Economics

Economics
Max and Stacy give you all the financial news you need as the Global Insurrection Against Banker Occupation gathers pace. Occupy Wall Street, Crash JP Morgan, Buy Silver and DEFINITELY visit MaxKeiser.com!
Updated: 9 hours 42 min ago

[KR1068] Keiser Report: Never-ending Greek bailout

9-May-2017

We discuss pledging more austerity in exchange for the never-ending Greek bailout. In the second half, Max interviews Sol Trumbo Vila about a report he co-authored entitled The Bailout Business. They discuss the Big Four audit firms and how bailout consultants are raking in big bucks from the bailout business.

Sympathy For The Devil? Trouble in paradise for the bankers

9-May-2017

The banking industry is beginning to turn on itself as the ramifications of its rapacious ways are coming back to bite it.

We’re at the point where those at the apex of power are becoming increasingly desperate to maintain their unfair advantage.

And as the economic pie refuses to grow due to the twin overload of too much debt and declining net energy, these apex predators will turn on each other — first to maintain their spoils, and then simply to survive

Click here to read the full article

Silver Investment Case Remains Extremely Compelling

9-May-2017

Silver Investment Case Remains Very Compelling

Are we near a turning point in silver’s relentless decline?
Avert your eyes – this is one ugly silver chart
Gold silver ratio at 75 shows real value of silver
Mining CEO explains why silver could reach $136.67
Buy silver low, sell high

Money Week

The silver price has been in sharp decline for three weeks and silver prices have fallen from $18.61 on April 16 to $16.20/oz today.

However, every cloud has a silver lining and for Dominic Frisby writing in Money Week, silver is the silver lining and the silver investment case remains compelling.

Silver in USD – 12 Months

Many concur with Frisby including the CEO of one of the largest silver mining companies in the world who believes silver could reach as high as the very exact figure of $136.67/oz as pointed out by Sovereign Man.

Read full story here….

Access Award Winning Daily and Weekly Updates Here

What’s Killing the Middle Class? (Part 1)

8-May-2017

We all know the middle class that actually owns capital and wields political influence is shrinking. As I noted last week in Redefining the Middle Class: It Isn’t What You Earn and Owe, It’s What You Own That Generates Income, defining the middle class by household income alone is a misleading metric, as it leaves out the critical factors of debt and ownership of productive assets.

A household may have an income of $150,000 and appear well-off by that metric, but if they are mired in debt and own virtually no productive assets or wealth that can be passed on to future generations, they aren’t middle class–they’re well-paid proletariats.

So what’s killing the middle class? If you read the dozens of articles on the decline of the middle class in the mainstream (corporate) media, you soon discover there’s a short list of the usual suspects:

1. Globalization / outsourcing

2. Technological changes / automation

3. “Winner take all” asymmetry in rewards for specialized skills

Clearly, each of these has squeezed the incomes of all those between the jobless poor and the wealthy reaping the lion’s share of the rewards from globalization and technological change.

A worker at a steel mill who earned $28/hour plus benefits could, with frugality and long-term planning, eventually own a home free and clear and acquire a nest-egg of assets.

When that worker’s job was outsourced, and his next job paid $9.25/hour, the opportunities to amass capital fell precipitously.

A middle-skill worker replaced by automation had the same life-changing experience if he didn’t acquire much higher level skills and move to a stronger job market–both difficult tasks with highly uncertain outcomes. (No wonder secure government jobs from which jobholders can’t be fired are so sought after.)

As economist Michael Spence explained, a key dynamic in globalization’s asymmetric rewards in pay and career stability is the tradability / non-tradability of output and labor: a bushel of grapes can be grown in another country, but you can’t outsource a haircut.

Grapes, computer chips, tech support, etc., can be grown, made or done elsewhere (outsourced) as they are tradable; hair cuts, most government services, being served a beer at a brewpub, etc. are non-tradable.

The rising asymmetry of rewards within our economy has many drivers. Studies by physicists suggest that the highly networked complexity of our economy generates wealth / income inequality by its very nature: Physics can predict wealth inequality:

Bejan’s Constructal Law addresses the fundamental principle of physics that underlies the evolution of flow systems as they change in design over time to increase flow access. It reveals that “branching tree-shaped” flow patterns govern the structure of the entire universe–most clearly evident within rivers, neural networks, lightning bolts, electrical circuitry and trees.

