainly the ones on the world economy rather than individual countries – so we’re happy to help out advertising your work.

This blog is a wonderful resource for anti-capitalists.

All the best for the New Year,

sartesian, January 4, 2015 at 1:06 am
Here’s a prediction: growth will slow, turn negative, etc; things will get worse, the rate of profit will fall, and capitalism will not collapse; it will go on being capitalism until it is overthrown. Overproduction, financial crises, plummeting oil prices are just part of capital being capitalism; “The price of beef may be high or low, but it always involves the same sacrifice for the ox.”
GrahamB, January 4, 2015 at 11:41 am
> Russia, Ukraine and Venezuela. Where else do you think growth be negative next year?
sartesian, January 4, 2015 at 1:07 pm
Italy, Cyprus, Slovenia, possibly the eurozone as a whole, Argentina, South Africa, Egypt, Nigeria, Angola, Libya, Senegal, Ecuador…..
GrahamB , January 4, 2015 at 1:46 pm
Well, the eurozone is of course the big unknown and I think the ECB will be forced to act early in the new year. If there is any improvement in the eurozone, global growth will probably be higher next year.
sartesian, January 4, 2015 at 4:38 pm
OK, that’s your prediction. I have two predictions: (1) This shit–capitalism– will continue until it’s overthrown. (2) Predictions will make absolutely no difference.

sartesian , January 5, 2015 at 6:25 pm

Now that’s very interesting. I think maybe the problem is in viewing Capital as a “close and abstract” model– rather than as a critical analysis of the laws of capital accumulation and the immanent contradictions of that accumulation.

In a sense– right, no abstract closed theory can account for all variations, iterations of structural changes in a concrete mode of production. But historical materialism can and does.

I think that’s what we’re “supposed” to do with Capital– grasp its analysis as a means for apprehending what is going on here (or there) now (and then) in the mode of production.

Capital is not complete, in, of and by itself, without that historical materialism– without that recognition and apprehension of class struggle.

Henry, January 5, 2015 at 6:37 pm

Yep, I agree with that. Except closed and abstract can be at the same time a critical analysis. i think Marx was fully justified in his abstractions in Capital. I just think some Marxists can’t see the world and the system beyond the abstractions.

GrahamB, January 5, 2015 at 7:01 pm

Some Marxists use a high frequency crisis predictor so it’s not surprising that they sometimes get it right. Predicting capitalist non-crisis periods is less successful. And slow, stagnation, crisis and depression get used too loosely.

Edgar , January 6, 2015 at 9:16 pm

Maybe, but 2008 was a crisis! Some think it was merely a blip.

There is one thing not predicting a crisis but if you can’t actually see one when it explodes in front of you then you have to ask, what use are you? I think the permanent revolution perspective, which I assume you are part of (Billj and that crowd), didn’t regard 2008 as a crisis at all?

davidellis987, January 6, 2015 at 3:07 pm

How did we get here and where will we go?

Behind every crisis of capitalism is the fact that it takes more and more capital to make a decent rate of return. Capital constantly comes up against its political economic limits which prevent further growth and even throws the system into reverse. It has to burst through these arrangement once so favourable if it is to grow again. It takes great violence to overthrow the previously established political economy. It took two world wars and a Great Depression to establish American hegemony over a declining Europe and even then the assistance of world Stalinism was required.

But the post-War political economic arrangements could only deliver a boom of less than thirty years duration before profitability became an issue once again. This crisis of profitability which left the West stagnant, sclerotic and monopolised forced it into seeking an aggressive victory in the Cold War. An assault on the domestic and international working classes was launched along with an unprecedented credit-driven boom based on bank de-regulation.

Stalinism surrendered in the teeth of the West’s spending and its weaponry not to mention a Western leadership seemingly mad enough to use them. Victory pushed America to seek to establish itself as the sole and only global super power. But the mighty US became militarily and morally bogged down in Iraq and Afghanistan and in 2008 the real cost of `winning’ the Cold War became apparent when the Bankers’ 30-year Ponzi Scheme collapsed in spectacular fashion.

The very forces whose emergence US imperialism had hoped to prevent were now evoked by its own efforts and US-sponsored globalisation began to unravel. The world economy is now stagnant, sclerotic, monopolised and irrevocably and completely bankrupt. The unravelling of globalisation will be a process ten times more violent than the process that established it and of course there is no America waiting in the wings to save America. There are no seriously conceivable new political economic arrangement into which capitalism can now move even if the old is swept away with great violence. A system that cannot change is a dead system.

Capitalism is a dead system. Our choice is to go with it to a New Dark Ages in which war is a permanent condition, a regime of global savagery a glimpse of which can be seen in Syria or Gaza or Baghdad today, or we can transcend capitalist globalisation through world proletarian revolution establishing a global commonwealth of proletarian nations taking global economic integration to the next level and putting our barbaric past behind us.

matt Says:

January 8, 2015 at 1:01 am

“So, I’d say that in terms of profit recovery, Russo-Japanese war is the start of a unique World War that lasted from 1905 until 1945.”

Yep, that’s a good starting point. Russia (Federation) and Japan, two sinking countries today.

Thanks for your mighty efforts generally, Michael.

Don’t know about Kontratief waves myself, but I agree that the end of the long depression involved an escalating series of imperialist wars, culminating in the First World War.

That’s not likely this time around, despite that destruction of the Russian Federation is virtually official U.S. policy. The Russian neo-con far right and fascist fringe cannot be mobilized for the destruction of the multinational federated state, as they presently have in Russian neo-imperialism what they would seek for if they were Ukrainian.

The Russian neo-liberals cannot overthrow the Putin regime, or any possible Russian Federation regime, without the Russian neo-fascists, as the actual outcome of the Maidan showed. And Ukraine is scheduled for reaming this year, by the EU and US oligarchs. Anyway a couple of key predictions neglected.

[Jan 19, 2015] Investment Outlook by Bill Gross

Be cautious and content with low positive returns in 2015. The time for risk taking has passed
January 2015

... I’ll leave the specific forecasting for a few weeks’ time and sum it up in a few quick sentences for now: Beware the Ides of March, or the Ides of any month in 2015 for that matter. When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over

Timing the end of an asset bull market is nearly always an impossible task, and that is one reason why most market observers don’t do it. The other reason is that most investors are optimists by historical experience or simply human nature, and it never serves their business interests to forecast a decline in the price of the product that they sell

Nevertheless, there comes a time when common sense must recognize that the king has no clothes, or at least that he is down to his Fruit of the Loom briefs, when it comes to future expectations for asset returns. Now is that time and hopefully the next 12 monthly “Ides” will provide some air cover for me in terms of an inflection point


Manias can outlast any forecaster because they are driven not only by rational inputs, but by irrational human expressions of fear and greed. Knowing when the “crowd” has had enough is an often frustrating task, and it behooves an individual with a reputation at stake to stand clear. As you know, however, moving out of the way has never been my style so I will stake my claim with as much logic as possible and hope to persuade you to lower expectations for future returns over the next 12 months

My investment template shares a lot in common with, and owes credit to, the similar templates of Martin Barnes of the Bank Credit Analyst and Ray Dalio of Bridgewater Associates. All three of us share a belief in a finance-driven economic cycle which over time moves to excess both on the upside and the downside. For the past few decades, the secular excess has been on the upside with rapid credit growth, lower interest rates and tighter risk spreads dominating the long-term trend. There have been dramatic reversals as with the Lehman Brothers collapse, the Asia/dot-com crisis around the turn of the century, and of course 1987’s one-day crash, but each reversal was met with a new and increasingly innovative monetary policy initiative on the part of the central banks that kept the bull market in asset prices alive

Consistently looser regulatory policies contributed immensely as well. The Bank Credit Analyst labels this history as the “debt supercycle,” which is as descriptive as it gets

Each downward spike in the economy and its related financial markets was met with additional credit expansion generated by lower interest rates, financial innovation and regulatory easing, or more recently, direct central bank purchasing of assets labeled “Quantitative Easing.” The power of additional and cheaper credit to add to economic growth and financial asset bull markets has been underappreciated by investors since 1981. Even with the recognition of the Minsky Moment in 2008 and his commonsensical reflection that “stability ultimately leads to instability,” investors have continued to assume that monetary (and at times fiscal) policy could contain the long-term business cycle and produce continuing prosperity for investors in a multitude of asset classes both domestically and externally in emerging markets

There comes a time, however, when zero-based, and in some cases negative yields, fail to generate sufficient economic growth. While such yields almost automatically result in higher bond prices and escalating P/E ratios, their effect on real growth diminishes or in some cases, reverses. Corporate leaders, sensing structural changes in consumer demand, become willing borrowers, but primarily to reduce their own outstanding shares as opposed to investing in the real economy. Demographics, technology, and globalization reversals in turn have promoted a sense of “secular stagnation” as economist and former Treasury Secretary Larry Summers calls it and the “New Normal” as I labeled it as early as 2009. The Alice in Wonderland fact of the matter is that at the zero bound for interest rates, expected Returns on Investment (ROI) and Returns on Equity (ROE) are capped at increasingly low levels. The private sector becomes less willing to take a chance with their owners’ money in a real economy that has a lack of aggregate demand as its dominant theme.

Making money by borrowing at no cost for investment in the real economy sounds like a no-brainer. But, it comes with increasing risk in an environment of secular stagnation, demand uncertainty, and with the ROI closer to zero itself than an entrepreneur is willing to bear.

The power of additional and cheaper credit to add to economic growth and financial asset bull markets has been underappreciated by investors since 1981

And so the miracle of the debt supercycle meets a logical end when yields, asset prices and the increasing amount of credit place an unreasonable burden on the balancing scale of risk and return. Too little return for too much risk. As the real economy of developed and developing nations sputter, so too eventually do financial markets. The timing – as mentioned previously – is never certain but the inevitable outcome is commonsensically sound. If real growth in most developed and highly levered economies cannot be normalized with monetary policy at the zero bound, then investors will ultimately seek alternative havens. Not immediately, but at the margin, credit and assets are exchanged for figurative and sometimes literal money in a mattress. As it does, the system delevers, as cash at the core or real assets at the exterior become the more desirable holding. The secular fertilization of credit creation and the wonders of the debt supercycle may cease to work as intended at the zero bound.

Comprehending (or proving) this can be as frustrating as understanding the differences between Newtonian and quantum physics and the possibility that the same object can be in two places at the same time. Central banks with their historical models do not yet comprehend the impotence of credit creation on the real economy at the zero bound. Increasingly, however, it is becoming obvious that as yields move closer and closer to zero, credit increasingly behaves like cash and loses its multiplicative power of monetary expansion for which the fractional reserve system was designed.

Finance – instead of functioning as a building block of the real economy – breaks it down. Investment is discouraged rather than encouraged due to declining ROIs and ROEs. In turn, financial economy asset class structures such as money market funds, banking, insurance, pensions, and even household balance sheets malfunction as the historical returns necessary to justify future liabilities become impossible to attain. Yields for savers become too low to meet liabilities. Both the real and the finance-based economies become threatened with the zero-based, nearly free money available for the taking. It’s as if the rules of finance, like the quantum rules of particles, have reversed or at least negated what we historically believed to be true

And so that is why – at some future date – at some future Ides of March or May or November 2015, asset returns in many categories may turn negative. What to consider in such a strange new world? High-quality assets with stable cash flows

Those would include Treasury and high-quality corporate bonds, as well as equities of lightly levered corporations with attractive dividends and diversified revenues both operationally and geographically. With moments of liquidity having already been experienced in recent months, 2015 may see a continuing round of musical chairs as riskier asset categories become less and less desirable

Debt supercycles in the process of reversal are not favorable events for future investment returns. Father Time in 2015 is not the babe with a top hat in our opening cartoon. He is the grumpy old codger looking forward to his almost inevitable “Ides” sometime during the next 12 months.

Be cautious and content with low positive returns in 2015. The time for risk taking has passed

[Jan 19, 2015] The End of Our Financial Illusions - By Simon Johnson

In retrospect, much of the financial innovation in the previous decades built up risk for the financial system in ways that were not properly understood by regulators or, arguably, by management at some of the largest banks.
April 17, 2014 |

Simon Johnson, former chief economist of the International Monetary Fund, is the Ronald A. Kurtz professor of entrepreneurship at the M.I.T. Sloan School of Management and co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.”

The global financial crisis that broke out following the collapse of Lehman Brothers in September 2008 was a big shock. This is literally true in terms of the impact on investors and market prices; a wide range of financial variables moved rapidly in unexpected and worrying directions. But what happened was also a shock to the realm of ideas about finance.

Before September 2008 — or at least before 2007, when some of the underlying problems first became more clearly manifest — the prevailing consensus among officials and specialists was that financial innovation was a good thing. In isolated instances, a particular new product might not work out as planned, as happens, for example, with medical innovation. But over all, the consensus went, financial innovation led by the private sector was making the system safer and more efficient.

This view was wrong.

In its day, this line of thinking justified the legal and regulatory changes that allowed some banks to become very large and to build up a much more complex range of activities in the 1990s and early 2000s, including through various kinds of opaque derivatives transactions.

In retrospect, much of the financial innovation in the previous decades built up risk for the financial system in ways that were not properly understood by regulators or, arguably, by management at some of the largest banks.

Of course, some bankers knew exactly what they were doing as their companies increased their debt relative to their equity. On average, large complex global banks had about 2 percent equity and 98 percent debt on the liability side of the balance sheet before the crisis, meaning they were leveraged 50:1 (the ratio of total assets to equity).

The good news is that the official consensus was shattered in 2008, and is not coming back. Systemic risk slapped everyone in the face with an undeniable wake-up call.

However, the process of reforming the financial system is still at an early stage. The Dodd-Frank financial reforms of 2010 represent a useful start — including the Volcker Rule‘s restrictions on excessive risk-taking — and the recently adopted Basel III framework for capital regulation nudges equity requirements higher.

But the world’s largest banks will, by one informed estimate, end up — as things currently stand — with about 3 percent equity and 97 percent debt as the average structure of their balance sheet liabilities. In the United States, if the latest leverage rule is implemented and enforced properly, this will become 5 percent equity and 95 percent debt for the biggest eight banks by 2018. While 20:1 is better than 50:1, this is still not enough equity to assure a reasonable degree of financial stability in the foreseeable future.

The argument about finance has now shifted and is much more about whether capital requirements for the largest banks should be increased further. Those opposed to such a move offer three reasons why big banks should not be required to fund themselves with much more equity.

First, some people contend that the crisis of 2008 was a rare accident and Dodd-Frank fixed whatever problems existed. This is completely unconvincing — particularly because many of the same people have spent much of the last four years opposing and delaying financial reform.

Most importantly, it ignores the ways in which incentives and rules have changed since the 1980s. As James Kwak and I asserted in “13 Bankers,” the structure of the financial system is quite different now from what it was in 1980. In particular, the largest banks have become much bigger and more able to take on (and mismanage) much more risk.

The second argument is that the costs of the crisis were not huge, so there is no reason to fear a repeat. This is the view sometimes associated with former Treasury Secretary Timothy Geithner. (Mr. Geithner has a book coming out soon, and it will be interesting to see his current position on this point).

But the impact of any financial crisis is not measured primarily in terms of whether the Treasury made or lost money on specific investments. The criteria instead should be what happened to output and jobs, as well as what the impact was on the country’s fiscal accounts. How much more public debt do we have now relative to what we had before — and what kind of lasting negative effects will that have?

Mr. Kwak and I took this on in “White House Burning,” putting the recent surge in public debt in the longer-run context of American fiscal policy. No matter how you look at it, the financial crisis was a complete disaster for the real economy and, given the way fiscal politics work in the modern United States, for the budget and for investments in any kind of physical infrastructure and education.

The third counterargument is that large complex financial institutions are needed because they provide some sort of magic for the broader economy. This still seems to be the view of some people at the Federal Reserve Bank of New York, which recently published a set of research papers on the topic.

But the benefits they find are small relative to the potential costs. Anat Admati and Martin Hellwig’s “The Bankers’ New Clothes” makes the vulnerability of modern banking abundantly clear.

A recent report from the International Monetary Fund finds that the United States and other governments are providing large implicit subsidies to these big banks: The prospect of potential government support lowers their funding costs by about 100 basis points (one percentage point).

Many people are involved in the official sector’s rethinking of finance. This is the lasting contribution from books such as Sheila Bair’s “Bull by the Horns,” Neil Barofsky’s “Bailout” and Jeff Connaughton’s “The Payoff.” In government circles, key decision makers were swayed by officials including Thomas Hoenig and Jeremiah Norton (both of the Federal Deposit Insurance Corporation) and Sarah Bloom Raskin (then on the Board of Governors of the Federal Reserve System; now at the Treasury Department). As chairman of the Commodity Futures Trading Commission, Gary Gensler had an immensely positive impact, both directly on the regulation of derivatives and also more broadly.

The Democratic senators Sherrod Brown of Ohio, Jeff Merkley of Oregon and Carl Levin of Michigan and Ted Kaufman of Delaware (who has since left the Senate), along with David Vitter, Republican of Louisiana, played key roles in shifting opinion. Elizabeth Warren’s work, both before and after her election to the Senate from Massachusetts, has also had great influence.

Of all the civil society organizations seeking to promote financial stability, Dennis Kelleher’s Better Markets stands out for its major impact through a relentless surge of arguments, comment letters and research. Its report on the cost of the crisis made clear beyond any reasonable doubt that the crisis had profound negative consequences for millions of people.

Many other officials have also shifted their views in important ways. We are not going back to the old ways of thinking about finance, and allowing for changes in these theories is an essential part of any modern economy. Finance needs to be regulated effectively, and large banks should fund themselves with much more equity than is currently the case.

Selected Skeptical Comments

toom, germany 19 June 2014

The basic question is whether financial trickery and juggling can produce wealth? Certainly these tricks produce wealth for the bankers on Wall St. But how about the rest of us?

The answer is "maybe, sometimes". The pension funds profited from 1980 to 2007 and then again after 2010, with help from the Fed. However the wealth increase from 1980 to 2000 was mainly from the export of manufacturing jobs from the US to China. That will never occur again.

So we are stuck with 1% return on investment, unless trickery or some new invention (a new kind of cell phone, or more broadband or alternate energy?) occurs.

jack waymire, sacramento, ca 22 April 2014

Sure 20:1 leverage on balance sheets is better than 50:1 leverage, but the intellectuals are missing the point. Who wins when banks are excessively leveraged? Shareholders? Clients? The U.S. economy? I submit the primary beneficiaries are the executives who run the banks. They make decisions with impunity. Increased leverage increases profits which increase executive bonuses. Shareholders may benefit if company stocks rise in value. Highly leveraged balance sheets create a huge risk for all Americans - except the executives who made the decisions to leverage the balance sheets and get into businesses they barely understand.

Justin, Ohio 18 April 2014

You nail it perfectly. But we need to ask broader question: Is American Dream a myth?
It seems to me American Dream is clearly a form of both myth and illusion and propaganda used by the upper classes to keep the lower classes or the 99% in their place.

I'm shocked!, America 17 April 2014

"The second argument is that the costs of the crisis were not huge, so there is no reason to fear a repeat."

Let's find the person who said that and feed him to the tens of millions of unemployed people.

Jeff Atkinson, Gainesville, GA 17 April 2014

It's pretty simple. TBTF bank managers want to be regulated and paid like hedge fund managers but with a huge edge in the form of implied government assurances for their suppliers of capital. Such assurance can be purchased cheaply with political contributions and post government jobs for regulators.

Robert Baesemann, Los Angeles CA 17 April 2014

Bravo. I was prepared to read a rehash of the Collected Scientific Papers of Jamie Dimon," but this piece is very informative and helpful. The most critical issue on my horizon is the stability of the financial system. What I ask is whether or not the system is as stable as it was in 1998, or is it still teetering the way it was in 2007. In 2008, we observed the failure of Lehman, the rescue of several others (Merrill merged into BofA), and the failure and rescue of two money market funds that failed to make the buck. This seems to have been a global run on the banks which was cut off, but narrowly cut off. If there is a next time, the 2008 experience will only cause the fingers on the triggers to be quicker than they were in 2008. This seems to mean that we are not far removed from the lethally dangerous circumstances of 2008.

Thank you for pointing out the need for better financial regulation. As I recall, under Glass-Steagall commercial banking and investment banking were separate (no Merrill-BofA unions) and commercial bank reserve requirements were set by the FED at 20% to 25% or 4 to 1 or 5 to 1. In those days, commercial banks could not make profits like investment banks, but they could not drage the entire world into Depression. Investment banks were left to deal with people silly enough to gamble on Wall Street rather than Las Vegas. Oh for those halcyon days.