“The Constructal Law extends the power of physics over all of the phenomena of evolutionary design and organization, from geophysics to biology, technology, and social organization,” Bejan said.

“This unites economics and physics. The equivalence between wealth and movement is correct in the broadest sense: outliers exist and undoubtedly the equivalence is evolutionary because wealth and fuel use are increasing over time.”

What did they discover in terms of wealth inequality? Bejan and Errera show that nonuniform distribution of movement (wealth) becomes more accentuated as an economy becomes more developed–its flow architecture becomes more complex for the purpose of covering smaller and smaller interstices of the overall territory. “Relatively modest complexity is required for the nonuniformity in the distribution of movement (wealth) to be evident,” Bejan said.

In other words, only specific types of specialization garner most of the rewards.Specialization itself doesn’t necessarily lead to outsized gains; what matters is thetradability of the specialization and the supply and demand for that specialized set of skills.

As I repeatedly point out, just issuing 500,000 more graduate degrees in STEM (science, technology, engineering and math) doesn’t automatically create 500,000 new jobs; there has to be demand for those skills.

Skills that are non-tradable and scarce will command high compensation. Skills /credentials that are tradable and abundant are a dime a dozen–there is no pricing power to labor that’s abundant, tradable and interchangeable (i.e. a commodity).

In effect, outsourcing and automation are eating the soft center between the low/moderate-skilled workforce that can’t be outsourced (dog walkers, waiters, nannies, etc.) and the high-skilled technocrat class employed by the government, finance and corporations.

As software improves, automation can move higher up the employment food chain, turning non-tradable (i.e. can’t be outsourced) employment into commodity labor that can be augmented (partly replaced) by software/automation tools.

Self-driving vehicles are an example of this dynamic.

This displaces middle-skilled workers who find there is an abundance of other middle-skilled workers seeking high-paying jobs. This over-supply of middle-skilled workers creates a glut that pushes wages down. It’s just supply and demand.

All these factors are consequential, but they conveniently leave out the politically explosive dynamics that are enriching the political and financial elites (the few) at the expense of the middle class (the many). All these factors are politically neutral abstractions–they have been stripped of exploitive, parasitic, predatory political and financial dynamics.

For example, consider how we’ve substituted debt for income. Savings have crashed while consumer debt has soared. This is the core dynamic of debt-serfdom.

Was this substitution the result of automation and outsourcing? In Part 2, we’ll look at the politically explosive dynamics that are killing the middle class.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Gold Coins, Bars In Demand – +9% In Q1, 2017

8-May-2017

Gold Coins and Bars Demand Rises 9% In Q1, 2017

– Global gold demand in Q1 2017 was 1,034.5t
– Total demand -18% from record high levels in Q1, 2016
– Demand for coins and bars up 9% yoy to 290 t
– UK demand for coins, bars at highest since Q2 2013
– ETF inflows fell by 2/3, account for overall -18% fall in demand
– European uncertainty brings gold investors to market
– Innovation continues to drive gold demand in China
– Peak Gold: Mine production likely to drop

Global gold demand driven by climb in bar and coin investment

Uncertainty in Europe increased demand for gold investment products in the first quarter of the year, according to the World Gold Council’s Gold Demand Trends Q1, 2017 report.

Across the globe a mixture of festivities and renewed safe haven buying saw demand for gold bars and coins climb by 9%.

Demand for physical investment products helped to reduce the the overall fall in gold demand, which came in at 18% yoy, across investment, jewellery and central bank demand.

In all, global gold demand across a number of measures points towards a world that is uncertain and to ongoing safe haven demand. In some cases such as in the US, EU and China, demand remains robust whereas in the likes of Turkey demand is down from record levels.

Much of this is thanks to geo-political uncertainty and political upheaval.

Political uncertainty in Europe has helped to increase demand for gold bullion. Elections (upcoming and past) in the UK, Netherlands, France and Germany have helped to buoy investment in safe haven gold.  German gold bar and coin demand had its strongest first quarter since 2011 – 13% y­o­y to 34.3t, but this must not take away from the UK which hit its highest level since Q2 2013.

China (discussed in full below) was a major contributor to the uptick in demand for gold bars and coins, posting a 30% gain. As with its European counterparts, there is much uncertainty over the economic situation of the country and both investors and retailers alike are able to match these feelings with gold purchases.

Politics, uncertainty and gold prices make for a mixed bag of jewellery

When it comes to jewellery, demand was mixed across the board but overall very low, compared to recent years. Demand was 18% below the 587.7t five­ year quarterly average. The 9% climb in the USD gold price, meant that there is overall long-term weakness in the sector.

Whilst uncertainty can be a positive driver for gold demand, this combined with a high gold price in Turkey saw demand for jewellery sink to a four year low of 7.7t. The looming referendum (held in April) combined with the fact that the price of gold in lira rose more than in any other currency during Q1 (+12%), meant that the fragile political and economic conditions continued to impact the sector.

The WGC state that “The outlook for the [Turkish] market is weak” and this is expected to continue as both economic and political reforms keep both uncertainty and the gold price high.

In the United States however, a feeling of relief following the US election propelled jewellery demand to its strongest Q1 since 2010 –  it rose 3% to 22.9t. The WGC refers to a climb in ‘clicks and mortar’ (online) purchases. There is little doubt that the election hasn’t increased uncertainty, but it seems there is a calm before the storm element to purchasing decisions.

In Europe, both the UK and France let the side down when it came to jewellery demand, which fell 6% in the Fifth Republic. Much of the fall was down to uncertainty in the run-up to elections and a spate of terrorist attacks.

It seems many buyers are favouring ‘branded silver’ in their jewellery purchases. In the same way that silver coin and bar buyers see silver as better value than gold – it seems that jewellery buyers also may be attracted to getting better value with silver.

Investment is better than jewellery – even for romantics

On Valentine’s Day we discussed the problems with buying jewellery as an investment. Jewellery is a terrible investment due to the significant mark-up at the point of sale, ‘valued added’ (VAT) and sales taxes and it’s very poor resale value. We suggested that romantics buy gold coins and bars for their loved ones instead.

This advice was perhaps heeded even after Valentine’s Day as gold bars and coins had an excellent quarter, with 289.8t of demand (+9% y­o­y). Much of this was thanks to China, where safe haven flows, tech innovation and Chinese New Year is helping to push demand (see below).

The WGC accounts much of the increase in coin and bar demand to the ‘strength of the retail investment market’ internationally. Companies such as GoldCore are seeing very strong demand – particularly for allocated and segregated storage for risk averse investors looking to own in gold bars and coins.

The feeling of uncertainty  and uncertain outlook does appear to be driving demand and this is a trend we suspect we will continue to see. Whilst elections have been, or will soon be decided, that does not guarantee the economic result, investors are aware of this and stocking up on gold accordingly.

Gold ETFs failed to benefit as much as physical gold

Whilst ETF inflows did not experience the same surge as gold bar and coin demand, US demand was strong. As the WGC points out, geopolitical tensions were ‘more of a concern for European ­based investors than for their US counterparts.’

The report refers to the positivity in the US towards gold, and that the speculative buying seen in 2016 has been ‘reversed in the November/December washout’ leaving strategic investors behind. Having said that the only net inflows were in February, ‘sandwiched between’ outflows in January and March.

Collectively in Europe we make for a worried bunch. Europeans increased inflows in gold ETFs, as we saw with gold bar and coin demand.

As summarised by the WGC, we are surrounded by both economic and political uncertainty which, with some dips in the gold price, meant we could increase our exposure to gold:

‘On top of a fragile political environment, conditions in financial markets gave investors a further incentive to build their positions in gold-­backed ETFs. Safe­ haven flows pushed two­ year German yields further into negative territory, reaching a record low of ­0.95% in February. And European equity markets were subdued with volatility at multi­year lows. Negative real and nominal yields coupled with a period of relative calm in regional stock markets improved the appeal of gold, particularly as its price strengthened through the quarter. The dips in the euro­ denominated price of gold in January and March were also taken as a good opportunity to add it to portfolios.’