Murray Kenney, Ross, CA 17 April 2014

More equity = less lending. Less lending = less capital, particularly for small and medium sized businesses and for consumers with weak credit histories. Less capital for small and medium sized businesses and moderate income consumers = less economic growth.

That's why European Governments have resisted higher capital levels. They'd rather backstop their banks and treat bank debt as an off balance sheet liability of their governments than acknowledge the problem created by slow economic growth, excess supply, weak demand and low interest rates.

Michael F. Rhodes, Vancouver, Canada 17 April 2014

That is bunk. Financial alchemy has been tried in history (4th century Rome, post-war Germany and Basel risk weights). They don't work. Value creation, not finance creation, drives durable economics. Stop the apologetics. Tell people to work harder.

Manuel Morales, San Juan, Puerto Rico 17 April 2014

Financial illusions may be stronger than they may have ever been.

Professor Johnson writes that the financial crisis was a complete disaster to the real economy. Dennis Kelleher estimates a $12.8 trillion debacle in that same real economy with a negative impact that will be felt for years, if not decades, to come.

The doyens and shamans of ‘high finance’ have only received timid penalties for the global destruction they triggered while companies in the tangible economy, causing much less damage, are oftentimes chastised much more strongly and receive relatively far stricter punishments.

Regrettably the all-inclusive list of wizards of Wall Street are doing fine, are much alive and vigorously kicking while working compulsively to find ‘innovative’ and ingenious maneuvers to outfox regulations while moving higher on the 1% list.

The distressed state of affairs caused by the Great Recession may prove not to be the Main Event. Only time will tell.

Bob Feinberg, DC area 18 April 2014

At a recent event in Washington, Mr. Kelleher drastically raised his estimate of the embedded cost of the ongoing crisis due to overvaluation of swap positions of the TBTF banks. No one seems to know what this exposure is, and the prevailing view is that this is minimal because the positions net out.

The people who say this are the same ones who minimized the practices that gave rise to the 2008 episode of the ongoing, permanent crisis. The positions don't necessarily net out unless they are opposing sides of the same trade.

To estimate this exposure at several times the GDP of the US is probably conservative, but no one seems to know. Meanwhile the efforts of the so-called regulators are directed at preventing a so-called "default event" that would require these losses to be recognized.

BB, Orlando 17 April 2014

An excellent article. I completely agree that "Finance needs to regulated effectively and large banks should fund themselves with more equity." However, this is not going to happen until there are major political changes in the United States. The country is not a democracy, but a plutocracy. Wealthy people have benefited immensely by the status quo whereas the middle and lower classes have been devastated. This is because the government and the supreme court are controlled by big business. All elected government officials get in office with big business funding and they will act accordingly. The supreme court has exacerbated this situation by ruling that there should be no limits on campaign contributions. Campaign contributions need to be severely limited so educated, capable people from the middle and lower classes have an equal chance to play a significant role in government. How about a physicist as president(eg Ms Merkel)!.

Only a wealthy person such as Timothy Geithner would have the opinion that the costs of the financial crisis were not huge. He would feel differently if he was standing in the unemployment lines. The current plutocracy wants big profits which mean shipping jobs overseas, lower wages and more unemployment.

Dryly 41, 17 April 2014

Every thing that Professor Johnson says is spot on. Indeed, he is the only major economics professor that has identifies the source of the September 15, 2008 collapse of our financial system for the first time since October of 1929.

He is also the only one who has pointed out that Dodd-Frank didn't fix the problems created by the reversion to the Laissez Faire of Harding, Coolidge, Hoover and Mellon from the "strict supervision" of FDR.

We will once again return to "strict supervision" of finance. The only question is whether we do it before or after the next financial collapse. A wise and prudent nation would do it before but there is insufficient wisdom and prudence at this unfortunate time in American history.

Bob Feinberg, DC area 18 April 2014

Prof. Admati is another relentless leader of this debate. While the calls for stricter regulation of banks have grown louder, the opposition by the industry has hardened, and industry executives and lawyers are still running policy. This industry is, in effect, regulated by its own lawyers. To have meaningful regulation of this dangerous industry would required Transparency, Independence, and Accountability, all of which have been lacking throughout the decades of the ongoing, permanent crisis, and they still are.

Ms B, Buffalo 17 April 2014

Back in the 80's a local savings bank went "big time" around here with fancy deals in Florida and Texas. The deals were put together with the bank as lender with a piece of the ownership/equity as well. They bankers thought it was the cats meow, the cutting edge of sophisticated banking. The deals all tanked and the bank went down. Same nonsense now with different players and an even better means of obfuscation and rent seeking. Today, unfortunately the banksters are above the law and burning town the country has no consequences.

Larry L. Dallas, TX 18 April 2014

Here's a fact about the Oil Boom and the S&L Mess that happened in its midst that few people know:


The 2008 Crisis was that smaller crisis writ large on the national and global scale. The fact that two idiots from Texas (Armey and Gramm) had a hand in the elimination of the Depression-era financial regulations that eventually led to 2008 just show that idiots are not capable of learning from prior experience.

Mark T, is a trusted commenter New York NY 17 April 2014

This sounds like a valedictory and indeed I hope it is the last post on this topic on which so much has been said (and repeated, and repeated).

One official unwisely unmentioned is Daniel Tarullo who is at the forefront of the push for greater macroprudential regulation. Among authors who should have been mentioned are Viral Acharya who has published a lot on systemic risk, Raghuram Rajan's Fault Lines is essential to understand the role of debt in the political economy of the post-gold-standard Western economies; and no analysis of the crisis is worthy of mention unless it faces up to the role that bank capital regulations played in shaping the portfolios of banks, which one can explore in Friedman's Engineering the Financial Crisis.

The post manages to discuss the financial crisis without once even alluding to the role of the GSE's and their politically driven acquisition of credit risk despite being overleveraged, through use of the implied government guarantee. Nor does it touch on the foreign role in the chase for yield, the connection between the trade deficit and the issuance of debt securities to countries with trade surpluses, or the mismatch between pension promises and pension funding that is one of the major sources of the growth of financial risk over the past two generations. Everything gets laid at the feet of 13 bankers. Unbelievable, yet so convenient, since it allows a whole sector of the elite to ignore the consequences of their policy preferences.

Larry L, Dallas, TX 17 April 2014

The problem with your argument is that same people who wanted to eliminate the Depression-era regulations were also the same people who wanted free trade which offshored a significant of the country's job base (and therefore its tax base and consumer spending capacity).

The result was higher federal deficits (which led to 5-fold increase in the national debt within a generation), higher gov't spending on transfer payments to make up for that lost personal income, a higher trade deficit from all of the imports and the reduced domestic expenditures on everything from education, R&D and infrastructure as a % of GDP.

The very same people who gave us the Financial Crisis were also responsible for the vicious cycle in the real economy.

E.T. Bass, SLC 18 April 2014

More to the point:

A bubble burst. "Bi-partisan" efforts at "home ownership" blew up, due to very highly questionable home mortgages. Which caused Lehman and Govt. Motors to blow up.

Outcome: second worst economic disaster in 100 years.

Today -- the most anti-small business president in history (per N.F.I.B.) who publicly snarls at the U.S. House and the slowest economic recovery in 100 years.

Res ipsa. Entirely predictable.

Steve, Raznick 17 April 2014

To be very clear, very precise, the banks were completely incapable of anything approaching accuracy when it came to the risks they took. Enough with this myth that these are unbelievably intelligent people who having attended a school with name people recognize inculcates them with special powers of divination.

We have 5 financial lobbyists for every congressmen. Just one illustration of how the game is tilted. Those lobbyists do not care about the financial security and welfare of the people. They care only about themselves and thwarting passage of any legislation which creates a sustainable, viable finance industry.

[Jan 16, 2015] Moody’s Says Russia’s GDP To Fall By 5.5% In 2015

There can not exist nether "free markets" nor independent rating agencies. Especially under neoliberalism. credibility. It's the same Moody that rate AAA mortgage CDOs before 2008. How many people dearly pay for their recklessness?
Moscow Exile, January 16, 2015 at 10:29 am

A Peter pre-empt:

Moody’s Says Russia’s GDP To Fall By 5.5% In 2015

Russia Says Inflation Could Hit 17% by March

For Navalny:

Get round here, Tagansky District, quick!

They’re still selling milk at our local supermarket for 45 rubles a litre.

Bring some Western hacks if you can.

kirill, January 16, 2015 at 2:45 pm
The same clown outfit, Moody’s, predicts a 2% drop in Ukraine’s GDP in 2015:

Moody’s has zero credibility.

[Jan 12, 2015] Goldman tries to make oil prices go lower

In a note to clients, Goldman Sachs slashed its forecast for oil prices. It now estimates that crude will average $50.40 a barrel this year, far below its previous forecast of $83.75. It also trimmed its forecast for Brent crude, a type used in international markets, to $70 a barrel from $90.
Jan 12, 2015 |

Oil Slides Again, Taking Shares on Wall Street Down With It -

Falling oil prices dragged the stock market lower on Monday as Exxon Mobil, Chevron and other big energy companies sank along with crude.

The steep drop in oil prices over recent months has investors second-guessing expectations for the quarterly earnings season that starts this week.

Sam Stovall, the United States equity strategist at S&P Capital IQ, said that it seemed that every day brought another drop in Wall Street’s earnings forecasts.

“What’s happening is that we’re seeing the very low bar for fourth-quarter earnings raising anxiety,” Mr. Stovall said. “It’s the continued decline in oil, but it’s also that nearly half of the S.&P. 500’s revenues come from overseas. Japan is in recession, and Europe is teetering on the edge of it.”

The Standard & Poor’s 500-stock index lost 16.55 points, or 0.8 percent, to close at 2,028.26. The Dow Jones industrial average slid 96.53 points, or 0.5 percent, to 17,640.84, and the Nasdaq lost 39.36 points, or 0.8 percent, closing at 4,664.71.

... ... ...

In a note to clients, Goldman Sachs slashed its forecast for oil prices. It now estimates that crude will average $50.40 a barrel this year, far below its previous forecast of $83.75. It also trimmed its forecast for Brent crude, a type used in international markets, to $70 a barrel from $90.

Oil prices extended their slide, with American crude losing $2.29 to settle at $46.07 a barrel. Brent lost $2.68 to $47.43. Both were trading at their lowest levels since March 2009.

[Jan 12, 2015] Is the US economy overstretched

RT Op-Edge

Unfortunately at the same time, economic gravity will out and that leads to some concern for 2015. The US economy has averaged 57 months of expansion before matters get a tad overheated and a recession ensues. Equally, we have many indicators of somewhat frothy stock multiples. Are they expensive? Well they certainly aren’t cheap, with large US corporations making half their profits overseas. Even presuming growth elsewhere, a resurgent US dollar suggests lower profits for American corporations. Moreover, the bond bubble is on borrowed time with the shale economy likely subject to a “wildcat” cyclical downturn, given collapsing oil prices.

Admittedly, the US economy suffered a large downswing in the last recession but thanks to the flexibility of its employment and a relatively forgiving approach to redemption of entrepreneurial spirit after failure, the US has had a huge upswing which may continue awhile yet. However, January 2015 marks the 67th consecutive month of expansion (read that and weep, Europe!), already 10 more than the average upswing. Yes, the cycle may carry on for a while (we all hope so) but ultimately cyclical gravity will impact the US economy once more and it begins 2015 leveraging itself against the mean. A US recession is likely close at hand.

Ironically, while a US recession will adversely impact its citizens, the biggest losers in the process will likely be overseas markets. Even a short, relatively muted recession will likely cause a wave of dislocation, e.g. amidst the enormously over-leveraged government spendthrift continent of Europe where government continues to ignore the lessons of their own hubristic impotence to create growth.

An overstretched US cycle will likely cause America more economic pain before the lame duck Obama presidency ends. However, it will make the greatest impact on weakened states across the Atlantic

Mikhail R

Of course it is overstretched, and there are and will continue to be economic cycles. The U.S. and the world will soon be in another down cycle and whether we will have inflation or deflation remains to be seen. The U.S. and Russia need better communication. The Ukraine fiasco is a perfect example for much needed discussion. The U.S. should have kept Russia aware of its activities in Ukraine and Russia should have advised the U.S. of its intentions. Since neither party wanted to disclose their intentions, we now have sour relations between the two super powers. And, what affects Russia will eventually effect the U.S. and Europe, and vice versa. I am hoping a more conservative President will be elected in the U.S. and the White House will make it a priority to improve and re-establish better relations with Russia with an understanding that open communications is critical for a successful foreign policy and improved negotiations.

Serge Krieger

America growing rapidly ? hahaha! 5%. It is based upon purchases of health care plans. Yeah, great growing! America is one big lie.

Patrick O'Neil

How much industry does Russia have. It's GDP is about the same as Italy. LOL
Do a search of the highest revenue companies in the world. Look what country they are from. See the US multiple times? Now scroll for a Russian one. Keep scrolling. :)

[Jan 09, 2015] Larry Summers US economy not growing fast enough

Jan 09, 2015 |

Former Clinton Treasury Secretary Larry Summers told CNBC Friday the U.S. economy is not growing fast enough.

While American economic growth is getting better and leads the rest of the world, investments need to be made to get the economy stronger, Summers said. "Confidence is the cheapest form of stimulus," he said on " Squawk Box ."

"We're not doing well enough. We haven't had a year of 3 percent [growth] in a very long time in the United States," he said.

Summers, also a former Obama administration economic advisor, said the U.S. bond market is indicating that investors are worried. "With forward interest rates coming down as much as they have, it suggests concern about underlying growth in this economy."

The government should be investing more, not less, in the economy, especially with borrowing rates at such low levels, he said. "We've got to be doing more to get the economy growing more rapidly and making sure everybody share in that prosperity."

Summers called for infrastructure investments in antiquated airports and shipping ports, and said tens of thousands schools around the nation need to be improved.

He said private-sector investments need to be made in energy, high-speech Internet and information technology. "Way over three- quarters of the investment that we're making is private-sector investment."

The government also needs to address burdensome regulations and policies, Summers said. "It's important to legislate tax reform in the corporate sector as soon as possible."

[Dec 29, 2014] Dramatic drop of ruble: Russians traveling less abroad

All the latest development might lead to recession in EU in 2015... Deflation in Eu already started. Now with loss of Russian market to china and Russian tourists and business travelers they well might slight into recession. Germany probably already lost considerable part of lucrative Russian auto market.
Dec 25, 2014 |
Decrease of 40 to 50 percent - Many also feel that they are undesirable in the West

The dramatic drop of exchange rate for Russian ruble make the Russians significantly less travel abroad on holidays . The numbers of travelers this year decreased 40 percent to 50 percent compared to 2013, said the Director of the Association of tourism in Russia, Maja Lomidse.

The reasons for the decrease were the lack of trust in the economy and the declining purchasing power, because of the drop of ruble against Western currencies like the Euro and the Dollar . Lomidse called that "external factors". which might lead to bankruptcies for travel agents

Many Russians also feel that they are now undesirable in the West because of the sanctions against their. This also increase probability of mass bankruptcies of the travel agents. Turkey and Egypt became the most popular tourist destinations in the Russians called Lomidse .

In the European Union, Greece and Spain remain the most sought-after countries with a share of seven percent of the total number of the Russian tourists. The German Embassy in Moscow registered a decrease of 16 percent to 20 percent in the number of Visa applications in comparison to the previous year. (APA, 25.12.2014)

[Dec 28, 2014] In Reversal, Germany Cools to Russian Investment

Germany hurts itself following the USA foreign policy. You can expect German trade with Russian to be halved: "Including other companies like BMW, Mercedes and Ford of Europe, which is based in Cologne, German automakers will lose 15 billion euros, or about $18.3 billion, in Russian sales and €600 million in profit through 2017, according to estimates by Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen.
Dec 28, 2014 |
Few countries have invested more heavily in Russia than Germany has, rushing in to exploit new trade opportunities that opened up after the Cold War ended. More than 6,000 German companies set up operations there, and Russia became a major customer for German cars, pharmaceuticals and machinery.

But now the rush is going in reverse. The announcement last week by the German chemical giant BASF that it had canceled a planned deal with Gazprom, the Russian energy giant, involving natural gas extraction and distribution, was the latest example of how German companies are delaying projects and investment.

... ... ...

Russia’s largest trading partners

Total trade, January through August 2014 (billion $)

... ... ...

...Russia’s problems have helped slow Germany’s momentum. Exports to Russia fell 22 percent through October compared with the same period a year earlier.

... ... ...

Last weekend, the two most prominent Social Democrats in Chancellor Angela Merkel’s grand coalition government of center right and center left — the party leader, Sigmar Gabriel, and the foreign minister, Frank-Walter Steinmeier — voiced concern that sanctions might hobble the stricken Russian economy, and they opposed tightening them.

Ms. Merkel, clearly frustrated with the behavior of President Vladimir V. Putin of Russia, has so far taken a harder line. But the potential for conflict within Ms. Merkel’s government complicates her efforts to use Germany’s close ties with Russia as leverage to fashion a solution to the crisis in Ukraine.

Business groups, normally strong backers of Ms. Merkel’s Christian Democrats, have agreed with the Social Democrats on Russia and warned against using economic means to put pressure on Mr. Putin.

“Sanctions are not the proper means to resolve this political crisis,” Eckhard Cordes, a former Daimler executive who is chairman of the Committee on Eastern European Economic Relations, which represents companies doing business in the former Soviet bloc, said in an email. “The West cannot have an interest in destabilizing the Russian economy or Russian politics.”

... ... ...

The Russian market has turned sour for German automakers. Opel said in September it would cut production at its main factory in St. Petersburg, where it makes Opel Astra and Chevrolet Cruze cars, eliminating a shift and 500 out of 1,600 jobs.

Volkswagen halted production for 15 days at a plant in Kaluga in recent months, in addition to the usual Christmas and New Year’s shutdown. The company said in a statement it remained committed to Russia but was “watching the market with concern.”

Including other companies like BMW, Mercedes and Ford of Europe, which is based in Cologne, German automakers will lose 15 billion euros, or about $18.3 billion, in Russian sales and €600 million in profit through 2017, according to estimates by Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen.

[Dec 27, 2014] New Year message from Wall Street to 401K investors

[Dec 26, 2014] We Live In A New World And The Saudis Are The First To Get It

Dec 26, 2014 |

We live in a new world, and the Saudis are either the only or the first ones to understand that. Because they are so early to notice, and adapt, I would expect them to come out relatively well. But I would fear for many of the others. And that includes a real fear of pretty extreme reactions, and violence, in quite a few oil-producing nations that have kept a lid on their potential domestic unrest to date. It would also include a lot of ugliness in the US shale patch, with a great loss of jobs (something it will have in common with North Sea oil, among others), but perhaps even more with profound mayhem for many investors in US energy. And then we’re right back to your pension plans.

[Dec 26, 2014] SF Fed Warns US Equity Valuations Will Be Cut In Half In Next Decade

Tyler Durden on 12/25/2014

When "the retirement of the baby boomers is expected to severely cut U.S. stock values in the near future," is the ominous initial sentence from no lesser maintainer-of-the-status-quo than the San Francisco Fed's research department, one begins to recognize the Federal Reserve's overall need to hyper-inflate asset prices at whatever cost for fear of the 'wealth' destruction looming. As the following study reports, projected declines in stock values - based on the latest demographic and valuation data - have become even more severe. Our current estimate suggests that the P/E ratio of the U.S. equity market could be halved by 2025 relative to its 2013 level.

[Dec 24, 2014] The Fed is heading for another catastrophe by Stephen S. Roach

Dec 24, 2014 | MarketWatch

America’s Federal Reserve is headed down a familiar — and highly dangerous — path. Steeped in denial of its past mistakes, the Fed is pursuing the same incremental approach that helped set the stage for the financial crisis of 2008-2009. The consequences could be similarly catastrophic.

Consider the December meeting of the Federal Open Market Committee, where discussions of raising the benchmark federal funds rate were couched in adjectives, rather than explicit actions.

In line with prior forward guidance that the policy rate would be kept near zero for a “considerable” amount of time after the Fed stopped purchasing long-term assets in October, the FOMC declared that it can now afford to be “patient” in waiting for the right conditions to raise the rate. Add to that Fed Chair Janet Yellen’s declaration that at least a couple more FOMC meetings would need to take place before any such “lift-off” occurs, and the Fed seems to be telegraphing a protracted journey on the road to policy normalization.

With so much dry kindling, it will not take much to spark the next conflagration.