Gold ETF holdings grew tremendously in 2016. 2017 has failed to keep up as of yet. Inflows were just one-third of those seen in Q1 2016. Unsurprisingly the WGC do not seem unduly worried, despite pointing towards the fact that Q1’s figures might be pointing to a wider financial issue, ‘inflows of 109.1t are in line with quarterly average between Q1 2009 and Q4 2011 (108.7t), a period that encompassed the global financial crisis.’

Whilst calm is often seen settling across a market after a surge such as that seen in 2017, we wonder if we will continue to see a slow-down in ETF inflows, especially if averages such as these have not been since since the financial crisis.

Earlier this week we wrote about the tenuous London property market and asked if this was an indicator of a bubble about to burst, setting off a domino affect around the world. This would obviously lead to even greater safe haven flows and demand.

Innovation holds key to future of China’s gold market

Whilst the gold market is one of the oldest in the world, it is markedly different from how it once began.

Gold bullion dealers and jewellery sellers have made a concerted effort to keep up with innovations across the technological, investment and retail spaces. This is more important today than it has ever been.

In China, there has long been concern that China’s millennial population will not look at gold in the same way as their elders do. The WGC cites research from Agility Research & Strategy which shows the top three priorities for young Chinese are ‘health, travel and spending time with the family’. This, combined with concerns over the economy, has prompted worries for the future of the world’s largest gold market.

However, innovation both technological and in marketing suggests that the Chinese gold market has a resilient and fruitful future. As the WGC writes, “the industry is keen and determined to adapt – an attitude that should help stem any weakness.”

In the jewellery space, where demand was slightly down by 2% thanks to high gold prices following Chinese New Year, sellers are providing services and products to keep up with today’s younger generations – such as more modern 18k gold jewellery pieces, rather than the traditional 22k gold designs. In a perhaps more reflective sign of the times, sellers of bridal jewellery are ‘offering customers a no­-cost exchange option on jewellery from its bridal range.’

Jewellery demand may have experienced a small decline, but gold bars and coins saw a 30% increase (yoy), its fourth best quarter on record. We would generally expect the first quarter of the year to be a strong one for China, given their New Year, however it was this combined with concerns regarding the economy (falling yuan and property market) that drove demand to 105.9t.

Some of this stellar demand can be attributed to the innovation appearing in the local gold market, namely interest-paying gold accounts, benchmarked on the Shanghai Gold Exchange (SGE)’s AU9999 contract with a minimum entry point of one gram. It is traded online, with an option for physical delivery – all important for Chinese investors.

Online developments continue with 800 million WeChat users being given access to MicroGold, a physical gold-backed product offered by ICBC. Digital gold can be traded between individuals, online, supporting festivals and culturally significant events with ‘red envelopes.’

These moves, combined with recent changes supported by the government have lead to an imbalance between supply and demand. Premiums have shot up over global gold price in recent month, they averaged $17/oz in Q4, 2016, and averaged down to US$14.2/oz.

India, cashless push was merely a setback but innovation required

India had a tumultuous year last year, the second-half of 2016 saw Modi take the country by surprise when he announced the removal of old Rs 500 and Rs 1,000, throwing millions of people into financial chaos. The announcement was particularly badly timed due to wedding season which is vital to the country’s gold industry.

Since then gold demand has managed to find some calm. Whilst global jewellery demand remains weak with just a 1% increase in Q1 India has propped it up, despite rising gold prices, posting a 16% gain.

The 16% gain isn’t really much to shout about, given it is only the third quarter this decade where demand has come in at less than 100t (92.3t). There is still some wariness in terms of how the next phase of remonetisation will play out, combined with uncertainty over the forthcoming Goods & Service Tax (GST), which is dampening demand somewhat.

We would suggest that there is something to be learnt both at the business and political level when it comes to innovation in the gold market. This is perhaps coming to pass as the WGC’s field research found that not only are consumers gradually adopting cashless payments, but cashless transactions are ‘gathering momentum’. Retailers such as Tanishq reported a ‘quite significant recovery’ in Q1, on account of cashless transactions.