This bears an eerie resemblance to the script of 2004-2006, when the Fed’s incremental approach led to the near-fatal mistake of condoning mounting excesses in financial markets and the real economy. After pushing the federal funds rate to a 45-year low of 1% following the collapse of the equity bubble of the early 2000s, the Fed delayed policy normalization for an inordinately long period. And when it finally began to raise the benchmark rate, it did so excruciatingly slowly.

In the 24 months from June 2004, the FOMC raised the federal funds rate from 1% to 5.25% in 17 increments of 25 basis points each. Meanwhile, housing and credit bubbles were rapidly expanding, fueling excessive household consumption, a sharp drop in personal savings, and a record current-account deficit — imbalances that set the stage for the meltdown that was soon to follow.

The Fed, of course, has absolved itself of any blame in setting up the U.S. and the global economy for the Great Crisis. It was not monetary policy’s fault, argued both former Fed Chairmen Alan Greenspan and Ben Bernanke; if anything, they insisted, a lack of regulatory oversight was the culprit.

This argument has proved convincing in policy and political circles, leading officials to focus on a new approach centered on so-called macro-prudential tools, including capital requirements and leverage ratios, to curb excessive risk-taking by banks. While this approach has some merit, it is incomplete, as it fails to address the egregious mispricing of risk brought about by an overly accommodative monetary policy and the historically low interest rates that it generated.

In this sense, the Fed’s incrementalism of 2004-2006 was a policy blunder of epic proportions.

[Dec 24, 2014] Report: Afghanistan War Reaches $1 Trillion And Will Require Hundreds of Billions More

Despite the public pledge of President Obama to pull out of Afghanistan, we continue to spend huge amounts of money in the war and the Obama Administration has fought to keep U.S. troops in the country. Now an estimate from the Financial Times and independent researchers put the cost of the war at roughly $1 trillion with a commitment of hundreds of billions more in the coming years. There continues to be no serious debate over our ongoing losses both in personnel and money in this war.

[Dec 24, 2014] Economist's View Links for 12-24-14

"A boom has to be driven by something. Looks, to me, like we are still in a demand-constrained economy, and the 5% is mostly a spike and not a trend. "
anne said in reply to Peter K....

December 24, 2014

On the Economic Boom: Too Much Eggnog?

I hate to put a damper on the party, but the some of the reporting on the economy is getting a bit out of hand. The Washington Post gave us an example, with a piece * on the revised fourth quarter GDP numbers headlined, "Robust Economic Growth in the third quarter raises hopes that a boom is on horizon." That's not what Mr. Arithmetic says.

First, just to be clear, the third quarter numbers were definitely good news. Five percent GDP growth is a solid economic performance by any measure, so there is no doubt that it is a big step forward by any measure. The economy is clearly growing, and likely at a reasonably respectable rate. The issue is whether the term "boom" is appropriate.

As this article and other reporting notes, the third quarter follows a strong second quarter of 4.6 percent growth, which in turn followed a first quarter where GDP shrank by 2.1 percent. The piece dismisses the drop in first quarter GDP as the result of bad weather. This is surely true, but the strong growth in the subsequent two quarters is clearly related to the drop in the first quarter. The growth in these quarters was a reversal of the decline in the first quarter.

If we take the average growth over the last three quarters, we get a 2.5 percent annual growth rate. This isn't bad, but it's hardly anything to write home about. If we assume the economy has a potential growth rate (the rate of growth of the labor force plus productivity) in the range of 2.2-2.4 percent, then with the 2014 growth rate we are filling the gap in output at the rate of between 0.1-0.3 percentage points a year. CBO estimates that the gap between potential GDP and actual GDP is still close to 4 percentage points. This means that at the 2014 growth rate we can look to fill that gap in somewhere between 13 and 40 years. Perhaps we should put a hold on that champagne.

Looking at specifics of the third quarter numbers, there are several items that are virtually certain to be reversed in whole or in part in the fourth quarter. Top on this list was the jump in military spending that added 0.66 percentage points to growth in the quarter. Military spending is highly erratic and sharp jumps are almost always followed by sharp falloffs in subsequent quarters. This means that instead of adding 0.66 percentage points to growth, we are likely to see military spending subtracting something like 0.66 percentage points from growth in the fourth quarter.

A smaller trade deficit also added 0.78 percentage points to growth. We will almost certainly see a larger trade deficit in the fourth quarter (October's deficit was considerably larger than the third quarter average), which means that the trade deficit will be subtracting from growth in the fourth quarter. Equipment investment, which added 0.63 percentage points to growth in the quarter is also likely to go the other way in the fourth quarter. The data for October and November show that shipments are running below the third quarter average, before adjusting for inflation.

The takeaway is that we should see decent growth in the fourth quarter (consumption spending was very strong in November), but it is likely to be much closer to 2.0 percent than 5.0 percent, so folks may want to put that boom talk on the shelf for the moment. One final point, we continue to hear celebrations of the 0.4 percent growth in the average hourly wage reported for November. As noted previously, these data are highly erratic. The November number was primarily a bounce back from weak growth the prior two months. The annual growth rate for the three months (September, October, and November) compared with the prior three months was just 1.8 percent.

Folks can believe that wage growth was really weak in September and October and then bosses suddenly coughed up big pay increases in November, or that the monthly data was mostly driven by measurement error and that there has been little change in the actual rate of wage growth over the last three months. Mr. Arithmetic and I believe the latter.


-- Dean Baker

david s said...

Where exactly would a "boom" come from?

A boom has to be driven by something. Looks, to me, like we are still in a demand-constrained economy, and the 5% is mostly a spike and not a trend.

pgl said in reply to anne...

Nice piece from Dean. I'll just add that the GDP gap is still $570 billion (2009$) or 3.4% of potential GDP.

Peter K. said in reply to pgl...

Look at what Bernstein says about historical levels of "discretionary" government funding below:

Reagan 10.2 percent of GDP
Bush I 8.5 percent
Clinton 6.4
Bush II 7.3
Obama 6.1

and we have a 3.4 percent gap

JohnH said in reply to Peter K....

"Discretionary" government spending at 6.1% under Obama, the lowest in 35 years. What does it take for people to realize that Obama is an austerity-driven conservative? Did Obama, Reid, and Pelosi, despite majorities in the Senate and/or House, ever do anything but appease conservatives? Even when they had overwhelming majorities in both houses, they could only manage to pass a perfunctory stimulus? (Budget resolutions are not subject to filibuster.)

JohnH said in reply to anne...

In 2014 US real per capita income finally rose above what it was in 2008.

And people wonder why ordinary Americans are pissed at Obama, Reid and Pelosi, who have barely acknowledged their economic situation? And they done virtually nothing to help, dutifully appeasing Republicans at every opportunity. Heck, they couldn't even craft an economic message for the 2014 elections, which they lost big time.

To make matters worse, Democrats have largely shrugged as the 0.1% take an ever increasing share of income, reducing ordinary Americans' share.

Democrats are no friends of the 99%.

[Dec 21, 2014] Moyers The New Robber Barons

[Video] We are living in the Second Guilded Age...

Jesse's Café Américain

"I can hire one half of the working class to kill the other half.”

Jay Gould, aka the Mephistopheles of Wall Street.

Moyers & Company: The New Robber Barons
Dec 19 2014

We’ve just watched the Senate and the House — aided and abetted by President Obama — pay off financial interests with provisions in the new spending bill that expand the amount of campaign cash wealthy donors can give, and let banks off the hook for gambling with customer (and taxpayer) money.

What happened in Washington over the past several days sounds strikingly familiar to the First Gilded Age more than a century ago, when senators and representatives were owned by Wall Street and big business. Then, as now, those who footed the bill for political campaigns were richly rewarded with favorable laws.

Bill’s guest this week, historian Steve Fraser, says what was different about the First Gilded Age was that people rose in rebellion against the powers that be. Today we do not see “that enormous resistance,” but he concludes, “people are increasingly fed up… their voices are not being heard. And I think that can only go on for so long without there being more and more outbreaks of what used to be called class struggle, class warfare.”

Steve Fraser is a writer, editor and scholar of American history. Among his books are Every Man a Speculator, Wall Street: America’s Dream Palace and Labor Will Rule. His latest, The Age of Acquiescence: The Life and Death of American Resistance to Organized Wealth and Power, will be published early next year.

Video+Transcript: 25:22 min

IP, Russia - Tim Duy's Fed Watch


Hard for me to see the fed sounding hawkish in the middle of an emerging currency crisis.

The financial sector can never be "insulated" from mass unemployment. No matter how many banks there are (big or small) mass unemployment will cause mass defaults. If they are (intentionally or not) behind the curve as unemployment rises, concerned about inflation, defaults will be higher than they would be otherwise.

Banks are largely exposed to domestic credit. The energy sector, though growing rapidly, is not nearly as large as housing, and there is not nearly as much collateral tied to the value of energy projects (housing backs a lot of financial market collateral).

This time though we are leaning the opposite way. With disinflation(as opposed to inflation in 2008), the Fed is more than likely to stay dovish for a while.

Credit is priced based on *expected* unemployment, wage growth, and default rates. If unemployment unexpectedly drops (or rises) then defaults will unexpectedly drop (rise) and banks will have unexpected gains (losses) - because credit reserves and capital are released (or needed).

Unfortunately, regulators will draw the wrong conclusions. They will draw the conclusion they are doing a good job regulating. No, they are just not causing unexpected mass unemployment by tightening too soon.

[Dec 19, 2014] The Implications of Red Monday

Dec 19, 2014 | Zero Hedge

The real problem as stated in other articles is that since 2007, ALL and I mean ALL of the decent paying jobs and enough of them to create positive jobs unemployment numbers and the like came from the 6 shale states...even with oil not going lower, that growth was probably slower to flat going forward.

With oil at $50, this will move in reverse and the next 6 months of employment numbers will be horrendous, which will have to engender more QE discussions IMO.


What we see happening in the currency market should be taken as a big red flashing signal of instability. A weakening in the yen, euro, and pound, is giving the illusion of a strong dollar. These four currencies are the big players in the world currency market.

Coupled with weak oil prices the strengthening dollar may be sending a signal that the whole system is unstable. Other currencies are under assault because both economies are weak and countries are buried in debt they can never repay at real market interest rates. The change in currency values may be dramatic and using history as a guide m often show no mercy when this shift occurs.

For months the major world currencies had traded in a narrow range as if held in limbo by some great force. This has allowed people to think we were on sound footing as central banks across the world continued to print and pump out money chasing the "ever elusive growth" that always appears to be just around the corner. Recently the major currencies have made multi-year highs or lows depending on the match-up.

John Maynard Keynes said By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. While there are not many Bond Vigilantes there are a slew of Currency Vigilantes and they are ready to make their presence known. Weakness in the value of the Yen, Pound, and Euro must not go unnoticed. The article below looks at why this trend may accelerate and cause the stock market to drop like a stone.

My writing on the Singapore dollar

the most dangerous thing in finance is the “thing” that never moves.

This stability creates an illusion of control around which many positions are built, the greater the perceived stability the greater the positions, and the more other assumptions and forecasts are made.

[Dec 19, 2014] Yellen Decoupled Stocks From Oil, BofA Warns It Won't Last

If we assume that "time-to-live" for an shale well is two years, the it would be logical to assume that at those prices the destruction of US shale will take 2-3 years.
Dec 19, 2014 | Zero Hedge

As we have noted in the last two days, on the heels of Janet Yellen's mutterings, US equity m have exploded higher even as the highly correlated and causative oil prices have done anything but rise. This 'fact' has not escaped BofA's Hans Mikkelsen's attention as he warns, "While stocks currently are getting a break from oil, it appears most likely that they reconnect when the decline in oil prices accelerates – especially if we see associated weakness in credit and EM." And sure enough, modestly at first, the two are starting to converge this morning...


Or maybe oil decoupled from stocks? Why does ZH ALWAYS take the view that is bearish on stocks?

How about this? If stocks discount the future, then why did they not respond to oil like in 2008? Maybe because the fundamentals don't jive with the drop in crude.

Yes, there is an oversupply, but does anyone honestly believe that can account for 50% DROP IN JUST A FEW MONTHS? That is not reasonable. Something else was going on.

For all I know, the US was intervening directly in the futures m . What happens when they close their "position"?


All the banks are giddy because they know DC signed the derivative bailout.

No matter how bad the bets are they'll steal from the taxpayer.

Dr. Engali

If BofA says it, then we know the opposite will happen.


what b of a says has no correlation to what will happen. dont give them any credit for anything except sub-prime and their complicity in their own bail out and riding on golden chariot lead by GS's ms. dimon. in a revolution...all b of a executives are 'fair game'. stupid, no conscience, holier-than-thou whores.

Fed-up with being Sick and Tired

Calling them whores is a compliment.


You have to admire the sheer dipshit arrogance of people who truly believe in their heart of hearts that they can, by fiat, counteract the forces of nature, economics, human tendencies, etc.

There are a number of them out there, and they shurely must be cut from the same cloth.

Fed-up with being Sick and Tired

This focus upon stocks or correlations is laughable. It would not surprise readers here who likely know this, but I will post if nonetheless: stocks are a distraction from where the real money is and will not be: CREDIT M . Bond moves move m , all of them and secondarily, we have our FX market. BUT, the real fortunes are made in bonds and buying and selling derivatives against them. Remember that it was the derivatives on Mortgage Bonds, and the CDS window that closed that caused world-wide misery and we are still stuck in that rut.

[Dec 10, 2014] Oil Market Reminds Me of 1986 Price Drop Sass

(video). Looks like his view is the economy is entering period of high turbulence...

Bottom of oil prices is not seen yet. Last time in 1986 oil fall $35 to $10. Most of the damage in oil price decline behind us. But not oil speculators were washed out.

Marginal producers will go out of business. They are highly leveled and they will have problems in refinancing their debt. There will some ripple affects on financial market. Increased volatility is probably coming in 2015. Fed intend to raise rate.

High yield bond market will be affected.

[Dec 03, 2014] Fall of the Bond King How Gross Lost Empire as Pimco Cracked

Dec 03, 2014 | Bloomberg

Behind closed doors, the billionaire also opposed the firm’s expansion into stocks and real estate, areas seen by others as crucial to position the firm as the bond rally on which Pimco’s growth had been built showed signs of waning. In pushing for a return to a simpler business model, he questioned why the firm needed some of the executives it had hired.

By September, as Gross revived plans to fire Balls, 41, Pimco’s new senior managers turned against him. Several of the firm’s key executives offered to resign. When Gross proposed again to take a smaller role, give up management responsibilities and hand over his main fund to a successor by the end of 2015, Pimco executives were considering his ouster.

Rather than suffer the humiliation of being fired, Gross decided to walk away from the firm that he had started in 1971. A few hours later on that Friday morning, he was on a plane bound for Denver to join Janus Capital Group Inc. (JNS), the money manager run by his former general counsel and operating chief Richard Weil, 51.

... ... ...

Gross built Pimco with some of the best long-term investing track records, and was the face of the bond market with television appearances almost every day. Assets at the firm doubled between 2010 and 2013, making Gross one of the best-compensated money managers, with a bonus of about $290 million in 2013, a fortune even by Wall Street standards.

An Ohio native who graduated from Duke University with a psychology degree in 1966, Gross built a reputation unparalleled among mutual fund managers, with his main fund, the $162.8 billion Pimco Total Return (PTTRX), beating 96 percent of peers over 15 years, according to research firm Morningstar Inc. The fund has become a staple in the 401(k) retirement accounts of millions of Americans.

Vietnam Vet

His departure triggered a combined $60.5 billion in withdrawals in the past three months from Pimco Total Return, which at its peak in April 2013 was the world’s largest mutual fund, with $293 billion. Assets in the fund have since shrunk by 44 percent.

Gross, who spent three years in the Navy and served in Vietnam, was obsessed with performance. When his flagship fund trailed 77 percent of peers in 2011, he apologized to clients, calling it a “stinker” of a year and reassuring them he hadn’t lost his touch. After a rebound the next year, he examined his legacy in an investment outlook that said the careers of great investors were fueled by a credit expansion that may be ending, and that the real test of his investing prowess was yet to come.

“Am I a great investor?” he wrote in an April 2013 investment outlook. “No, not yet.”

... ... ...

Four years after a Bloomberg M article in which Gross said that stock-market returns would beat bonds, the firm’s equity business wasn’t meeting expectations, having gathered less than $3 billion into its four main mutual funds.

Gross argued the push wasn’t cost-efficient, that stocks and other assets were too expensive, that Pimco should retrench and didn’t need the staff it had hired to diversify.

... ... ...

“In the case of Pimco, which always seemed like this monolithic really good organization, when you go behind the screen you can see that it was pretty messy,” said Kurt Brouwer, chairman of Tiburon, California-based advisory firm Brouwer & Janachowski LLC, who has invested in Pimco funds since the 1980s.

“Money, big money, personal egos, differences of opinion, slights and disagreements built up over 10 or 15 years -- that’s a pretty explosive combination.”

[Nov 29, 2014] OPEC has ushered in QE4, and how investors should play oil now

Crude Oil, -10.35% just for one day is a bad omen.
Nov 29, 2014 | MarketWatch
Welcome to the new era of QE4.

As if on cue, OPEC stepped in just as monetary policy (at least the Fed’s) has dried up. Central bankers have nothing on the oil cartel that did just what everyone expected, but has still managed to crush oil prices.

Protest away about the 1% getting richer and how prior QE hasn’t trickled down to those who really need it, but an oil cartel is coming to the rescue of America and others in the world right now.

It’s hard to imagine a “more wide-reaching and effective stimulus measure than to lower the cost of gas at the pump for everyone globally,” says Alpari U.K.’s Joshua Mahoney. “For this reason, we are effectively entering the era of QE4, with motorists able to allocate more of their money towards luxury items, while firms are now able to lower costs of production thus impacting the bottom line and raising profits.”

The impact of that could be “bigger than anything that has come before,” says Mahoney, who expects that theory to be tested and proved, via sales on Black Friday and the holiday season overall. In short, a consumer-spending explosion as we race to the malls on a full tank of cheap gas.

Tossing in his own two cents in the wake of that OPEC decision, legendary investor Jim Rogers says it’s a “fundamental positive for anybody who uses oil, who uses energy.” Just not great if you’re from Canada, Russia or Australia, he says. Or if you’re the ECB, fretting about price deflation. Or until it starts crushing shale producers.

Neil G

The problem with market volatility is a failure of traders to acknowledge cause and effect.

The United States has implemented some form of QE since 2008 which has very little to do with sustaining the economy other than flooding the banking system with reserves that haven't been lent while providing liquidity to institutional investors for repositioning to equities.

Regardless, equity valuations are no further out of line than they have been historically, and with nearly twice the growth rate among emerging m , those valuations are at a more favorable discount. That being said, the only thing that matters is valuation, not speculation.

Problem is, when your living as a trader is based on mostly speculation and inching out returns over competing institutions, one looks for reasons to invite volatility, partly from over reactive insight, also because volatility triggers opportunity. Meanwhile the vast majority of investors innocently bite their nails and assume improper references by mistaking the forest for the trees. Media exacerbation doesn't help either, especially while all the drama and accompanying attention deficit disorder feeds their paychecks too.

At the end of the day, the performance of XYZ company usually has very little to do with the price of rice in China. All investors large and small with have the most consistent chance of success by maintaining their investing focus based on prevailing economic fundamentals while remaining patient with those underlying assumptions. Divergences aside, these events are simply modest opportunities to re-allocate strategically and have little lasting impact that can't be overcome by long term discipline; so have a Xanax and stop obsessing already!


Most people recognize that the m are being supported in some way but most don't understand the mechanics. I have not worked in finance but I have a lot of experience with industrial process control systems and I understand their capability. Modern trading networked platforms are nearly identical. Among many other characteristics of the m , these platforms easily allow prices to be precisely controlled if there is an unlimited pool of digital money. These systems can precisely control the price, the rate of the price rise, and the priority of asset price control. All of the m are networked together to allow the needed liquidity to flow to the m that demand it. The constant rise in the m since 2009 could not have occurred without these systems even with QE. As far as the algorithms are concerned all QE looks the same, regardless of the central bank that support it. QE is the fuel but the trading platforms are the engine. Legitimate buyers, sellers, bid, and offers no longer dictate prices.

The algorithms ensure that the additional bids and offers are created with thin air digital money if the legitimate bids will not achieve the desired price. As a result there is nothing that will keep stocks from going higher except the will of the central banks. But remember that this is all a debt backed digital creation. Its not even cash until you sell and a clash between these illusionary values and real values will make it all blow up. That is the risk you are taking if you participate.


After 2009 the trading volume in stocks has been cut by 66.6 %. People lost too much. 99% of the bears disappeared.

Since 2010, People's credit debt is rising 6-7 % yearly. it used to be 2-3%. Now, DEBT to INCOME ratio is at a very-very high 25%. The only money made in the m are the 401 k s, rigged by the FED-centrals and the GOV. to keep HOPE alive.

[Nov 22, 2014] German Industrial Production Plunges

One word: blowback from Russian sanctions...

German industrial production dropped 4% from July to August, versus an expected decline of 1.5%. This is the biggest month-on-month drop in five years. The figure represents a 2.8% drop on the same month last year.

Similarly ugly numbers on factory orders released on Monday and the worrying business reports suggest the sector is in decline.

We don't yet have a full quarter's data, but Claus Vistesen at Pantheon Macroeconomics is already saying the German manufacturing sector "is in a recession."...

[Nov 22, 2014] 3 Of The 10 Largest Economies In The World Have Already Fallen Into Recession – Is The U.S. Next

This is just a warning for 401K investors to keep power dry... Recession might happen or it might be postponed again due to lower oil prices (which are huge economic stimulus in itself), but the fact that we are getting closer to the next economic crash is undisputable. It's already 6 years since the last. So each year the chances of a new devastating crash only grow. This is the nature of neoliberal economic order. And during the crash it is 401K investors who are fleeced by Wall Street.
Nov 20, 2014 |

Submitted by Michael Snyder of The Economic Collapse blog,

Are you waiting for the next major wave of the global economic collapse to strike? Well, you might want to start paying attention again. Three of the ten largest economies on the planet have already fallen into recession, and there are very serious warning signs coming from several other global economic powerhouses. Things are already so bad that British Prime Minister David Cameron is comparing the current state of affairs to the horrific financial crisis of 2008. In an article for the Guardian that was published on Monday, he delivered the following sobering warning: “Six years on from the financial crash that brought the world to its knees, red warning lights are once again flashing on the dashboard of the global economy.” For the leader of the nation with the 6th largest economy in the world to make such a statement is more than a little bit concerning.

So why is Cameron freaking out?

Well, just consider what is going on in Japan. The economy of Japan is the 3rd largest on the entire planet, and it is a total basket case at this point. Many believe that the Japanese will be on the leading edge of the next great global economic crisis, and that is why it is so alarming that Japan has just dipped into recession again for the fourth time in six years

Japan’s economy unexpectedly fell into recession in the third quarter, a painful slump that called into question efforts by Prime Minister Shinzo Abe to pull the country out of nearly two decades of deflation.

The second consecutive quarterly decline in gross domestic product could upend Japan’s political landscape. Mr. Abe is considering dissolving Parliament and calling fresh elections, people close to him say, and Monday’s economic report is seen as critical to his decision, which is widely expected to come this week.

Of course Japan is far from alone.

Brazil has the 7th largest economy on the globe, and it has already been in recession for quite a few months.

And the problems that the national oil company is currently experiencing certainly are not helping matters

In the past five days, 23 powerful Brazilians have been arrested, with even more warrants still outstanding.

The country’s stock market has become a whipsaw, and its currency, the real, has hit a nine-year low.

All of this is due to a far-reaching corruption scandal at one massive company, Petrobras.

In the last month the company’s stock has fallen by 35%.

The 9th largest economy in the world, Italy, has also fallen into recession

Italian GDP dropped another 0.1% in the third quarter, as expected.

That’s following a 0.2% drop in Q2 and another 0.1% decline in Q1, capping nine months of recession for Europe’s third-largest economy.

Like Japan, there is no easy way out for Italy. A rapidly aging population coupled with a debt to GDP ratio of more than 132 percent is a toxic combination. Italy needs to find a way to be productive once again, and that does not happen overnight.

Meanwhile, much of the rest of Europe is currently mired in depression-like conditions. The official unemployment numbers in some of the larger nations on the continent are absolutely eye-popping. The following list of unemployment figures comes from one of my previous articles

Are you starting to get the picture? The world is facing some real economic problems. Another traditionally strong economic power that is suddenly dealing with adversity is Israel. In fact, the economy of Israel is shrinking for the first time since 2009

Israel’s economy contracted for the first time in more than five years in the third quarter, as growth was hit by the effects of a war with Islamist militants in Gaza.

Gross domestic product fell 0.4 percent in the July-September period, the Central Bureau of Statistics said on Sunday. It was the first quarterly decline since a 0.2 percent drop in the first three months of 2009, at the outset of the global financial crisis.

And needless to say, U.S. economic sanctions have hit Russia pretty hard. The rouble has been plummeting like a rock, and the Russian government is preparing for a “catastrophic” decline in oil prices…

President Vladimir Putin said Russia’s economy, battered by sanctions and a collapsing currency, faces a potential “catastrophic” slump in oil prices.

Such a scenario is “entirely possible, and we admit it,” Putin told the state-run Tass news service before attending this weekend’s Group of 20 summit in Brisbane, Australia, according to a transcript e-mailed by the Kremlin today. Russia’s reserves, at more than $400 billion, would allow the country to weather such a turn of events, he said.

Crude prices have fallen by almost a third this year, undercutting the economy in Russia, the world’s largest energy exporter.

It is being reported that Russian President Vladimir Putin has been hoarding gold in anticipation of a full-blown global economic war. I think that will end up being a very wise decision on his part.

Despite all of this global chaos, things are still pretty stable in the United States for the moment. The stock market keeps setting new all-time highs and much of the country is preparing for an orgy of Christmas shopping. Unfortunately, the number of children that won’t even have a roof to sleep under this holiday season just continues to grow. A stunning report that was just released by the National Center on Family Homelessness says that the number of homeless children in America has soared to an astounding 2.5 million. That means that approximately one out of every 30 children in the United States is homeless.

Let that number sink in for a moment as you read more about this new report from the Washington Post

The number of homeless children in the United States has surged in recent years to an all-time high, amounting to one child in every 30, according to a comprehensive state-by-state report that blames the nation’s high poverty rate, the lack of affordable housing and the effects of pervasive domestic violence.

Titled “America’s Youngest Outcasts,” the report being issued Monday by the National Center on Family Homelessness calculates that nearly 2.5 million American children were homeless at some point in 2013. The number is based on the Education Department’s latest count of 1.3 million homeless children in public schools, supplemented by estimates of homeless preschool children not counted by the agency.

The problem is particularly severe in California, which has about one-eighth of the U.S. population but accounts for more than one-fifth of the homeless children, totaling nearly 527,000.

This is why I get so fired up about the destruction of the middle class. A healthy economy would mean more wealth for most people. But instead, most Americans just continue to see a decline in the standard of living.

And remember, the next major wave of the economic collapse has not even hit us yet. When it does, the suffering of the poor and the middle class is going to get much worse.

Unfortunately, there are already signs that the U.S. economy is starting to slow down too. In fact, the latest manufacturing numbers were not good at all

The Federal Reserve’s new industrial production data for October show that, on a monthly basis, real U.S. manufacturing output has fallen on net since July, marking its worst three-month production stretch since March-June, 2011. Largely responsible is the automotive sector’s sudden transformation from a manufacturing growth leader into a serious growth laggard, with combined real vehicles and parts production enduring its worst three-month stretch since late 2008 to early 2009.

A lot of very smart people are forecasting economic disaster for next year.Hopefully they are all wrong...

[Nov 17, 2014] SP 500 and NDX Futures Daily Charts - 溢れ - Overflowing

Jesse's Café Américain

Equities are in a bubble, but the real economy continues to languish. Paper money is overwhelming, and overflowing. There is some thought that the US can never print too many dollars for the rest of the world to take. Hubris does not even begin to describe the financial system of the Anglo-American banking cartel. Who are these people? What are they thinking? Their ability to bully others blinds them to the balances of the real world.

This will end badly.

[Nov 16, 2014] David Cameron warns that second global crash is looming

Nov 16, 2014 | The Guardian
David Cameron has issued a stark message that “red warning lights are flashing on the dashboard of the global economy” in the same way as when the financial crash brought the world to its knees six years ago.

Writing in the Guardian at the close of the G20 summit in Brisbane, Cameron says there is now “a dangerous backdrop of instability and uncertainty” that presents a real risk to the UK recovery, adding that the eurozone slowdown is already having an impact on British exports and manufacturing.

His warning comes days after the Bank of England governor, Mark Carney, claimed a spectre of stagnation was haunting Europe. The International Monetary Fund managing director, Christine Lagarde, expressed fears in Brisbane that a diet of high debt, low growth and unemployment may yet become “the new normal in Europe”.

Cameron has adopted the more sombre tone in the runup to the chancellor’s autumn statement on 3 December, when the Office of Budget Responsibility will produce new growth forecasts and spell out the impact on public finances.

“The eurozone is teetering on the brink of a possible third recession, with high unemployment, falling graowth and the real risk of falling prices too,” Cameron writes. “Emerging market economies which were the driver of growth in the early stages of the recovery are now slowing down. Despite the progress in Bali [trade talks in 2013], global trade talks have stalled while the epidemic of Ebola, conflict in the Middle East and Russia’s illegal actions in Ukraine are all adding a dangerous backdrop of instability and uncertainty.”

The emphasis on potential dangers, balancing some more hubristic ministerial accounts of the state of the UK economy, reflects Cameron’s concern – underlined by conversations at the G20 – about the extent to which Britain can detach itself from gathering economic storms.

Politically, Conservatives believe an emphasis on the risks still facing the UK will make anxious voters recoil from handing stewardship of a fragile economy to a relatively untried Labour team.

Some recent polling has seen the economy decline as an issue for voters, partly because there is a belief that the recovery is secured, leading to issues such as the health service and living standards, which have been seized upon by Labour, to rise in importance.

But with Germany, Europe’s manufacturing powerhouse, growing by just 0.1% in the third quarter, the eurozone economy appears to be faltering.

A European Central Bank (ECB) survey showed that inflation would remain at worryingly low levels before picking up slightly next year. The annual inflation rate in the eurozone was near a five-year low of 0.4% in October and the ECB expects a rate of 0.5% for 2014 – well below the target of close to 2%.

The EU may also be only one or two new rounds of sanctions away from pushing Russia into a deep recession as punishment for its interference in Ukraine, a point made in Brisbane by the Russian president, Vladimir Putin.

Cameron stresses that retreating from the world or imposing extra tax and borrowing may seem easy solutions but they would instead prove only to be a repeat of the mistakes of the past.

[Nov 15, 2014] A majority of Americans make less than $20 per hour

Nov 15, 2014 |

Where do you fit on the earnings scale?

According to data compiled by Goldman Sachs, most American workers earn below $20 per hour. Goldman Sachs economists David Mericle and Chris Mischaikow crunched Labor Department data that is used to generate the monthly jobs report that the market closely watches, in particular from the survey of employers.

The chart, shown above, shows that 19% of workers make less than $12.50 per hour, 32% of workers make between $12.50 and $20 per hour, 30% make between $20 and $30 an hour, 14% make between $30 and $45 per hour, and 5% make over $45 an hour.

The economists also found that, while wage growth has been soft, the fastest growth in income has come to the lowest-paid workers.

And they found that the biggest driver to income growth has been rising employment, with help from rising wages and more hours worked.

[Nov 15, 2014] David Stockman Warns, They Don't Ring A Bell At The Top

Nov 15, 2014 |

Needless to say, this relentless expansion of the bubble eventually kills off the bears, the skeptics, the prudent and even the militantly incredulous. Undoubtedly, that is where we are now because the global economic news has been uniformly negative since the October dip, yet the market has resumed its relentless melt-up.

Under such circumstances, therefore, it is well to remember that we are in the middle of the greatest central bank fueled inflation in recorded history, and that this insidious inflation has been channeled into financial assets owing to the arrival of peak debt everywhere around the world.

But that is the Achilles heel of the game. As the bubble takes on ever greater girth, it becomes increasingly susceptible to a negative shock to confidence.


This Kyle Bass interview from Jan. 2013 is as relevant as ever:


I have a lot of respect for Stockman (even though I think he's a bit of an ideologue who could learn from his contemporary Paul Craig Roberts), but he fails to consider the fact that bubbles pop when the CB's allow them to pop. Will the Fed decide to pop the stock market bubble in the next few months or few years? Maybe, maybe not.

He's still focused on fundamentals which mean jack fucking shit for the market. We could have a Mad Max scenario in the real world, and the market could still be making new highs each week.


Stockman, just another old crank ranting about how he missed the biggest bull run in history. Or is he the type of guy who's screaming for a collapse, but is long stocks anyway?

Newsflash, DJIA is up 11,000 pts in 5 1/2 years, anyone who didn't make some money off that is an epic loser.


Sold, have you? Converted your paper profits into cash?

Yeah, sure you did Isaac, the South Sea Trading Company is still going strong! You'd be a fool not to get back in now!


Well take a look, University of Missouri Professor of Economics Videos. MMT is the current Official US Economic Theory... But lo and behold... here is a Professor talking as a Rebel. (Michael Hudson Video, talks about Predators, what Greece Expected by Joining a United Europe, How they got hijacked by the Bankers, 2011)

---- (Michael Hudson Video, Social Security, Simpson-Bowles, Getting Rid of Tax Credits for Mortgages, Fake Crisis for bankers)


Michael Hudson: Finances vs Economy, Credit vs Money [3/18 ENG] ...Sounds like lots of ZH people agree with him on Greece & Financialization of Debt & Government in order to steal the assets. Whole thing is good!

[Nov 14, 2014] Retirement Savings Fears Grip Americans “I Don’t Have Enough” by By Eric Pianin

June 9, 2014 | The Fiscal Times

...A recent Gallup poll found that 59 percent of those surveyed were very or moderately worried they won’t have enough money for retirement – by far their biggest concern.

Many people once counted on a triad of support for retirement – Social Security, personal savings, and employer-sponsored pensions. Yet in the wake of the Great Recession and a long stretch of high unemployment and stagnant wages, the once-dependable foundation has been crumbling.

Related: Rubio’s Retirement Savings Solution: Work Longer

Employers have phased out generous defined benefit pension programs in favor of 401(k)s and other workplace-based retirement accounts. Personal savings have taken a dive as many people have tapped retirement savings to pay the rent or help make ends meet. And many young people seriously question whether the Social Security trust fund will be able to pay them anything by the time they retire.

The latest National Retirement Risk Index from the Center for Retirement Research (CRR) at Boston College says that more than half (53 percent) of households risk falling more than 10 percent short of the retirement income they’ll need to maintain their standard of living. More than 40 percent of retirees are also at risk of running out of money for daily needs, out-of-pocket spending on health care or long-term care, according to the Employee Benefit Research Institute (EBRI).

Even more alarming, the National Bureau of Economic Research recently concluded that nearly one-quarter of Americans could not come up with $2,000 in 30 days if necessary, and another 20 percent would have to pawn or sell possessions to do so. That would mean nearly half of all Americans are financially stressed.

Since 1998, the number of companies offering any sort of defined benefit plan plummeted from 71 to 30 – and an increasing number of those are hybrid plans, where workers accumulate an account balance rather than an annuity. When 401(k)s were created in 1978, they were meant to be a supplement to traditional defined benefit pensions, not a stand-alone retirement account. But over time, they have evolved to serve that purpose – although they typically provide far less in long-term benefits than the old plans.

The reasons for the long decline in personal savings are difficult to pinpoint, but they likely include stagnant real incomes for many workers, rising standards of living and higher consumption, and a weaker dollar than in the past. The savings rate is the percentage of money that one deducts from his or her personal disposable income for retirement.

America’s savings rate fell steadily from the early 1980s through the mid-2000s, ticking up only during or after recessions, according to a Washington Post analysis. It topped 11 percent during President Ronald Reagan's first term. From 2005-2007, the annual rate averaged 3 percent. The savings rate essentially doubled during the Great Recession, and stayed there, averaging nearly 6 percent from 2009-2012. By early 2013, the rate had dipped to 2.6 percent, before rising again to 4 percent by mid-2014.

... ... ...

A Sea Change in Workplace Retirement Plans

Over the past two decades, the workplace retirement landscape has dramatically shifted to defined contribution plans, in which a worker and in some cases the employer contribute to an account managed by the employee. These have largely replaced defined benefit plans, which specify a benefit – often a percentage of the average salary during the last few years of employment – once the worker retires.

Since 1998, the number of companies offering any sort of defined benefit plan plummeted from 71 to 30 – and an increasing number of those are hybrid plans, where workers accumulate an account balance rather than an annuity.

When 401(k)s were created in 1978, they were meant to be a supplement to traditional defined benefit pensions, not a stand-alone retirement account. But over time, they have evolved to serve that purpose – although they typically provide far less in long-term benefits than the old plans.

Related: The 401(k) Loan: America’s Pricey New Piggy Bank

Nearly half of us are dangling on the edge of financial ruin By Beth Braverman

The Fiscal Times

Even as the job market continues to improve, many financial experts recommend that most Americans keep at least three to six months of expenses stashed away in an emergency savings account. Yet that message – despite years of shaky economic times – still hasn’t gotten through.

Over 40 percent of Americans are living paycheck to paycheck, says a new report from Springleaf Financial, a consumer finance company. The findings, released today, apply to people across all education and salary levels.

The study discovered that 24 percent of consumers have less than $250 in their bank accounts on any given payday – leaving them without reserves to handle unexpected costs.

“We know full well that with rising costs and unexpected expenses, consumers may have a tough time making ends meet,” Dave Hogan, executive vice president of marketing and analytics at Springleaf, said in a statement.

‘Rather Go to the Dentist’

Among those surveyed who make more than $200,000 per year, 20 percent said they save rarely, inconsistently, or not at all. One in four consumers with a graduate degree actually couldn’t miss a single month of paychecks without having to borrow or sell assets.

The study put some of the blame for Americans’ failure to save on a lack of financial skills. One in five says they learned about money “the hard way” – and one in five says they would rather go to the dentist than spend half an hour learning money management skills.

The survey was conducted online among 2,010 consumers in October 2014.

In a separate survey done this year by Ameriprise Financial, just a quarter of people said they were trimming their housing expenses or college savings – the big lifestyle decisions that could result in serious savings. By comparison, more than half said they were cutting down on everyday expenses like eating out, entertainment, and clothing.

[Nov 13, 2014] Paul Singer Slams The Fake World: "Fake Growth, Fake Money, Fake Jobs, Fake Stability, Fake Inflation Numbers"

The USSR managed to last 20 years in exactly those conditions: "Fake Growth, Fake Money, Fake Jobs, Fake Stability, Fake Inflation Numbers" ;-).
Nov 04, 2014 |

"Nobody can predict how long governments can get away with fake growth, fake money, fake financial stability, fake jobs, fake inflation numbers and fake income growth. Our feeling is that confidence, especially when it is unjustified, is quite a thin veneer. When confidence is lost, that loss can be severe, sudden and simultaneous across a number of m and sectors."

"The situation is universal, a consequence of incompetent leaders and careless (or ignorant) citizenry."

[Nov 03, 2014] Bubble Exit Rule: You Only Get Out If You Panic Before Everyone Else Does

Just a warning against overconfidence and violating 100-your age asset allocation due to greed or clear insufficiency of the size of 401K to the age/time to retirement. Trying to outsmart Wall Street in this casino game is like trying to pick nickels before a steamroller. As financier J. P. Morgan used to say "During crisis assets return to their legitimate owners". This situation repeats before each crisis because the allure of “reaching for yield” is so strong. That does not mean that the next crisis will happen the next year or in 2016. It just means that when it happen suddenly you will see that many people were swimming without pants.
Zero Hedge

The stock market reached all-time highs last week based upon the machinations of central bankers and the perceptions of speculators that these bankers will always have their back. Yellen, Kuroda, and Draghi are growing increasingly desperate as everything they have done in the last five years has failed to revive their moribund economies. The average person in the U.S., Japan and Europe is far worse off today than they were in 2009 at the height of the worldwide recession. The .1% have vastly increased their riches through the ZIRP and QE policies of central bankers. The rise in stock m is nothing but a confidence game built upon the false belief that there will always be a greater fool to buy overvalued assets acquired by borrowing from the central bankers at 0%. John Hussman understands the nature of markets:

We’re mindful that the financial m move not based on what is true, but by what is perceived.

At present, the entire global financial system has been turned into a massive speculative carry trade. A carry trade involves buying some risky asset [typically on margin -- NNB] – regardless of price or valuation – so long as the current yield on that asset exceeds the short-term risk-free interest rate. Valuations don’t matter to carry-trade speculators, because the central feature of those trades is the expectation that the securities can be sold to some greater fool when the “spread” (the difference between the yield on the speculative asset and the risk-free interest rate) narrows.