At this point we should issue a word of warning, as we did when India announced its move to cashless and the topic became the point of discussion in economic circles. Whilst cashless is publicised as a way to make economies more efficient, to reduce tax evasion and to prevent other criminal activities it is also there to serve an ulterior motive – as we wrote a few month’s ago:

“A cashless world means a transparent world, which is great if terrorists were the only ones using cash. But they’re really not, so a cashless world means transparent bank accounts which means restricted banks accounts.”

This is perhaps yet another reason why gold demand is recovering in India.

Trivial sales in Central Bank demand

Whilst purchases buy central banks slowed, they remained robust – especially from Russia and China – and central bank sales remain nearly non existent and are set to do so.

Quarterly net purchases were 76.3t (a six year low) and a 27% fall yoy. Russia and Kazakhstan were the main buyers in the quarter.

China’s gold reserves still represent just 2% of their total reserves, despite not adding to the reserves since October 2016. The ratio hit 2.4% in Q1, its highest point since the early 2000s and the reason perhaps for no further purchases since 2016. It is also worth noting the pressure their FX reserves have felt for some time having dropped from US$3.2 trillion in January 2016 to US$3 trillion in January 2017.

Peak Gold: Mine production likely to drop

There are many tidbits of information in the WGC’s report about overall mine production in Q1 2017.

Indonesia accounted for the largest impact on the fall in production, thanks to a fall on 8t from its Grasberg region. There were also some areas of growth, however physical gold investors mainly need to be aware of the following summary from the WGC:


“Having plateaued in recent years, mine production will soon enter a period of decline. The production profile of currently operating mines shows a relatively steep drop-­off over the next 5 to 10 years. Even factoring in high­ probability projects (those highly likely to reach commercial production), the fall in production is still significant.”

The negative feeling from the WGC is attributed to cuts in capital expenditure but most importantly the fact that there just aren’t that many new discoveries of gold.

“Inevitably, the supply pipeline will be squeezed…The speed at which production will fall is uncertain. As existing reserves are depleted, the current project pipeline will be unable to replace them fully.

Over the long­term, the global production profile will depend on the trajectory of the gold price and potential exploration upside, particularly the speed with which brownfield exploration can be brought into production”

Conclusion: Buy physical gold – not making much more of it

The news that gold production is falling and the near certainty that production levels will fall in the coming months and years should be enough to encourage investors to buy gold.

Even if political and economic turmoil weren’t a factor in every major country, gold demand would still be pertinent thanks to the issue of peak gold.

However, it is the imminent feeling of uncertainty and growing instability which is driving investors to allocate more of their investment and pension portfolios to gold bars, coins and ETFs.

The motto ‘Stay calm and carry on’ is no longer relevant, it should be ‘stay calm and buy gold’.

News and Commentary

Gold up on buying, euro strength after Macron’s win in France (Reuters.com)

Euro Edges Higher as Macron Beats Le Pen in French Election (Bloomberg.com)

Lower gold prices bolster gold demand; premiums rise in India, China (Reuters.com)

Chinese demand for gold bars and coins soars in first quarter (People.cn)

Hong Kong exchange operator hopes for third time lucky when it comes to gold futures (SCMP.com)

China gold reserves unchanged at end-April (Reuters.com)

Gold Demand Trends Q1 2017 (Gold.org)

Gold-Futures Shorting Attacks (321Gold.com)

Jaw-Dropping 4,700 Tonnes Of Paper Silver Sold In Just 2 Hours (KingWorldNews.com)

Attacks on gold don’t come from mere ‘speculators’ (Gata.org)

Greatest Ponzi Scheme in History (DailyReckoning.com)


Avoid Digital & ETF Gold – Key Gold Storage Must Haves

Gold Prices (LBMA AM)