He is also understands the move by the BOJ on Friday was made out of panic. It will set in motion tragic consequences for the Japanese people and world financial systems:

With regard to the recent move by the Bank of Japan, seeking to offset deflation by expanding the creation of base money, the move has the earmarks of a panic, which is counterproductive. The likely response of investors to panic is to seek safe, zero-interest money rather than being revolted by it. The result will be a plunge in monetary velocity and a tendency to strengthen rather than reduce deflationary pressures in Japan. In our view, the yen has already experienced a dramatic Dornbusch-type overshoot, and on the basis of joint purchasing power and interest parity relationships (see Valuing Foreign Currencies), we estimate that rather than the widely-discussed target of 120 yen/dollar, value is wholly in the other direction, and closer to 85 yen/dollar (the current exchange rate is just over 112). The Japanese people have demonstrated decades of tolerance for near-zero interest rates and the accumulation of domestic securities without any material inclination to spend them based on the form in which those securities are held. Rather than provoking strength in the Japanese economy, the move by the BOJ threatens to destroy confidence in the ability of monetary authorities to offset economic weakness – in some sense revealing a truth that should be largely self-evident already.

The carry trade is like picking up nickles in front of a steam roller. We’ve seen it all before. The result will be the same.

The narrative of overvalued carry trades ending in collapse is one that winds through all of financial history in countries around the globe. Yet the pattern repeats because the allure of “reaching for yield” is so strong. Again, to reach for yield, regardless of price or value, is a form of myopia that not only equates yield with total return, but eventually demands the sudden and magical appearance of a crowd of greater fools in order to exit successfully. The mortgage bubble was fundamentally one enormous carry trade focused on mortgage backed securities. Currency crises around the world generally have a similar origin. At present, the high-yield debt m and equity m around the world are no different.

Hussman can prove that QE and suppressed interest rates below the rate of inflation have completely failed to benefit the real economy and the real people. It has only benefited Wall Street profits, insiders, and rich speculators. They have set the stage for a financial collapse that will make 2008 seem like child’s play.

High real interest rates generally reflect strong demand for borrowing, driven by investment opportunities that are seen as productive enough to justify borrowing at those rates. They also encourage savings that can be directed to those productive investments. As a result, higher real rates are generally associated with more efficient investment and faster economic growth.

In contrast, depressed real interest rates are symptomatic of a dearth of productive investment opportunities. When central banks respond by attempting to drive those real interest rates even lower to “stimulate” interest-sensitive spending such as housing or debt-financed real investment, they really only lower the bar to invite unproductive investment and speculative carry trades.

We wouldn’t suggest that the Fed target above-equilibrium interest rates, but we are also entirely convinced that below-equilibrium interest rates are harmful to long-term economic and financial stability. Despite the ability of these policies to create short-term bursts of demand – enough to hold the global economy at growth rates that remain just at the border that has historically delineated expansions from recessions – the ultimate and rather predictable result of these policies will be another round of financial chaos.

Bernanke and Yellen created $3.5 trillion out of thin air since 2008 and have done absolutely nothing for Main Street USA. None of that $3.5 trillion has ever reached average people in the real world. It has been funneled to the .1% and used to speculate in the m , creating simultaneous stock, bond and real estate bubbles. Now central bankers around the world desperately attempt to keep the bubbles from bursting simultaneously. They will fail once again.

As the central bank creates more money and interest rates move lower, people don’t suddenly go out and consume goods and services, they simply reach for yield in more and more speculative assets such as mortgage debt, and junk debt, and equities. Consumers don’t consume just because their assets have taken a different form. Businesses don’t invest just because their assets have taken a different form. The only activities that are stimulated by zero interest rates are those where interest rates are the primary cost of doing business: financial transactions.

What central banks around the world seem to overlook is that by changing the mix of government liabilities that the public is forced to hold, away from bonds and toward currency and bank reserves, the only material outcome of QE is the distortion of financial m , turning the global economy into one massive speculative carry trade. The monetary base, interest rates, and velocity are jointly determined, and absent some exogenous shock to velocity or interest rates, creating more base money simply results in that base money being turned over at a slower rate.

Those expecting hyperinflation from these money printing measures will have to wait awhile. It will happen after deflation engulfs the world and those in power panic. But, confidence in fiat currency and those controlling its issuance is waning rapidly.

Hyperinflation results when there is a complete loss in the confidence of currency to hold its value, leading to frantic attempts to spend it before that value is wiped out. I expect we’ll observe significant inflationary pressures late in this decade, but present conditions aren’t conducive to rapid inflation without some shock to global supply.

The fact is that all financial m are extremely overvalued and will crash. The speculators have already forgotten the tremors of the coming earthquake which occurred two weeks ago. Treasury rates plunged, along with stock m , as there were no buyers to be found. Confidence dissipated in an instant. Fear was palpable. Everyone has a choice. You can look like an idiot before the crash or after it.

Overvalued bull market peaks may still be drawn-out and frustrating. They can seem endless (see The Journeys of Sisyphus) and then suddenly unravel far more rapidly than it seems they should (see Chumps, Champs, and Bamboo) at which point the “lagging” features of a defensive stance are often reversed with striking speed. As the late MIT economist Rudiger Dornbusch once observed, “The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.” Recall that the 2000-2002 decline wiped out the entire total return of the S&P 500 – in excess of Treasury bill returns – all the way back to May 1996. The 2007-2009 decline wiped out the entire total return of the S&P 500 – in excess of Treasury bill returns – all the way back to June 1995.

As we’ve noted before, the problem with what we call the Exit Rule for Bubbles – “you only get out if you panic before everyone else does” – is that you also have to decide whether to look like an idiot before the crash or an idiot after it.

[Nov 01, 2014] Richard Lehmann's 6% Solution Finding Gems Among Junk Bonds

Lehmann: I think it proves that Milton Friedman wasn’t exactly right in terms of saying that the printing of money is a major cause of inflation, that there are other mitigating factors. And the velocity of money isn’t there because the economy isn’t moving. So, the multiplier effect of all this pumping of money hasn’t happened. But that doesn’t mean it isn’t sitting there on the periphery, waiting for the economy to pick up.

Forbes: The gunpowder is still there, waiting for a match?

That’s it. The fuse is still burning.

Forbes: And has that created a bubble in the stock market?

Lehmann: Yes. The Fed policy has basically punished anybody that wants to invest into fixed income. And therefore, especially things like pension funds, which have 7% and 8% earnings assumptions, have had to go into the stock market to try to boost up their earnings. Because otherwise, the companies would have to dramatically increase their funding requirements. And that would be a real downer to the economy.

Forbes: You’ve made note, and maybe you can share it with us, that with the easy money, large companies find it easy to borrow at a very low rate. And this has led to stock buybacks. How much stock buybacks have there been since the middle of the last decade?

Lehmann: It seems to be a major activity. And it makes sense, in a certain context, that if companies aren’t growing or are even shrinking in their sales, then they’re throwing off cash and buying back their stock. It makes sense. But if you look back in history, it almost seems like they’re buying at the peaks or near it, rather than when things are really cheap.

[Oct 29, 2014] Good Riddance To QE - It Was Just Plain Financial Fraud

QE has finally come to an end, but public comprehension of the immense fraud it embodied has not even started. In stopping QE after a massive spree of monetization, the Fed is actually taking a tiny step toward liberating the interest rate and re-establishing honest finance. But don’t bother to inform our monetary politburo.

As soon as the current massive financial bubble begins to burst, it will doubtless invent some new excuse to resume central bank balance sheet expansion and therefore fraudulent finance.

But this time may be different. Perhaps even the central banks have reached the limits of credibility - that is, their own equivalent of peak debt.

Living Your True Wealth -

Remember my son’s comment about the drivers of expensive cars? You probably know at least a couple of people who put on a fantastic display of wealth even though they don’t have much. They are so concerned about appearing successful that they make buying decisions that get in the way of long-term financial success.

It may never happen, but our relationship with money would change considerably if our financial decisions were transparent to the world. For instance, what would change if the car we drive or the home in which we live could no longer hide that we’ve saved nothing for retirement? Would it be easier to focus on the financial choices that help us instead of hurt us?

Maybe this idea is too radical, but for the next week, I’d love for you to test this theory. Try living as if everything you did financially was public information. How does it affect your decisions? Do you find yourself still doing things that just look good, or are you doing things that actually are good for you? Do you find it easier to be your authentic self? And, perhaps most important of all, do you now understand the difference between buying the trappings of success and actual success?

[Oct 24, 2014] Van Hoisington And The Fed's Bubble: "Overtrading" And "Discredit" Always End In "Revulsion"

It's six years since the last bubble burst. So it's time for a new bubble ;-). In this sense Zerohedge is important antidote to Wall Street propaganda machine. And might help to avoid stupid moves, which people usually do after a long rise of stock market.
10/23/2014 |

The U.S. economy continues to lose momentum despite the Federal Reserve’s use of conventional techniques and numerous experimental measures to spur growth. As Kindleberger clearly stated, the process of excess liquidity fueling higher prices in the face of faltering fundamentals can run for a long time, a phase Kindleberger called “overtrading”. But eventually, this gives way to “discredit”, when the discerning few see the discrepancy between prices and fundamentals. Eventually, discredit yields to “revulsion”, when the crowd understands the imbalance, and m correct.

Goldman Makes It Official That the Stock Market is Manipulated, Buybacks Drive Valuations

It’s remarkable that this Goldman report, and its writeup on Business Insider, is being treated with a straight face. The short version is current stock price levels are dependent on continued stock buybacks. Key sections of the story...

[Oct 18, 2014] Fear of double dip is back

Zero Hedge

From exuberant escape velocity 'expansion' hopes and dreams in June, to 'slowing' in September, and 'drastic downward revisions' in early October, the Goldman Sachs Global Leading Indicator has had a very troubled recent past (as QE is just 4 POMOs away from coming to an end). But nothing could prepare the avid reader for what happened to the infamous Goldman "swirlogram" this month - an epic, total collapse. As Goldman 'politely' notes, "the October Advanced reading places the global cycle deeper in the ‘Slowdown’ phase, with momentum (barely) positive and declining."

And just as amazing: the world has gone from Expansion and Recovery, to Slowdown and borderline Contraction in the span of just 3 months.


Oh, and Rickards noted on a chart that the velocity of money now is almost identical in slope and duration to the months immediately preceding the 1929 crash.

Bell's 2 hearted

Channel stuffed. Wholesale inventories rising more than expected. NRF (national retail federation) reports record amount of imports for the holidays ... we just had a negative retail sales month. Blowing out of HY credit and more important OCC and FDIC have warned on subprime auto loans going sour.

Rising inventories + slowing demand = inventory correction (recession if bad enough ... it will be bad enough)


Bells, I learn a lot from your comments, but I had to downtick you here for appearing to believe that the 'recession' ever ended.

Bell's 2 hearted

haha. I agree with you 100%. "official" recession ended june 2009


Probably deflation in some areas, hyperinflation in others. I think U.S. might be crazy enough to hyperniflate. Europe, China will probably deflate. Again. Russia could go either way, but with the current action in its currency, may inflate significantly. Unless Putin reveals some gold-backing...doubtful that he will, but it's a possibility as a 'stabilization measure' or something similar.

Pool Shark

Once a banker creates money out of thin air by lending it into existence, there are only 3 possible outcomes:

1) The borrower goes even deeper into debt while continuing to service the original debt (what's been happening over the last 30 years). This is necessary to the continuation of our existing Ponzi financial system, and is where inflation comes from. The Ponzi must always increase: money and credit must constantly be created, or the system implodes. Unfortunately, no Ponzi scheme can go on forever (See # 2 & 3 below:)

2) The debt is payed off. This destroys the money that was in existence and is deflationary.

3) The debt is defaulted. This destroys the value of the loan 'asset' on the bank's books and is also deflationary. This is what happened in 2008 resulting in a rapid downdraft of deflation, which was reversed only by the massive credit creation of the central banks. Note that the debts and bad assets never went away, they were merely 'papered-over.'

Because the US dollar is still the world's reserve currency, a hyper-inflation cannot happen. Hyper-inflation is a political, not an economic event.

The most likely outcome of the current mess is a replay of 2008 on steroids (i.e., initial defaults, followed by a 'hunt for liquidity' liquidation of assests to meet obligations, followed by an immediate slowdown in economic activity, resulting in a vicious-cycle feedback loop of debt destruction, asset price collapse and eventually depression). That will all be highly deflationary...

[We are all Japan. Cash, Bonds, Gold...]


Another few more cases of Ebola in the US and many people will stop flying, going to sporting events and restaurants, and heaven forbid, going to malls. With thousands of people being monitored for Ebola, we may be just a week or two away from this reality. Yellen better be ready to buy airlines and hotels and restaurants with a trillion or so in freshly-minted fiat.

Have not heard anything about Nina Pham's boyfriend who worked at Alcon and was allegedly admitted to a hospital for monitoring.

Ebola fears blamed for poor turnout at mainland's largest trade fair

Lack of buyers at the mainland's largest trade exhibition amid fears over disease and economy

The number of buyers attending the mainland's largest trade fair was down significantly yesterday, the first day of its autumn session, with the downturn attributed to fear of the Ebola virus and global economic gloom.

The opening of the fair coincided with reports the number of Ebola cases in West Africa could reach between 5,000 and 10,000 a week by December and that a second nurse who contracted the virus while treating a patient in Texas boarded a plane the day before she fell ill, sparking fears the disease could spread elsewhere in the US.

Exhibitors at the Canton Fair, held twice a year in eastern Guangzhou, said they had seen far fewer buyers yesterday than at the spring session in April.

"In the past the hall was full of people. There are fewer people this session, around half of that in the spring session this year," said Joyce Lin, a sales representative for Guangdong Kito Ceramics, which sells ceramics used for building materials. She said her company's exports had declined.


<<But given that it's all just bullshit anyway, they probably just do this to mix things up a bit>> far does the the market have to fall before 'folks' start believing it's really down? I think the machines and printers may have a wee credibility problem with their market numbers, going up AND going down, these days. Nobody I've heard from thinks this fall is far. Bet it'll take a lot bigger than 2008 to get a good panic going this time.

Trouble with believing the printers will always come to the rescue, is that this same belief leads to their inability to do so. It's just logic. You need some real, true believers in there to take the losses, in order to convince anyone that this is a real market.

But the jig is up. Every BTFATH moment of the last six years, has proven that this is nothing but printing. Delete risk, delete market. There are no market moves anymore, no charts to follow, no production to judge. There is only what the central planners do and don't do next. I think we're done here, at least with this economic iteration.

But then, I always was an optimist.

[Oct 18, 2014] 4 better alternatives to Bill Gross and Pimco - MarketWatch

Most of those funds use lower credit rating bonds.
Good alternatives to Bill Gross and Pimco
Fund Ticker Yield 1-Year Return 3-Year Return 5-Year Return Expense Ratio
DoubleLine Total Return Bond DLTNX 4.85% 6.24% 5.08% NA 0.73%
Fidelity Strategic Income FSICX 3.71% 9.09% 5.78% 7.73% 0.69%
Loomis Sayles Bond LSBRX 3.99% 12.87% 8.54% 10.62% 0.92%
Pimco Income PONDX 4.98% 11.11% 11.47% 13.20% 0.77%
Source: Yahoo Finance
DoubleLine Total Return Bond. Manager Jeff Gundlach may become the Bill Gross of his generation. (He’s 55.) After having a terrific decade at TCW Total Return bond fund, he started DoubleLine in 2010. DoubleLine Total Return has good, if not quite stellar, returns over nearly five years, though it has attracted more than $2.47 billion this year. Its yield is just below 5%. Turnover is only 14%

Fidelity Strategic Income. Joanna Bewick is the most low-profile manager in a group of heavyweights, but she has posted very good returns since taking over in 2008. Fidelity Strategic Income is small, giving her more leeway, and is invested heavily in U.S. and foreign government bonds. Turnover is a relatively high 135%. This is a good choice for people who have Fidelity accounts, though I might not go out of my way to buy it.

Loomis Sayles Bond. Another investing legend, Dan Fuss, co-manages this fund with Elaine Stokes and Matt Eagan. Fuss is 80, 10 years older than Gross, so I wouldn’t invest just because of him. But I’ve interviewed Eagan and found him very bright, and the fund’s performance is excellent. Turnover, at 28%, is also low.

Pimco Income. Co-managed by new CIO Ivascyn and Alfred Murata, who both won Morningstar’s Fixed-Income Manager of the Year in 2013, Pimco Income’s performance has smoked many other unconstrained bond funds over the last five years. Ivascyn probably won’t be as hands on as he used to be, so Murata will likely do more heavy lifting.

One reservation: The fund’s turnover rate was a blistering 251% — way too high! I’d wait a bit to see if the managers reduce that over the coming months. But if you’re in Pimco Total Return and want an alternative, look no further than this stellar next-door neighbor rather than following the once-great Bill Gross down his long, lonesome road.

Howard R. Gold is a MarketWatch columnist and founder and editor of GoldenEgg Investing, which offers simple, low-cost, low-risk retirement investing plans. Follow him on Twitter @howardrgold.

robert laden

Probably shouldn't blame Gross too much. It's tough to make money in the bond market when credit-worthy bonds are yielding zero after taxes and inflation.

"Unconstrained" bond funds sounds like it could be the new face of "mortgage backed securities", except that the "mortgage" part has probably been replaced by "sub-prime car loans".

Don Bowmore

@robert laden

and "student loan backed securities" ?

[Oct 18, 2014] A quote from previous crisis

After a spectacular year-long rally in the stock market, investors are exuberant. Stock market bears have become an endangered species, but reports of their extinction are greatly exaggerated. Indeed, there are many reasons to believe that a return to bear market conditions may be imminent. If the m turn down again, it won't be pretty but bearish investors may be able to harvest impressive profits by betting on lower prices.

Regardless of market conditions, most investors are overwhelmingly bullish. They have been trained to hold stocks through thick and thin. The bear market of 2000-2003 proved that the average investor will hold stocks through devastating declines, much like a deer in the headlights. Few investors are even aware of techniques such as short selling, put options, or inverse funds that allow profiting within bear m . For savvy traders, a fast moving bear market can provide stellar profits using these techniques. But a bear market implies that most investors are losing. Severe losses can lead to extreme resentment against those traders who profit from these environments. If you are a profitable bear trader, you should be sensitive to those who are losing while you are winning. In a very real sense, the money that you are making is the money they are losing.

Cocktail conversations about stocks are typically brag sessions about being long a stock that went to the moon. When was the last time you heard someone brag about a spectacular short sale? The next time you are at a party, try telling your best short-sale story and see what kind of reaction you get. Hopefully, your friends will be polite.

The most popular form of bear market investing is short selling, a practice where the investor sells borrowed stock from a broker with the obligation to purchase it back later, presumably at lower price, with the profit being the difference between the sale price and the repurchase price. Even though there is nothing illegal or unethical about short selling, it is still regarded in popular culture as a rogue practice. Many people consider it unpatriotic to sell short the country's finest firms and profit from their troubles. Short sellers have always created resentment, particularly during bear m when the majority of investors have lost large sums of money.

Stock investing is fundamentally an optimistic pursuit. Most people (particularly Americans) have a natural tendency to be optimistic. Short selling goes contrary to that natural tendency. This may be why short sellers are mistrusted. Short sellers are not necessarily pessimistic, they are just identifying a trend and profiting from it.

One of the most famous short sellers on Wall Street was Jesse Livermore who emerged from the 1929 crash with almost $100 million. Jesse certainly caused a lot of resentment among all of the ordinary people who had lost fortunes in the crash. Some even blamed Jesse and other short sellers for the crash. In response to investor outrage, the stock exchanges enacted rules to limit short selling that remain to this day. After the crash, Livermore often received personal threats and was forced to hire bodyguards. Sadly, Jesse lost his entire fortune in a mistimed investment strategy a few years later and eventually committed suicide. The tragic story of Jesse Livermore has become a parable for the "evils" of short selling.

Other well-known bears have been teased and ridiculed during bull m , then shunned and reviled when their bearish predictions came true. Bearish analyst Jim Grant endured years of ribbing by Louis Ruckeyser on the Wall $treet Week television show during the long bull market. The same Mr. Ruckeyser fired "permabear" analyst Gail Dudack just months before the stock market peak in April 2000. The unfortunate Ms. Dudack disappeared into obscurity just as her bearish forecasts proved correct. Professional stock analysts know that a bearish outlook may permanently ruin a promising career. This may be why bullish analysts vastly outnumber bearish ones. There is little room on Wall Street for a bear.

Stock market bears are always in a battle with a perpetually bullish "Wall Street Industrial Complex". These institutions are designed to sell securities to the public so they are always promoting stocks as safe and sound places to invest capital. Trading commissions by short sellers generate little revenue for the brokerage industry. In fact trading commissions in general are only a small part of investment industry profits. Management fees, investment banking, research, media, and a plethora of related activities make up the big money the investment industry. These institutions need a constant inflow of new capital to survive. Only a continuously bullish marketing message can lure investors to buy these products and services.

This bullish message is reinforced by the financial media who receive the bulk of their advertising revenue from the same industry that is after your investment dollars. They have created 24-hour "news" channels that are really nothing more than non-stop infomercials for stock investing. Most people get their financial information exclusively from these tainted sources. Financial media influence is powerful and pervasive. Most common investors simply reflect the bullish perspective of the information they receive from the media.

It is not the purpose of this article to discourage purchasing stocks. Quite the contrary. Stock investing is an essential part of a healthy economy. But there is a time to buy and a time to sell. The media will tell you that anytime is the right time to buy but will never tell you when to sell. Successful investors listen to the message of the m , not the talking heads on the cable news network. The financial media will give no comfort or assistance to short sellers or any other species of the bear family. Short sellers must think independently and not be influenced by the media-controlled stock market pop culture.

It is important to remember that other investors may deeply resent all of the money you have made selling their favorite stocks short. You are on the other side of most investor's trades and making all of the money that they are losing. Be careful how you describe your investment success. Be sensitive and generous to those who are losing. Don't brag about your short-selling triumphs.

A bear market usually implies economic distress. Those who profit from this distress have an obligation to give back to society and help those who have been hurt by deteriorating economic conditions. Bear investors in particular should give generously to charity and work for the public good. This is not only for good karma, but to diffuse any resentment that would be generated by profiting from a bear market.

[Oct 12, 2014] Here We Go Again Greece Will Be In Default Within 15 Months, S&P Warns

Collapse without triggering CDS as that would end the Eurozone’s amusing monetary experiment and collapse the Deutsche Bank $100 trillion house of derivative cards
Zero Hedge
Remember Greece: the country that in 2010 launched Europe's sovereign solvency crisis and the ECB's own helpless attempts at intervention, which later was "saved", only to default shortly thereafter (but without triggering CDS as that would end the Eurozone's amusing monetary experiment and collapse the Deutsche Bank $100 trillion house of derivative cards), which later was again "saved" when every single global central bank made sure Greek bonds became the only yield-generating securities in the world? Well, the country which at last count was doing ok, is about to not be ok. Because according to none other than S&P, at some point over the next 15 months, Greek debt is about to be in default when the country is no longer able to cover its financing needs. In other words, back to square one.

As Bloomberg reports, citing Real News, S&P analyst Marie-France Raynaud said Greece can’t cover its own financing needs.

How is that possible? Isn't Europe so fixed, it no longer has anything to worry about except deflation, pardon, inflation?

Guesst not. According to Bloomberg, S&P estimates Greek financing needs for the next 15 months to be at EU43 billion.

This is a problem because even if Greece sells bonds this year and next, sales won’t be enough to cover net financing needs. So maybe Greece will sell more bonds? Well, the problem with that is that the second the LIFO paradigm of bond investing no longer works, and the last guy in may be stuck holding the bag, nobody will want to buy 1 penny in debt issued by Greece.

The specifics: S&P estimates Greece will draw EU5 billion from intl bond sales, EU20 billion from internal mkt, EU12 billion from official lenders inluding the IMF in next 15 mos. S&P also forecasts Greece will repay EU3 billion in bonds held by investors who refused to participate in 2012 debt writedown, and if it doesn't then Greece will following Argentina in being held in "contempt to court" for cramming down foreign law covenants. Just kidding: that would mean the global legal system actually works instead of serves merely to make the rich richer.

ucgsblog ,

October 4, 2014 at 9:10 pm

It’s the latter. Here’s the gist of what happened:

Let’s say that you’re making $90k a year, and you run three companies: tourism, ship construction and warehousing, You want to expand, so you take out a loan. Each one of those, (for simplicity’s sake,) makes $100k and costs $70k. So to expand, you take out a loan, say $300k apiece. You’re making a profit, everything’s going great, and you’re looking to expand again. Even better news, someone offers you unlimited credit to expand. What do you do if you’re optimistic and have unlimited credit? You overexpand. Instead of taking $300k on $30k profit, you take $3 mil. And then the crisis hits. So now you have a lot of debt, a lot of workers, and no one wants to buy your original product, nevermind your expanded products.

On top of that, you have to subject your company to austerity. The problem is that if you’re running tourism and subject your workers to austerity, tourism fails. That’s what happened to Greece in a nutshell; by adopting the Euro, the Greek government went on an uncontrolled spending spree. When you have your national currency, you’d either have to buy Euro reserves, (or Dollar reserves,) with your currency. If your currency is fucked, you cannot borrow more currency. If the Dollar’s at 100 of YCU (your currency units), you cannot get it for 50. Unless you’re a member of the Euro Zone. Since the Euro is backed by Germany, and thanks to loose restrictions and creative financing,, the Greek government breached their currency safety wall. This means that Greece has a debt that they cannot pay back.

The financial machinations continued, but the point is that Greece still cannot pay back their debt. If I make $30k and I’m $3 mil in debt, can I pay that back? On top of that, Greece was hit hard with austerity, which further destroyed their ability to pay back the debt that they couldn’t pay in the first place. It’s going to be a fall into the abyss for Greece, so the EU is, allegedly, applying pressure to credit agencies to be nicer to Greece, meaning that those projections are the most optimistic that S&P could manage to run on their simulators.

What’s going on in Greece is certainly interesting from an analytical perspective, i.e. “what happens when a country breaches its currency safety wall”, but for the average Greeks they really suck. Greece can default now or Greece can default later. Add Russian sanctions in response to EU sanctions on top of that, and, well, poor Greece. In more ways than one.

[Oct 10, 2014] Illusionary Growth by PAUL CRAIG ROBERTS

Cult of GDP existed in the USSR and served the same purpose: to hide real problems and stagnation of the economy... Without new technological breakthrough, it doubtful the this period of stagnation will end by itself. Money printing since 2008 allowed to make the shock milder (and conceal the death of neoliberal doctrine), but at one time chickens might come to roost.
Oct 3, 2014 |

Poverty Report Contradicts GDP Claims

It is amazing how the government manages to continue selling Brooklyn Bridges to a gullible public. Americans buy wars they don’t need and economic recoveries that do not exist.

The best investment in America is a highly leveraged fund that invests only in large cap companies that are buying back their own stocks. Many of the firms repurchasing their stocks are borrowing in order to push up their stock prices, executive “performance bonuses,” and shareholders’ capital gains. The debt incurred will have to be serviced by future earnings. This is not a picture of capitalism that is driving the economy by investment.

Neither is consumer spending driving the economy. The US Census Bureau’s 2013 Income and Poverty Report concludes that in 2013 real median household income was 8 percent below the amount in 2007, the year prior to the 2008 recession and has declined to the level in 1994, two decades ago! Even though real household income has not regained the pre-recession level and has declined to the level 20 years ago, the government and financial press claim that the economy has been in recovery since June 2009.

Neither is an increase in consumer debt driving the economy. The only growth in personal debt is in student loans.

Real retail sales (corrected with a non-rigged measure of inflation) remain at the level of the bottom of the recession in 2009. Macy’s , J.C. Penny’s, and Sears store closings are further evidence of the lack of retail sales growth, as is the fact that two of the three dollar store chains are in trouble. Walmart’s sales are declining.

The basis of auto sales hype is subprime loans and leases taken by those who cannot qualify for a loan to purchase.

Housing starts remain far below the pre-recession level, which is not surprising when available jobs are part-time with no benefits. Such jobs cannot support the formation of households and purchase of homes.

Where does the government’s second quarter 2014 real GDP growth rate of 4.6 percent come from? It comes from an understated inflation measure and jiggled numbers. It is not a correct figure. Nothing has occurred in the economy to turn it from a first quarter decline of more than 2 percent into a second quarter growth of 4.6 percent.

The 4.6% number is pulled out of a hat to set the stage for the November election.

It is extraordinary that economists and the financial media permit the government to get away with its false economic reporting. Of course Wall Street likes good news . . . but fake news that misleads investors and covers up economic policy mistakes?

Clearly, something is wrong with the government’s economic reporting. It is not possible to have real GDP growth when real median family incomes are declining and business investment consists of corporations buying back their own shares. Either the government’s GDP estimate is incorrect or the Census Bureau’s Income and Poverty report is incorrect. Apparently Washington doesn’t understand that if it is going to rig the numbers, it must rig all the numbers.

The rigged inflation measures create illusionary real GDP growth. They also block cost-of-living adjustments to Social Security pensions. Indeed, the main purpose of the rigged inflation measures is to get rid of “socialistic” Social Security by allowing inflation to gradually erode away the real values of “entitlements.” Republicans always want to cut “entitlements” that people have paid for over their working lifetime with the payroll tax. But Republicans never want to cut the payroll tax. They need the revenues in order to bail out the big banks and to pay for never-ending wars.

Washington has been conducting needless wars abroad for 93 percent of the 21st century at a cost of trillions of dollars. More trillions have been wasted bailing out banks that deregulation permitted to become “too big to fail.” During the past seven years, millions of Americans have lost their jobs and their homes, and food stamp rolls have reached record numbers. These hurting Americans have been ignored by policy-makers in Washington.

Clearly, government in America is focused on something different from a healthy economy and the well being of citizens. We call it democracy, but it’s not.

Paul Craig Roberts is a former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal. Roberts’ How the Economy Was Lost is now available from CounterPunch in electronic format. His latest book is How America Was Lost.

[Oct 09, 2014] U.S. stocks, dollar sink as global growth woes multiply

It might well an end to the created by FED money printing period of irrational exuberance" where all those "mad money" instead of going to infrastructure went to speculation and propelled S&P500 to 2000.

Wall Street slumped on Thursday as anxieties about global economic growth smothered a short-lived, Federal Reserve-sparked rally in equity m around the world.

The dollar gave up some gains from a remarkable three-month run-up and U.S. benchmark bond yields touched one-year lows as investors shrugged off encouraging U.S. jobless data.

Oil prices, deeply affected by the dollar's value, tumbled to near a two-year low.

Energy stocks were big losers on Wall Street, where leading indices were off sharply at mid session. The MSCI index of world stocks was off 0.9 percent at 407.53.

The Dow Jones industrial average (.DJI) fell 311.82 points, or 1.83 percent, to 16,682.4, the S&P 500 (.SPX) lost 36.73 points, or 1.87 percent, to 1,932.16 and the Nasdaq Composite (.IXIC) dropped 83.10 points, or 1.86 percent, to 4,385.49.

The S&P Energy Index (.SPNY) was down 3.5 percent on Thursday, a day after investors gave the U.S. stock market its best day of the year as Fed meeting minutes suggested the central bank would not rush interest-rate hikes.

European shares hit a fresh two-month low as German exports fell 5.8 percent in August, the worst decline since January 2009. The data from Europe's biggest economy fed anxieties about recession in the euro zone.

Brent oil fell below $90 a barrel. Prices have been hurt by a supply glut and concerns about global economic growth and are now down 20 percent from June.

[Oct 09, 2014] The Greatest Trick Mr. Market Ever Played by Bill Bonner via Acting-Man blog,

Zero Hedge
The Mantra

Yesterday, gold climbed back above $1,200 an ounce. US stocks went nowhere. Meanwhile, a chill went down our spine. A sense of dread filled our frontal cortex.

We read a report that was designed to give investors courage and hope. Instead, it felt to us like a guilty verdict in a murder trial. Even with good behavior, our sentence would probably last longer than we would.

A chart told the story. It showed three bull m over the last 20 years. In the 1990s, the S&P 500 total return was 227%. Then from 2002 to 2007, another bull market. The total return this time: 108%. And from 2009 to 2014, the S&P 500 returned another 195%.

The lesson is unmistakable. It tells you to get in stocks… and stay in. If the market has a fainting spell, don’t get dizzy. Stick with stocks!


Don’t let the occasional 50-60% crashes disturb your peace of mind! You will always win in the long run! Long term bear m don’t exist…well, maybe except in Japan. And much of the 18th century. But other than that, nothing can go wrong – click to enlarge.

Buy the Dips?

“Yes, we’ve seen some weak periods,” say the wealth managers, investment counselors and stockbrokers. “But they’ve always been followed by even greater strength. Each high has led to an even higher high.”

This is the message taken on board by a generation of investors. And if you go back further, you will find the same lesson learned by their fathers… even their grandfathers.

Since the end of World War II, there have been up m , down m and sideways m . But if you had just gotten in and stayed in over any substantial length of time, you would have done well.

That is true for almost all financial assets – at least over the last 35 years – and true for stocks, especially, over the last 70 years. In 1960, the S&P 500 was 59. Yesterday, it was 1,964.

The lesson is now imbedded in our race memory… in our collective unconscious… and in our brains, our culture and our muscles. Even after a stroke or Alzheimer’s… after senile dementia and adult diapers… we will recite it on our deathbeds: “Buy the dips.”

We don’t have to think about it. We may fear the next recession… or the next sell-off on Wall Street… but we are confident the darkest night will always be followed by a bright dawn – always has!

And always will. At least, until it doesn’t.

2-Nikkei, Long term

A picture of the “impossible” – a stock market that remains 60% below its peak value almost a full 25 years later. It frequently paid to buy the dips, but there was never a full retracement of the lost ground – click to enlarge.

Mr. Market’s Biggest Coup

But what if Mr. Market is about to pull his biggest coup? What if the next dark night lasts 10… 20… 30 years? What if the experience of the last 70 years was sui generis? What if it was the result of particular conditions, which have now changed… and can’t be repeated? What if we are now looking at highs that we will never again see in our lifetimes?

Of course, what we don’t know about the future is encyclopedic. But wouldn’t it be a nice trick on Mr. Market’s part?

After World War II the US had the world’s largest economy – by far – and unlike its rivals in Europe, it was still intact. The GIs came home. They got married… they had the famous baby boom children… they started businesses and careers. Credit expanded – up 50 times since then.

And now, with interest rates lower than ever before, the credit expansion must be nearing its end. World War II vets are dying at the rate of about 1,000 a day. And their children are retiring… at a rate of 10,000 every day. The boomers are no longer adding to wealth; they’re subtracting from it.

They’re no longer expanding credit by borrowing to buy new houses and new cars; now, they’re living off their investments and Social Security, counting on their own savings or the kindness of strangers to see them through the rest of their lives.

You heard about the great jobs report on Friday. Some 248,000 new jobs were created. But wait… The real story is that of the 14 million people added to the adult population of the US since 2008, only 1 million have found real jobs.

That’s the important story: Growth is slowing. We have more people… but fewer of them paying the bills. Reagan’s former budget adviser David Stockman comments:

“Going back to September 2000, for example, there were only 76 million adults not in the labor force or unemployed, and that represented just 35.8% of the adult population of 213 million.

This means there has been a 26 million gain in the number of adults not working – even part-time – during that 14-year period. About 10 million of that gain is accounted for by retired workers on Social Security – a figure which has risen from 28.5 million to 38.5 million during the interim.

But where are the other 16 million? The answer is on disability (+4.5 million), food stamps (+25 million), survivors and dependents benefits, other forms of public aid, living in parents’ basements on student loans or not, or on the streets.

The employment ratio has plunged; full-time breadwinner jobs have actually shrunk; total labor hours employed have been stagnant; real GDP has grown at only 1.8% annually for 14 years – compared to 4% annually between 1956 and 1970; and real net capital investment is 20% below its turn-of-the-century level.

This isn’t at all like the postwar period. It is a whole different ballgame. We may never again in our lifetimes see stocks so high.”

3-labor force participation rate

Labor force participation is in a steep downtrend since the peak of the 1990s stock market mania – click to enlarge.

Charts by: BigCharts, St. Louis Federal Reserve Research

[Oct 08, 2014] IMF warns period of ultra-low interest rates poses fresh financial crisis threat

Quote: "loose monetary policies also prompted investment in high-yield but risky assets and for investors to take bigger bets."
The Guardian

A prolonged period of ultra-low interest rates poses the threat of a fresh financial crisis by encouraging excessive risk taking on global m , the International Monetary Fund has said.

The Washington-based IMF said that more than half a decade in which official borrowing costs have been close to zero had encouraged speculation rather than the hoped-for pick up in investment.

In its half-yearly global financial stability report, it said the risks to stability no longer came from the traditional banks but from the so-called shadow banking system – institutions such as hedge funds, money market funds and investment banks that do not take deposits from the public.

José Viñals, the IMF’s financial counsellor, said:

“Policymakers are facing a new global imbalance: not enough economic risk-taking in support of growth, but increasing excesses in financial risk-taking posing stability challenges.”

He added that traditional banks were safer after the injection of additional capital but not strong enough to support economic recovery.

Viñals said the IMF had analysed 300 large banks in advanced economies, making up the bulk of their banking system. It found that institutions representing almost 40% of total assets lacked the financial muscle to supply adequate credit in support of the recovery. In the eurozone, this proportion rose to about 70%.

“And risks are shifting to the shadow banking system in the form of rising market and liquidity risks,” Viñals said. “If left unaddressed, these risks could compromise global financial stability.”

The stability report said low interest rates were “critical” in supporting the economy because they encouraged consumers to spend, and businesses to hire and invest. But it noted that loose monetary policies also prompted investment in high-yield but risky assets and for investors to take bigger bets. One concern is that much of the high-risk investment has taken place in emerging m , leaving them vulnerable to rising US interest rates.

“Accommodative policies aimed at supporting the recovery and promoting economic risk taking have facilitated greater financial risk taking,” the IMF said. As evidence it pointed to rising asset prices, smaller premiums on riskier investments and the lack of volatility in financial m . In many cases, the IMF said the behaviour of investors was at odds with the state of the global economy.

“What is unusual about these developments is their synchronicity: they have occurred simultaneously across broad asset classes and across countries in a way that is unprecedented.”

The IMF said there was a trade-off between the upside economic benefits of low interest rates and the money creation process known as quantitative easing and the downside financial stability risks. While its report found that in some countries, including the UK and the US, economic benefits were becoming more evident, it warned that

“market and liquidity risks have increased to levels that could compromise financial stability if left unaddressed”.

It said developments in high-yielding corporate bonds were “worrisome”, that share prices in some western countries were high by historical norms, and that there were pockets of real estate over-valuation.

“The best way to safeguard financial stability and improve the balance between economic and financial risk taking is to put in place policies that enhance the transmission of monetary policy to the real economy – thus promoting economic risk taking – and address financial excesses through well-designed macroprudential measures.”

These include tougher supervision of banks, requirements on them to hold more capital, and curbs on lending to specific sectors such as housing.

Viñals said it was time for traditional banks to overhaul their business models. This would involve not only changing the focus of their lending, but also consolidation and retrenchment. “In Europe, the comprehensive assessment of balance sheets by the European central bank provides a strong starting point for these much-needed changes in bank business models,” he said.

elektrafortyseven, 08 October 2014 2:12pm

time for traditional banks to overhaul their business models.

In other news ... turkeys vote for Christmas.

phildigbybayliss -> elektrafortyseven, 08 October 2014 5:25pm

This has got bog all to do with turkeys or christmas (i.e self regulation).

Larry Summers (ex Obama treasury guru) stated: if you are too big and too systemic to fail you need a too big and too systemic regulator to regulate you (see the video on

Bring back the Glass-Steagal Act which split commercial banking (read 'real world economy') from financial banking (read speculation) and made casino bets with customers funds illegal. Simple bit of regulation. But regulation is off the agenda.

Even the IMF who have stated the problem do not advocate a 'simple' political act to remedy the situation. Speculation is leading (has led) to risk taking (and high returns) in fracking, privatization of health, transport, energy........

Is there a political party in May 2015 who is willing to regulate the financial system? Vince Cable has threatened it (but has been very quite since); nothing from Labour and the Cons would cut their own throats before rejecting the Thatcher-Reagan mantra of the 'free market'.

As Piketty has so eloquently argued, inequality is a political issue, not an economic one.

Elbowpatch, 08 October 2014 2:28pm

These include tougher supervision of banks

There's a major downside to increasing regulation, often the very best model small regional banks and building societies are taken over by the big boys able to absorb the cost of regulation.

Instead, Govt should create incentives for small regional lenders to once more flourish because old fashioned building societies tend to be naturally responsible 'old fashioned' guardians of finance. Bet no one in the lofty corridors of Westminster has ever thought of this.