08 May: USD 1,229.70, GBP 948.71 & EUR 1,123.45 per ounce
05 May: USD 1,239.40, GBP 958.06 & EUR 1,130.33 per ounce
04 May: USD 1,235.85, GBP 958.15 & EUR 1,131.05 per ounce
03 May: USD 1,253.95, GBP 971.18 & EUR 1,148.99 per ounce
02 May: USD 1,255.80, GBP 974.25 & EUR 1,150.19 per ounce
28 Apr: USD 1,265.55, GBP 978.40 & EUR 1,156.84 per ounce
27 Apr: USD 1,264.30, GBP 980.21 & EUR 1,160.63 per ounce

Silver Prices (LBMA)

08 May: USD 16.38, GBP 12.64 & EUR 14.96 per ounce
05 May: USD 16.27, GBP 12.58 & EUR 14.85 per ounce
04 May: USD 16.50, GBP 12.80 & EUR 15.09 per ounce
03 May: USD 16.85, GBP 13.04 & EUR 15.44 per ounce
02 May: USD 16.95, GBP 13.12 & EUR 15.53 per ounce
28 Apr: USD 17.41, GBP 13.45 & EUR 15.92 per ounce
27 Apr: USD 17.46, GBP 13.53 & EUR 16.02 per ounce


Recent Market Updates

– Irish Property Bubble – 38pc Believe Housing Market Will Crash
– Silver Bullion On Sale After 10.6% Fall In Two Weeks
– London Property Bubble Vulnerable To Crash
– Silver price manipulation, is regulation putting a stop to it?
– Trump 100, Margin Debt Stock Bubble and Gold
– Gold Bullion Imports Into China via Hong Kong More Than Doubles in March
– LePen Euro Frexit Panic Over – “For Now”
– Gold Sovereigns – ‘Treasure’ Trove Found In UK – Don’t Be The Piano Owner
– Silver, Platinum and Palladium as Investments – Research Shows Diversification Benefits
– When Trump Turns On “Enemy Within” Fed It May Create 1970s Style Stagflation
– Silver Production Has “Huge Decline” In 2nd Largest Producer Peru
– Gold Erases Post- Election Fall as Trump Wrong on Dollar
– Perth Mint Silver Bullion Sales Rise 43% In March

Access Award Winning Daily and Weekly Updates Here

[KR1067] Keiser Report: Shareholders Getting Leftovers

6-May-2017

We discuss shareholders getting leftovers and mortgage lenders collapsing. In the second half, Max interviews Paul Craig Roberts, Assistant Treasury Secretary under Ronald Reagan, about the failures of capitalism to account for externalized costs.

Peak Gold, Silver On Small Finite Planet With Near Infinite Currency

5-May-2017

Peak Gold and Silver On “Small Finite Planet” With Near Infinite Currency

Peak gold and silver and the case for peak precious metals on “our small, finite planet” was the topic for discussion on the latest episode of the the Keiser Report.

(Max Keiser interview of Mark O’Byrne of GoldCore in 2nd half of show at 13 min 15 seconds)

Topics covered in the interview

– Small planet with finite resources including gold, silver
– Resources finite but near infinite creation of currency
– Derivatives and fiat currency creation going exponential
– Primary gold production fell in 2016 – Thomson Reuters
Peak gold – “biggest gold story not reported”
– Harder to pinpoint peak silver as is mining byproduct
– South African gold production is ‘canary in gold mine’
– SA gold production collapsed over 80% – from over 1,000 metric tonnes in 1970 to just 167.1 metric tonnes in 2016

– Price manipulation suppressing precious metals
– Supply demand deficits should result in “much higher prices” in the medium and long term
– Investors beginning to “see through the artificial nature of the sell offs” and accumulating on dips

Read full story here….

Access Award Winning Daily and Weekly Updates Here

[KR1066] Keiser Report: All Talk, No Action

4-May-2017

We discuss the all talk, no action of the ‘we’re going to rise up one day generation’. In the meantime, central banks have become all talk, all action with their monetary revolution. In the second half Max interviews Mark O’Byrne of Goldcore.com about the case for peak precious metals.

There Is One Way Out of Debt-Serfdom: Fanatic Frugality

4-May-2017

If we accept that our financial system is nothing but a wealth-transfer mechanism from the productive elements of our economy to parasitic, neofeudal rentier-cartels and self-serving state fiefdoms, that raises a question: what do we do about it?