Germany is full of small regional lenders.

warmachineuk, 08 October 2014 2:29pm

Wow! When the IMF realises something is wrong, it's really obvious.

foolisholdman warmachineuk, 08 October 2014 3:15pm

Wow! When the IMF realises something is wrong, it's really obvious.

It is another case of "You saw it first on Max Keiser!" Really, it is the case, that he has been saying exactly these same things, in almost the same words, for about 4-5 years.

He also said, long before it was admitted, that LIBOR was being rigged.

Tiresius warmachineuk, 08 October 2014 10:39pm

What is obvious , but not yet on the radar of the IMF , is that grotesque income inequality also produces unproductive consumption and asset price inflation.

When wealth is so concentrated and real wages for most people so depressed this becomes further exacerbated. But as yet the IMF still believe in the idiocy of trickle down economics ..

tomsixty1, 08 October 2014 2:30pm

So why do they now recognise that the policies they supported are making what remains of the global economy unstable and unsustainable?

They are preparing us for more bail outs and austerity.

"The primary beneficiaries of these central bank money creation policies have been global very high net worth investors, their financial institutions, and global corporations in general.

According to a study in 2013 by Capgemini, a global business consultancy, Very High Net Worth Investors increased their invest-able wealth by $4 trillion in 2012 alone, with projected further asset growth of $4 trillion a year in the coming decade. The primary financial institutions which invest on their behalf, what are called ‘shadow banks’ (i.e. hedge funds, private equity firms, asset management companies, and dozens of other globally unregulated financial institutions) more than doubled their total assets from 2008 to 2013, and now hold more than $71 trillion in invest-able assets globally.

This massive accrual of wealth by global finance capitalists and their institutions occurred in speculating and investing in offshore financial and emerging market opportunities — made possible in the final analysis by the trillions of dollars, pounds, Euros, and Yen provided at little or no cost by central banks’ policies since 2008. That is, until 2014.

That massive tens of trillions of dollars, diverted from the US, Europe and Japan to the so-called ‘Emerging M ’ and China is now beginning to flow back from the emerging m to the ‘west’.

Consequently in turn, the locus of the global crisis that first erupted in 2008 in the U.S., then shifted to Europe between 2010-early 2013, is now shifting again, a third time. Financial and economic instability is now emerging and deepening in offshore m and economies—and growing increasingly likely in China as well."

Jack Rasmus February 2014.

Terpitude, 08 October 2014 2:55pm

How is it a "new global imbalance"? The shadow banking system has been in full flow for almost a decade and its activities make the majority of government attempts to stabilise the global economy almost pointless.

Johnny Kent, 08 October 2014 2:59pm

The UK and US, who seem to share identical ideals, unfortunately, stick with near zero rates for the benefit of stockmarket speculators, not the wider hard working public. High time this changed.

Beginner20 , 08 October 2014 3:02pm
International Monetary Fund: China Just Overtook The US As The World's Largest Economy

foolisholdman ruskiny, 08 October 2014 3:31pm

The US/UK ruined by the Neo Cons lets hope Germany can take centre stage and save us from the authoritarian Chinese regime and the religious fascists in the Middle East. Mutti we need you and your engineers we got rid of ours for City sharks.

The pinnacle of British engineering skills and training was Rolls-Royce. If you had worked for RR you could get an engineering job almost anywhere. So what did our brilliant government do? They sold it to the heirs of Joseph Goebels! If that wasn't treason, it bloody well should be!

ruskiny, 08 October 2014 3:19pm

You cannot create wealth from a Ponzi scheme. Over 1 million people using money given to them by the UK Gov. who have borrowed said money in the name of the rest of the UK , go to work in the City of London and prove this truth every day.

marcelprout, 08 October 2014 3:23pm

Private Eye on Tesco

“While earnings per share (EPS) – “the Number” that drives all things, especially management pay, had marched on upwards in the Leahy years, return on capital employed “ROCE” had declined. Tesco was generating insufficient free cash to invest and pay its dividend- the gap being filled by debt. And its definition of ROCE had changed eight times”

Cheap debt is ruining companies as their greedy CEOs do anything to boost EPS so they can get big bonuses.

The system is in serious trouble. EPS and low interest rates are right at the heart of it.

kimdriver Notbig Mick, 08 October 2014 4:45pm

Buying a share on the secondary market isn't the sort of investment the IMF is describing. They want investment in productive assets.

Sadly, with so much existing productive capacity and little growth in demand, nobody wants to invest.

Ron Jacobs, 08 October 2014 3:35pm

The capitalist system is now in the hands of the financiers. They will not make decisions that do not provide them with a means to make as much money as possible via their speculative practices. The rest of the world be damned.

richbandit, 08 October 2014 3:37pm

IMF ......almost 40% of total assets lacked the financial muscle to supply adequate credit in support of the recovery. In the Eurozone, this proportion rose to about 70%.
So that must leave the Basel III LCR stress test close to tatters which was supposed to strengthen bank capital requirements by increasing bank liquidity and decreasing bank leverage. Fluidity in the system is obviously failing.

My take:-Western lander EU banks have a problem when compared to those in the FE and Asian pacific rim which are doing fine. The UK has a lender of last resort, i.e BoE; but for the rest of Eurozone only the EZB.

marcelprout -> richbandit, 08 October 2014 4:46pm

Basel 3 is a joke. It's stupid to think individual CFOs in finance companies understand the risk on their books. They do not understand the risk posed by the system itself.

Stripping out all the margins that the boring previous generation left behind was the worst thing that ever happened to banking. Most if it was lost in speculation.

Following the Lehman collapse (Greenspan 'shocked' that free m are flawed, November 23, 2008) Alan Greenspan told the New York Times “I made a mistake in presuming that the self-interest of organisations, specifically banks and others, was such that they were best capable of protecting their own shareholders.”

o572, 08 October 2014 3:54pm

Mind boggling.

The idiocy of the people that 'run' our economic 'systems' is beyond belief.

A layman can instantly see the insanity of printing infinite money, charging nothing for it and never expecting it to be paid back but those who operate it take 5 years to get an inkling it might not work.

Am I even living in the same reality as these sort of people, although I suppose when you are taking 10% of £infinite and pass it on your ability to suspend belief must be affected.

Notbig Mick -> Halo572, 08 October 2014 4:01pm

Not sure you grasp this, tightening would be suicidal a la 1929. Central banks have modestly increased their balance sheets and the recession has not been bad. The exception being EZ, a reduction in balance sheet and chaos.

I'm sorry if people don't grasp this but back in 2008 I'd take the UK today in an instant, few understand how grim things could have been. EZ meanwhile.......................

Notbig Mick, 08 October 2014 3:58pm

Why not wind the IMF up by 2020.

Totally pointless and discredited if not self-serving organisation.

Governments may not ride so rough with their hairbrain schemes, act more conservatively with a view to long term sustainable progress. Their central bank is the correct backstop.

lellel , 08 October 2014 4:01pm
Was waiting for that... "we want interest rates to rise"

The "rich" don't care if inflation rises too.

Think about it, interest rates usually hover a % or two above inflation. (financial crash period excluded). The more money they have, the more money they make relatively, just by storing it.

The inflation hit is less relevant to them as a corporation doesn't rely on CPI and isn't really affected by the cost of milk.

IMF (september 30th)

"one of the few remaining policy levers available to support growth" – especially in the euro zone where despite accommodative monetary policy "there is still substantial economic slack, and inflation remains too low."


The German government provisionally posted a 16.1 billion euros ($20.3 billion) surplus in the first half of 2014, despite faltering growth.

IMF are working for corporations?

Zakida , 08 October 2014 4:13pm
The whole Keynesian ponzi scheme will come crashing down.

The sooner it does and we get a system of sound money, the better off we will all be.

Elbowpatch Zakida , 08 October 2014 4:23pm
The Puritans said the same hundreds of years ago. People always say Armageddon is just around the bend, yet we muddle through.

If this was 1973 you would be posting that OPEC is kicking off together with Iran Iraq war and third world war inevitable.

In 1977 Carters state of the nation address informed a sombre public that peak oil was upon them, to prepare for the worst. Then followed 20 years of boom.

theonionmurders Zakida, 08 October 2014 6:27pm

The whole Keynesian ponzi scheme will come crashing down.
The sooner it does and we get a system of sound money, the better off we will all be.

Keynesianism was actually premised on 1.5% monetary growth per year, as it tied in with annual increases in the physical amount of gold produced each year, thus tying in perfectly with the gold standard and tight state regulation over endogenous money creation.

The present system is premised far more firmly around monetarist policies - that is, providing liquidity to banks and financial institutions to increase the growth of money creation in the economy like we did over 2008-10. It is the idea that won Friedman his Noble Prize in 1974. QE is a Friedmanite idea first used in the mid 1970s and then in Japan from 1990.

Philip Pilkington: The New Monetarism Part I

Of course, this is completely useless in an economy where the cash leaks out to tax havens, or simply goes into speculation - particularly when a slump is entirely demand driven and hampered by vast inequalities.

Keynesianism would recommend public works programs and encourage 'the euthanasia of the rentier' and growth in infrastructure, not their empowerment to speculate away with QE and hold entire countries at ransom.

Also, your system of 'sound money' (which I presume is full reserve banking) would send the global economy into a twenty year slump - the key is to take full state control over the creation of credit/fiat and put it to more productive, rather than speculative, use.

Fendercombo -> Elbowpatch , 08 October 2014 11:43pm
Speaking as somebody who actually owns a small manufacturing business I can't say I blame you for not investing in a manufacturing start-up. It's not a safe investment. I was pretty lucky in that i've been building guitar amplifiers and effect pedals since about 14 as a hobby and I kind of grew that hobby into a business. The only investment i've ever taken was a startup loan in 2002 and I paid that back in 2010.

I think there are a couple of problems with British Business from my observation. Firstly a lot of senior management lack technical experience in the business sector their business is involved in. When I was at university I worked freelance as a web developer and I noticed that a lot of the MDs of these web development firms had no background in web design or development. Whilst i'd concede that it's not necessary to be an expert web developer to own web development firm i'd say it is necessary to have some technical competency otherwise how do you make appropriate decisions, you end up reliant on other people and usually those people have their own interests at heart not the interest of the business.

The other problem is again senior management not being able to accept responsibility or criticism. They pretend they're open to constructive criticism but as soon as somebody sticks their neck out the axe swings even if the criticism is valid. This is part of the reason I struck out on my own and tried to run my business differently, I got pissed off with not being able to challenge stupid decisions. Being a CEO or MD doesn't mean one is better than anyone else, nor are they infallible and the sooner people realise this the better.

DaylitTunnel, 08 October 2014 4:25pm

Shadow banking system = organised crime. Or it would if the governments of the world legislated to outlaw antisocial banking activities. I don't hear ANY British political party standing for election in 2015 offering ANY redress, ANY shift in the balance of power to protect 'ordinary people'. So what is the point of voting?

The British political system needs urgent reform because as it stands it is undermining democracy and allowing a run-away corruption in 'shadow economies' to ruin our world.

Voltaire21, 08 October 2014 4:25pm

Thinking we could trust the people who f@#ked us over the first time is arguably the dumbest mistake our central governments could make. The low lending rates have been given to the banks with zero caveats to use it responsibly.

So they have done what they usually do...which is instead of working hard and doing the work they were asked to do, they have gone out and found the quickest way to make hay. The bankers are still playing on the stockmarket where they can easily make more than 0% interest.

The stockm have been performing remarkably well despite a moribund economy in most countries. The stockmarket and the real economy have limited relevance yet the former is continually used as an indicator for the latter. This lie needs to stop, the reason the m are performing well is the glut of cheap money parked into it by the banks. Half the world is in freefall but the world of high finance has nicely hijacked the funds to recover from it. Government should have by passed the funds and directly injected the money into the economy.

jayant, 08 October 2014 4:30pm

With near zero interest rates, it was clear that cheap money was there for asking. It is more profitable to engage in speculation than to invest in bricks-and-mortar businesses with human workers. It's too much trouble.

No wonder the stock exchanges are booming, take-overs are increasing and people are struggling because the real wages are stagnant.

dolly63, 08 October 2014 4:40pm

The cracks are showing and the full is beginning to happen! There is no golden egg, never have been, never will be. Just poverty to look forward to.

kykcrzy, 08 October 2014 4:44pm

Perhaps the fate of the modern economy is always going to be that of Japan, eventual stagnation and malaise.

mikedow, 08 October 2014 4:44pm

The IMF has lots to say.

The International Monetary Fund slightly lowered its outlook for global economic growth this year, but is optimistic about the next two years in the U.S. and Canada.

The IMF said Tuesday the global economy will grow 3.3 per cent this year, a drop from the 3.4 per cent it forecast in July, because of weakness in Japan, Latin America and Europe. In 2015, world growth could be 3.8 per cent, a reduction of two percentage points.

But it sees “firming momentum” in Canada and the U.S., led by buoyant domestic demand in the U.S. and export growth in both countries.

zelazny, 08 October 2014 4:48pm

The IMF, another cancer cell in the overall malignancy of financial capitalism, sees perpetual growth as the only solution to life.

Instead, the world needs a massive austerity program directed at the rich. Ban private jets. Ban cars, the cause of most wars for oil. Impose draconian taxes on wealth. Make the richest families pay reparations to those they have enslaved and abused. Hold war crime tribunals for all of the western leaders.

Many historians like to use the image of a human body to represent the body politic. In that image, the rich would appear as pustulant boils on the body's posterior, providing no benefit, but a lot of pain.

zelazny, 08 October 2014 4:51pm

Only perpetual war and authoritarianism holds financial capitalism together. Since 2008, the central banks have printed money to try to revive the decrepit body of capitalism, without success.

The cancer of perpetual growth must stop and the people should rise up and demand that the rich stop their predations. Rich people in their yachts and private jets provide nothing of value to society.

Michael York, 08 October 2014 5:14pm

<Almost zero borrowing costs has encouraged speculation rather than hoped-for pick up in investment, says Fund>

Well what a surprise! Who could have predicted that?

That's the problem with blackmail; after you pay them off, the blackmailer always wants more.

PeasantsRevolt, 08 October 2014 5:16pm

The Washington-based IMF said that more than half a decade in which official borrowing costs have been close to zero had encouraged speculation rather than the hoped-for pick up in investment.

No shit, Sherlock.

With governments of all hues singularly failing to rein in the pre-crash destructive habits of the banks, and prosecute those who took the global economy to the brink of annihilation, is it any wonder that said bankers feel free to return to their gambling ways, and shun the notion of lending to business and industry as a viable business model.

In the UK, this problem is being exacerbated by a government incapable of formulating anything close to an industrial policy, let alone facilitating a re-balancing of the economy away from financial services. GO's solution is to actively encourage a housing price bubble, and mass debt fuelled consumption as a means of boosting GDP - hence why most people don't feel any better off.

Those who ignore history are doomed to repeat it - and once again it will be the little people who pay the price.

jakedog, 08 October 2014 5:19pm

So the casino banking in the City by hedge funds and others is back in full flow - what a surprise!

After the financial crash of 2008, there was short period when greater regulation of the world's financial m looked possible - but not for long. Only 6 months into 2009 and the Financial Times was calling for the blaming of bankers to stop, for business as usual to be reinstated, and unfortunately that is exactly what has happened.

For the IMF, the temple of free market, neo-liberal economic thinking, to be calling these warnings shows just how serious the situation is.

How much longer are we going to accept that unregulated financial m are somehow of benefit to us all; how much longer before some contribution by rapacious hedge funds and the rest through a Tobin tax is imposed?

blueba, 08 October 2014 5:22pm

The IMF was founded to support the US Neoliberal Empire and its agenda is to promote its interests. Raising interest rates before there is employment recovery would be a disaster for the "real" economy where the bulk of people live and operate. It is just another Neoliberal concession to the oligarchs who have been screaming as loud as they can to raise interest rates as its in their best interest to own US Treasure paper with a good return and almost -0- risk.

Clearly, as we have watched the disaster of the "real" economy continue long past the recovery of the 1930s and policy makers making decisions only in the interests of the oligarchs and the banks and corporations they own we see IMF has supported the process throughout.

The US Neoliberal Empire and its globalization has done serious damage to civil and human rights as well as "corportized" the global economy.

No one should trust the solutions offered by this corrupt institution.

ID3839388, 08 October 2014 5:26pm

"IMF warns period of ultra-low interest rates poses fresh financial crisis threat" cries the headline... then we read down and find it's not actually low interest rates, but the choice of shadow banking institutions to go for excesses in financial risk taking in light of those ultra-low interest rates.

So in summary, greedy, high-risk investment by bankers chasing bonuses tanked the economy and interest rates had to drop to ensure the whole system don't come crashing down completely taking everything with it...

Then, 5 years or so later, the greedy, high-risk investments by bankers chasing bonuses threatens to destabilize the economy and cause a fresh financial crisis (even before we've recovered from the consequences of their last cluster-cuss).

Is anyone else spotting the common denominator here?

Low-interest rates are, thanks to the cost of housing relative to wages in most developed countries, about the only thing ensuring swathes of ordinary folks don't lose their homes at present and others aren't locked in to a largely unregulated, and mostly p*ss-poor value for money private rental sector.

Maybe, if low rates are being taken advantage of and abused by the financiers, the abuse and risk-taking should be looked at, instead of blaming low interest rates in themselves?

CrazyGuy, 08 October 2014 5:41pm

Greenspan is at fault for all of this nonsense - presiding over year after year of very low interest rates at the Fed so that Banks and Corporates took it for granted that money would always be cheap. As a result they developed long-term Business Models which required very cheap capital and very high margins - or, worse still, they chased after non-viable business such as Sub Prime Mortgages - and the rest is history.

This is all very well and it made a few people and enormous amount of money but the question remains as to what happens when the party is over? Adjusting your business model to make more normal profits - and foregoing huge bonuses is the right way but who in the City is going to do that? The mantra there is 'if I can take the money I will' - but amazingly with the Governments generous Quantitative Easing programmes they didn't have to come back to earth - and we are well on the way to Financial Meltdown 2 - the sequel - which will be much more dramatic - real 'end of the world as we know it stuff' - unless governments all around the world act to put in structural measures - with teeth - to change the way the M do business.

Which brings us to the punchline - why do governments not raise base rates to discourage this behaviour? Well. apart from the current government allowing their mates to stay on the Gravy Train a little/lot longer the real bombshell is that the Government is also in hock and working to a dodgy business model - there is a huge pile of Sovereign debt which was sold at very low rates of interest. If the Interest Rates on refinancing that debt were to rise even a couple of percentage points UK PLC would be properly invsolvent - in a way that even the IMF couldn't help us!

So we are stuffed and set on a long, hard road of reflation - hopefully led by economic growth to inflate away the debt - something the USA realised and accelerated 3 years ago - but don't hold your breath!

ChenaBaldEagle toadwarrior, 08 October 2014 8:35pm

Screwing up the economy?

What is wrong with pushing wages down to benefit the plutocrats and oligarchs? What is wrong with hollowing out the middle classes? Or transferring assets to the plutocrats and oligarchs, from the middle classes and also the poor? Or having the taxpayers indirectly subsidize the plutocrats and oligarchs, by providing the poor with safety nets?

Or ignoring the advice of Adam Smith, in his work, "The Wealth of Nations", that workers should receive good wages (well above living wages, which only create wage slaves), and that owners will or may be dissuaded from underpaying workers by patriotism and ethics. Many plutocrats and oligarchs today have no patriotism, being World Citizens, and justify paying low or minimum wages, because greater resulting profits benefit shareholders, which is their ethical duty, (and are not paid to their workers, who give them loyalty and create the profits),

Adam Smith realized that building the wealth of a nation required workers to have good wages (so that they may buy products of their labor and accumulate wealth). Today, that advice is ignored, and the wealth of many nations is being dissipated, for the benefit of the plutocrats and oligarchs. This process, which is a war on the middle classes and the poor, is not new. As Marie Antoinette advised, we should buy cakes. To date, the handmaidens of the plutocrats and oligarchs divert the attention of the rest of us with "infotainment", for the same purpose as the circuses of the Romans.

While there are patriotic and ethical millionaires and billionaires, to date they have not been able to enlighten the others. And the rest of us, even globally, do not know or understand what is, and has been occurring. The war on the rest of us, the middle classes, the poor and even the mere millionaires, will continue until reform or revolution.

Janet Yellen, the Fed Chair, at her confirmation hearing, stated she had not decided whether we are a capitalist democracy or had morphed into an oligarchy. She now might concur with my analysis, that we are now an oligarchy.