The typical answer seems to be: deny it, ignore it, get distracted by carefully choreographed culture wars or shrug fatalistically and put one’s shoulder to the debt-serf grindstone.

There is another response, one that very few pursue: fanatic frugality in service of financial-political independence. Debt-serfs and dependents of the state have no effective political power, as noted yesterday in It Isn’t What You Earn and Owe, It’s What You Own That Generates Income.

There are only three ways to accumulate productive capital/assets: marry someone with money, inherit money or accumulate capital/savings and invest it in productive assets. (We’ll leave out lobbying the Federal government for a fat contract or tax break, selling derivatives designed to default and the rest of the criminal financial skims and scams used so effectively by the New Nobility financial elites.)

The only way to accumulate capital to invest is to spend considerably less than you earn. For a variety of reasons, humans seem predisposed to spend more as their income rises. Thus the person making $30,000 a year imagines that if only they could earn $100,000 a year, they could save half of their net income. Yet when that happy day arrives, they generally find their expenses have risen in tandem with their income, and the anticipated ease of saving large chunks of money never materializes.

What qualifies as extreme frugality? Saving a third of one’s net income is a good start, though putting aside half of one’s net income is even better.

The lower one’s income, the more creative one has to be to save a significant percentage of one’s net income. On the plus side, the income tax burden for lower-income workers is low, so relatively little of gross income is lost to taxes.

The second half of the job is investing the accumulated capital in productive assets and/or enterprises. The root of capitalism is capital, and that includes not just financial capital (cash) but social capital (the value of one’s networks and associations) and human capital (one’s skills and experience and ability to master new knowledge and skills).

I cover these intangible forms of capital in my book Get a Job, Build a Real Career and Defy a Bewildering Economy.

Cash invested in tools and new skills and collaborative networks can leverage a relatively modest sum of cash capital into a significant income stream, something that cannot be said of financial investments in a zero-interest rate world.

Notice anything about this chart of the U.S. savings rate? How about a multi-decade decline? Yes, expenses have risen, taxes have gone up, housing is in another bubble–all these are absolutely true. That makes savings and capital even more difficult to acquire and more valuable due to its scarcity. That means we have to approach capital accumulation with even more ingenuity and creativity than was needed in the past.

Meanwhile, we’ve substituted debt for income. This is the core dynamic of debt-serfdom.

As Aristotle observed, “We are what we do every day.” That is the core of fanatic frugality and the capital-accumulation mindset.

For your amusement: a few photos of everyday fanatic frugality (and dumpster-diving).

The only leverage available to all is extreme frugality in service of accumulating savings that can be productively invested in building human, social and financial capital.

Debt is serfdom, capital in all its forms is freedom. Waste nothing, build some form of capital every day, seek opportunity rather than distraction.

Debt = Serfdom (April 2, 2013)

How Frugal Are You? (August 7, 2010)

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Irish Property Bubble – 38pc Believe Property Will Crash

4-May-2017

Irish Property Bubble? Central Bank Governor Denies Is Bubble

Central Bank of Ireland governor Philip Lane yesterday rejected suggestions of an Irish property bubble and that the economy is on the brink of another housing bubble and said the recent increase in house prices is not indicative of a property bubble forming.

Minister for Finance Noonan & Governor of the Central Bank Lane. Source: RTE

However, this optimism is not shared by a large part of the Irish people as there are very high levels of concern about the risk of another property bubble and property crash according to the latest Sunday Independent/Kantar Millward Brown poll:

“A quite astonishing 38pc of people believe that the housing market is destined to collapse as it did during the last recession. That is a much larger share than those who believe the contrary.

Growing fears about another property crash are reflected in another question put by the pollsters – “Is this a good time to buy a house?”

Five years ago, when the recovery hadn’t got going and property prices were on the floor, an overwhelming majority thought it a good time to buy. Now less than half do.

The fear of history repeating itself with another crash in house prices could well explain why, despite high and rising levels of optimism, spending in the shops is not rising at the same pace.”