Cavirac, 08 October 2014 6:21pm

Its all the fault of the greedy American banks and insurance companies. Now they are trying and claw back the money they lost. The IMF is just their mouthpiece. Three five years ago the IMF said the Euro was finished, possibly within six weeks of making that statement. Guess which is the second most traded currency in the world, guess what is the second biggest currency in the world?

Lets not forget that these are the same 'experts' (if ever a word was used so badly out of context) that got us in all this crap in the first place.. They should be confined to the bin along with the credit rating companies.

nikkkkko, 08 October 2014 6:24pm

This is the expected result of trying to use monetary stimulus without a Keynesian fiscal stimulus. Keynes showed back in the 30's that demand drives supply, and not the other way around.

Beginner20, 08 October 2014 6:39pm

According to the report the IMF's World Economic Outlook, released on Tuesday, the world has got a new Group of Seven (G7)

The new G7 includes BRIC countries (Brazil, Russia, India and China) and the three countries of the so-called group of MINT (Mexico, Indonesia, Nigeria, Turkey), with the exception of Nigeria.

The total size of the GDP of the new G7 calculated by PPP, is 37.8 trillion dollars, while the total GDP of the "old» G7 (Canada, France, Germany, Italy, Japan, United Kingdom and United States) reaches only 34.5 trillion dollars.

At the same time, according to the report, the United States ceased to be the world economy №1 losing this place China.

MountainMan23, 08 October 2014 6:50pm

A prolonged period of ultra-low interest rates poses the threat of a fresh financial crisis by encouraging excessive risk taking on global m , the International Monetary Fund has said.

The Washington-based IMF said that more than half a decade in which official borrowing costs have been close to zero had encouraged speculation rather than the hoped-for pick up in investment.

Who believed the "hoped-for pick up in investment" line? It was obvious from the outset, and even more obvious as the years wore on, that giving the big institutions "free money" to play with was only going to make matters worse. Of course they don't invest in the real economy. Why should they when they can "earn" much more money in derivatives, buy backs, corporate mergers, etc, ie ALL the bad "investments" that brought the economy down in the first place.

Beginner20 MountainMan23, 08 October 2014 7:04pm

If the stock market had not absorbed all the US dollars, today a loaf of bread would have cost thousands of dollars. Look how many shares of online companies that do not have any sort of assets and whose profits will never cover even their costs ... But it is a convenient mechanism of society control and the Government shifted this burden on private investors..

norecovery, 08 October 2014 7:02pm

For years, we have been screaming at the people holding the purse strings to put money into the real economy where it will boost real productivity and benefit all of society, instead of propping up the addictive financial gambling to benefit the infinitesimally few and imposing austerity on everyone else, but they will not listen nor will they learn from the errors of their ways.

As with climate change vis-a-vis the fossil fuel and military monopolies, only further disaster might bring about needed change in the financial system. Or maybe it will take mass revolt... take your pick, guys.

Beginner20 norecovery, 08 October 2014 7:09pm

Well, as it was so convenient to cut the property of the former Soviet Union and other development countries - crazy money and no work - that is all - shop is closed.

Blader, 08 October 2014 7:28pm

The US has a problem it has been ducking for years. One the one hand, real wages have been stagnant or dropping for many years (except for those at the top), yet the US economy depends heavily on consumer spending (69% of GDP according to the World Bank). Therein lies the problem: how do you keep consumer spending high while also reducing wages? First, offshore as much manufacturing as possible. This lowers product prices and eliminates the better-paying factory jobs at the same time, thus lowering wages. That's not enough though, to drive constant consumer spending. Here's the solution: sell everyone a house, thereby driving the housing market up. The paper value increases then serve a dual function: they form the basis for taking "equity" out by refinancing and higher real estate values result in higher property taxes, thus bringing in more revenue for towns and cities. Equity-out refinancing provides cash for consumer spending: everything from cars, appliances, clothes, to college tuition or vacations. Or even in speculative investing in the m ! As long as the housing market was going up, up, up this seemed to work just fine. I watched Jamie Dimon, head of JP Morgan, tell a Congressional committee that he "just never imagined the housing market would ever go down." But it did. The whole thing was a house of cards, a sort of Ponzi scheme that required ever larger numbers of homebuyers in order to stay afloat, and that in turn led to the more creative mortgage products: variable rate, interest only, liar loans, etc. And all of these were made possible because the secondary mortgage market (created conceptually by the big investment banks) led to very few banks holding mortgages. The notes and their accompanying mortgages were sold at a discount to bigger banks that then securitized them. This made it very easy for the institutions financing the actual real estate purchases to look the other way when it came to lending to unqualified borrowers, or taking advantage of inexperienced borrowers to sell them a mortgage product for which they qualified but which had a strong potential to fail. And of course in the end, the big banks learned nothing, because they were "too big to be allowed to fail" and likely because they have a practice of hiring their former regulators at peachy salaries (so how tough will those regulators be?)

The key to the whole thing was the idea that the US housing market had been "a sure bet" historically. Now there is another "sure bet" for banks: student loans. Here's the deal: US law prevents student loans from being discharged in bankruptcy! Those loans may go into default, but they can't be escaped from. If they do go into default, the borrower's ability to get a car loan or a house loan goes to nil. Although talking heads in the media keep talking about the housing market comeback, student loan debt is going to hurt those prospects, for a couple of reasons.

First, if recent grads (who would ordinarily be expected to begin focusing on buying a house) have large student loan debt to service, they will not have the cash to make mortgage payments. Second, mortgage lenders always want to have the "senior" debt. That way, if the bank has to foreclose on the borrower, the bank gets paid first. But if there's student loan debt, it could end up being "senior" to the mortgage bank's loan and if the borrower defaults on both then the student loan bank (for want of a better term) will get paid first from the proceeds of the foreclosure sale, meaning the mortgage lender may not recoup enough to cover what it's owed.

In the US college tuition costs have been skyrocketing - all out of proportion to other increasing costs. This suggests that there is a very large supply of "easy" money being made available for student loans, which in turn allows universities to increase their prices. We are now beginning to see cases where "for profit" colleges are springing up, and colleges in general are becoming more like processing plants rather than educational institutions. Along with this there is the longstanding belief that everyone should go to college. This sound familiar? Everyone should own a house - everyone should go to college. Same song, different key. And if you want to go to college, you most likely will have to take out loans. The ability to pay back those loans is predicated on an expectation that the graduate will be able to find employment with wages sufficient to service the loan. But that in turn is dependent on the labor market, and there are no guarantees (despite what education lenders say) that a graduate will in fact secure employment that pays enough to both service the loan and live independently.

It is getting dark. The chickens are headed home to roost. Maybe not today. But soon.

Online Hidden damage By Martin Hutchinson

Asia Times

Last week's US inflation figures showed that the Federal Reserve's over-expansionary monetary policy wasn't revealing itself in inflation. But that doesn't mean it's doing no damage. Instead of in inflation numbers, the multiple years of ultra-low Fed interest rates are manifest in savings figures for both individuals and companies. Individual savings are at half the long-term average and corporate stock buybacks, together with dividends, are absorbing 91% of the Standard and Poor's 500's net income, according to the Financial Times.

Traditionally, fiat-money central banks were supposed to run the system with a view to keeping inflation as low as possible. In 1978, the Humphrey-Hawkins Act extended the Fed's remit to the "dual mandate", supposedly managing unemployment and inflation simultaneously.

Hard-money types have criticized this as sloppiness incarnate, allowing the Fed to pursue soft money policies even when inflation is rising, as in 2005-06. However, the Fed's period of extraordinary stimulus since 2009 has not been accompanied by an inflation upsurge. Far from it.

There appear to be a number of reasons for this. The link between money supply growth and inflation is nothing like as tight as Milton Friedman claimed, and his parallel assertion that inflation is "always and everywhere" a monetary phenomenon is nonsense.

Actually, we could tell that Friedman himself was losing confidence in his own theory during his last years when he gave encouragement to Alan Greenspan's sloppy monetary policy. With M3 money supply rising at close to 10% per annum, Friedman should, as a true monetarist, have condemned it. Friedman should, as a true monetarist, have condemned it.

Since 2008, money supply growth has risen at 6-7% per annum, but that's still a lot faster than nominal GDP growth, which has rarely touched 5%. Saying that monetary "velocity" has declined is in a sense tautological; if money supply consistently rises faster than GDP then monetary velocity must, as an arithmetic necessity, decline. But that says nothing about events in the real world, nor does it suggest that any real factor is causing monetary velocity to decline and GDP to increase more slowly than money supply.

Prices have become detached from money supply growth owing to a number of factors. The most prominent of these is modern telecoms: the communications revolution that has made it much easier and cheaper to construct global sourcing networks for goods and services. By these technologies, emerging m labor has been put more directly in competition with Western labor, causing an arbitrage closing the differential between the two wage rates. That's why median incomes in the U.S. have declined a further 5% in real terms since 2010, even as economic growth has continued at a moderate pace.

The downward pressure on prices—both directly through competition from goods and services produced in emerging m and indirectly through lower domestic wages—has suppressed costs in the West in the 2010s just as an equivalent process of market opening to the world suppressed costs in Japan in the 1990s. Also, demographics haven't helped. As Western economies have aged, the downward wage pressure from semi-retired workers finding they need to continue working has been accompanied by downward price pressure as they and other disadvantaged consumers attempt to shop more cheaply.

If the Fed has no effect on inflation, then it is left simply with its unemployment mandate. That is completely unsatisfactory, because it causes the Fed to run policies of negative real interest rates long after there is any justification for them from the economic cycle. Normally, a burst of inflation would cut off this nonsense (as it did to some extent in 2004-06) but in this case, the inflation isn't happening, and the Fed's self-indulgence is thus uncontrolled.

Even though negative real interest rates aren't producing a surge in inflation (at present) they are having a number of other adverse effects on the economy. The most serious of these is that they are discouraging saving, to the extent that the U.S. savings rate (savings as a percentage of disposable income) has declined from an average of over 10% in 1929-94 to an average of just 5% since 1995. Even if everyone worked till they dropped without retiring, if savings are inadequate the economy is de-capitalized and living standards erode to poor-country levels.

The savings rate, measured by the Bureau of Economic Analysis since 1929, fluctuates considerably from year to year. Over the 84 years for which we have data, it has been at times very low, as in the early 1930s when incomes fell more than consumers were anticipating, and very high, as during World War II when the opposite process occurred and production shortages restricted purchases of many goods. However, if you divide the 1929-94 period into three roughly equal segments, 1929-45, 1946-71 and 1972-94 (the separator between the second and third being the breakdown of the Bretton Woods monetary system), you see an average savings rate that would round to 10% in each of the sub-periods. In other words, at least in the twentieth century, 10% has been the natural savings rate. Only extreme economic events have caused it to vary, and it quickly reverted to its long-term average after those ended.

The savings rate's descent to the 5% range after 1995 is thus highly significant. This is not solely a function of negative real interest rates. Real interest rates during the Greenspan bubble of the late 1990s were generally positive, yet the money supply was expanding much faster than the economy, and the savings rate correspondingly fell (with the impetus for the decline being the extraordinary rise in asset prices rather than ultra-low rates themselves). Then after 2002 the savings rate fell further, bottoming out at below 3% in the housing bubble in 2005-07. Its rebound in 2008-09, prompted by the collapse of housing and portfolio values in 2007-08, proved short-lived. Since 2010, it has once again languished around 5%.

The same dynamic has played out in the corporate sector. Here, profits in recent years have been running close to record levels in terms of GDP, but companies have not been using the extra money for long-term investment. Instead, they have been conducting stock buybacks, running at a record level of $338 billion in the first six months of 2014. Needless to say, since the U.S. stock market is at record levels, this is unlikely to be an efficient use of shareholder capital. Indeed, given that buybacks dropped off sharply in the bear market of 2008-09 and in several cases were replaced with emergency rights issues at low prices, shareholders have generally been penalized by management buying stock at high prices and selling at low prices (or at the very least, ceasing purchases when prices were low) thus producing almost perfect destruction of shareholder value.

Some of the largest companies have spent far more on buybacks and dividends (the preponderance on buybacks), with Hewlett-Packard spending almost double its profits in 2003-12 and Microsoft, Cisco and Intel all spending more than 100% of profits, according to the FT. Because all four companies are trading below their 2000 peaks—even though the S&P's 500 index is about 30% above its 2000 peak—the buybacks can be regarded as singularly inept investments. H-P, Cisco and Intel are almost certainly carrying a negative return even in nominal terms. It must be remembered that normal investors typically get no benefit whatever from buybacks, because they are not the ones tendering stock to the company. Management, which gooses the value of its stock options, is the only true beneficiary.

With the major tech companies of 2000 investing all their profits in share repurchases, it's not surprising that economic growth since 2000 has been anemic at best. The Fed, by encouraging cheap leverage and narrowing the capital cost differential between the U.S. and emerging m , is largely responsible for this failure. It has left the behemoths of U.S. industry with huge domestic leverage, while they sit on pools of overseas cash that cannot for tax reasons be deployed in investment within the U.S.

When you look at corporate behavior, individual savings behavior and monetary policy, it becomes clear that the economy-wide dearth of savings is very largely the Fed's fault. Far from providing "stimulus" to U.S. economic growth, its over-expansionary policies have driven growth offshore while stunting the creation of the domestic capital essential to providing adequate living standards for the American people. The Fed's artificial stimulus has been anything but stimulating, except in the shortest term.

The solution is simple. Rather than targeting inflation or unemployment directly, the Fed should target the savings rate, which it has a much better chance of affecting through its interest-rate policies. By running the financial system with a high risk-free real rate of interest, it will quickly pull the savings rate back to 10%, while ensuring that corporations cease taking on unnecessary borrowing and instead focus on reducing their leverage and repatriating foreign cash pools. Initially this might cause deflation, as a 3% federal funds rate was accompanied by minus 2% inflation. But high real rates would soon create more capital in the economy, tending to increase genuine capital investment and pushing inflation back to positive territory.

Rather than praying for Keynes' "euthanasia of the rentier," the Fed should instead run its interest rate policy in the interest of rentiers until savings have recovered to their long-term average level. Not only will it be good for the economy's heath, it will be good for its moral probity. Speculation and leverage games will disappear, and long-term, steady wealth accumulation will return to fashion. Who knows, we may even get the bankers back into wing collars!

Martin Hutchinson is the author of Great Conservatives (Academica Press, 2005) - details can be found on the website - and co-author with Professor Kevin Dowd of Alchemists of Loss (Wiley, 2010). Both are now available on, Great Conservatives only in a Kindle edition, Alchemists of Loss in both Kindle and print editions.

(Republished with permission from Copyright 2005-14 David W Tice & Associates.)

8 Reasons Why The Long-Bond Is Going Under 2.50%

Zero Hedge

Via Scotiabank's Guy Haselmann,

I’ve been a bond bull since February, frequently predicting that the 30 year would fall below 3% by the end of the year. Last week, I said it would fall below 3% by Thanksgiving; a call I still standby. For the reasons that I mentioned on a morning call, I will give the shortened version of a case why the long bond may even be headed toward 2.5% in 2015.

As the country managing the world’s reserve currency, the US needs to run a chronic current account deficit to supply the world with dollars. Yet, in running a chronic perpetual deficit it undermines confidence in it. This is what is known as the Triffin Dilemma.

Many believe QE3’s printing of $1 trillion per year (of a fiat currency) would be the tipping point that would debase the dollar. Bitcoin become popular and Gold soared. The world was flush in dollars. EM corporates issued in dollars, expanding the outstanding float of such securities 7X, versus 2006 levels. The debasement never happened and now that the QE is ending, the world will have fewer dollars. In turn, the dollar soaring, while Gold is under pressure and the Bitcoin has collapsed (75%).

Most importantly, the shale revolution is structurally shrinking the size of the US current account and fiscal deficits. The US is producing an extra million barrels of oil per year. Throw in a looming interest rate hike and the dollar is rising (more demand than supply). Since the US is exporting less capital, liquidity in being tightened abroad, particularly for countries whose currencies are tied to the dollar (China) or who depend on commodity production (EM).

Reasons to like long Treasuries:

  1. To obtain more dollars, these countries can try to export more or they can deflate their currencies. Either result is deflationary for the US.
  2. Bank regulation means that new bank deposits are going into Treasuries and away from loans and credit securities.
  3. Rule changes from the PBGC will increase demand over time for long dated Treasuries (asset allocation shift away from equities) as penalties for under-funding become more punitive.
  4. Bad demographics and higher debt levels will act as economic growth headwinds.
  5. The falling fiscal deficit will result in less Treasury issuance going forward.
  6. The Fed owns over 40% of all secondary Treasury securities 10-years and longer, so there is a shortage of high quality longer dated securities.
  7. Geo-political tensions are the highest in decades.
  8. China is reeling in its credit and real estate bubbles further hurting commodity exporters. (etc)

Equities and credit instruments will be hard pressed to justify valuations. With little pricing power and economic growth that is likely to be modest at best, revenue growth and profits are unlikely to be adequate enough to justify lofty valuations.

I maintain my bullish view on long Treasuries and implore investors not to underestimate the upside potential (in price). Almost everyone is expecting much higher yields in the near term, but a 30-year drop in yield toward 2.5% should be considered as a possibility

German factory orders had their sharpest drop

German factory orders had their sharpest drop since 2009, Berlin’s Economy Ministry said Monday, erasing recent gains and adding to fears of a slowdown in Europe’s largest economy.

A big drop in international demand caused factory orders to fall by 5.7 percent in August from July and 1.3 percent from a year ago, Berlin said. Economists had expected a 2.5 percent monthly decrease, according to a Bloomberg survey. By contrast, orders from abroad drove a 4.6 percent increase in factory orders in July, the most in more than a year.

Orders from outside the euro zone fell 9.9 percent in August from July, orders from other countries in the euro zone fell by 5.7 percent, and domestic orders fell by 2 percent.

The “hesitant economic development” of the 18-nation euro zone and uncertainty introduced by “geopolitical events” weakened demand, the ministry said. The bloc of European countries is struggling to maintain economic momentum in a recovery while political tensions with Russia continue to escalate. International sanctions against Russia and a faltering Chinese economy have deteriorated business and investor sentiment in the euro area. Inflation in the region is at a five-year low, at 0.3 percent last month compared with the European Central Bank’s 2 percent target for price stability.

The European Union and the U.S. have imposed several economic sanctions against Russia over its involvement in the Ukraine crisis, and Moscow has retaliated by banning most food imports from the Western trade partners. Moscow is reportedly considering a ban on car imports and clothes from the West, which would hurt Germany’s Volkswagen and Mercedes-Benz manufacturers among others leading the country's industrial output. If the dispute with Russia over the Ukraine crisis hits Germany’s economy harder in the third quarter than the second, the German economy could fall into recession.

[Sep 29, 2014] Low Oil Prices: Sign of a Debt Bubble Collapse, Leading to the End of Oil Supply?

Quote: "I would argue that falling commodity prices are bad news. It likely means that the debt bubble which has been holding up the world economy for a very long time–since World War II, at least–is failing to expand sufficiently. If the debt bubble collapses, we will be in huge difficulty."
September 21, 2014 |

I would argue that falling commodity prices are bad news. It likely means that the debt bubble which has been holding up the world economy for a very long time–since World War II, at least–is failing to expand sufficiently. If the debt bubble collapses, we will be in huge difficulty.

Many people have the impression that falling oil prices mean that the cost of production is falling, and thus that the feared “peak oil” is far in the distance. This is not the correct interpretation, especially when many types of commodities are decreasing in price at the same time. When prices are set in a world market, the big issue is affordability. Even if food, oil and coal are close to necessities, consumers can’t pay more than they can afford.

Selected Skeptical Comments
Paul, September 21, 2014 at 10:32 pm

An excellent article – as usual.

“Prices of many commodities crashed in 2008, and it was only with massive intervention that prices were propped up to 2011 levels.”

That’s one of the hamsters we need to keep running on the wheel.

Looking at prices at the moment are the central banks losing control — or are they playing a game — do not intervene when the prices increase with the purpose being to encourage investment — but this of course destroys growth — so do they phase it down purposely — to prevent a collapse of the economy …. then phase it back up again before oil producers shut down….

Hopefully it is the latter — because if prices keep dropping and stay low — we have a problem.

I think the latter is more likely because otherwise we surely would see some sort of reaction out of the central banks to offset this drop — the reaction may find it is pushing on a string — but none the less — I can’t imagine that they would sit idly by and let oil tumble out of control…

Of course all of these measures are stop gap – there is no solution … at some point it all unravels and that is the end