The risks of a new Irish property bubble and another housing bubble comes at a time of considerable economic uncertainty due to the increasing likelihood of a ‘Hard Brexit.’ There are also the considerable risks from continuing uncertainty due to the Trump Presidency and contagion in the Eurozone…..Read full story here…

 

Access Award Winning Daily and Weekly Updates Here

Goldmoney presents the Keiser Report live on stage

3-May-2017

Only a few tickets left for this event in New York City next week, so grab them while you can:

Financial markets all over the world are bloated with unprecedented government-created liquidity and political manipulation, cloaked in a fog of media hype. Global financial debt has reached staggering levels. Emerging market debt, subprime auto debt, shaky corporate debt, and student loans are growing daily with almost no chance of being repaid. The current banking system is failing, negative interest rates and signs of looming rapid inflation have already begun, and for most people, the crisis only has one ending.

Join us for the Keiser Report Live on Stage – an exclusive live stage discussion with the Keiser Report’s Max Keiser and Stacy Herbert, Goldmoney founders Roy Sebag and Josh Crumb, and Wall Street insider Christopher Whalen.

Admission is complimentary.
Wednesday, May 10, 2017
Doors open at 6:15 p.m.
Event begins at 7 p.m.

Reserve your space by clicking on above image, or here.

Silver On Sale After 10.6% Fall In Two Weeks

3-May-2017

Silver Bullion On Sale After 10.6% Fall In Two Weeks

– Silver down for eleven consecutive days to $16.80/oz
– Further weakness possible and support at $15.73/oz
– Never catch a falling knife – dollar cost average
– Silver buyers love manipulative futures selling
– Thank you ‘Gold and Silver Cartel’ !

Silver in USD (1 Year)

Precious metals continue to weaken, especially silver which has declined eleven consecutive days and is now down over 10.6%.

The sell off is again almost solely a result of futures market participants pushing or manipulating prices lower – depending on your view – despite no bearish silver or wider market developments or news that could be construed as bearish for silver.

It is telling that over the years, there have been very little massive silver and gold futures buying in very short periods of time which has propelled futures much higher. Why is this concentrated trading of futures always on the sell side, pushing prices to the downside?

The questions that arise once again are who was responsible for the sudden bout of selling and was it a bank or fund manipulating prices for their own book and profits or were they acting as a proxy for a central bank.

One way or the other, silver appears increasingly oversold. However, as ever with silver, rather than trying to time the exact bottom with a large lump sum investment or purchase of silver coins and bars, we would caution to “never catch a falling knife.”

Instead emulate the ‘silver stackers’ and keep gradually accumulating silver on artificial price dips.

This is what we are increasingly seeing and we tend to be very busy with silver buyers on price dips. Yesterday was no exception. Indeed, it was the busiest day for silver bullion coin sales in two months.

Silver stackers love manipulative silver futures selling as it allows them to accumulate even more silver bullion coins at discounted prices.

Thank you hedge funds, banks and or ‘Gold and Silver Cartel’ !


Read full story here….

Access Award Winning Daily and Weekly Updates Here

[KR1065] Keiser Report: Post-Brexit World

2-May-2017

We discuss the media bubble that is worse than you think and the one percent of new ad revenue split between all websites that are not Google or Facebook. In the second half, Max continues his interview with Alasdair Macleod of Macleod Finance. They discuss the disintegration of the EU in a post-Brexit world.

The Elites Have Destroyed the Status Quo’s Ability to Self-Correct

2-May-2017

For any system to endure, it must maintain a built-in capacity to self-correct: that is, it must generate accurate informational feedback about dangerous asymmetries and auto-correct with behavioral feedback.

This is true of ecosystems and enterprises as well as political/social systems.

Human systems can lose the ability to self-correct in three basic ways.

1. The information feedback is no longer accurate because self-serving interests manipulate the data to maintain whatever narrative/data-flow supports their power, wealth and income.

2. Self-serving interests limit any behavioral feedback that threatens their power, wealth and income.

3. Those in positions of responsibility who are tasked with managing behavioral feedback are no longer accountable, so the needed behavioral feedback fails.

Self-serving interests committed to protecting their power, wealth and income have destroyed our economic-political system’s ability to self-correct. There are many examples of these three dynamics; here are a few.

A law enforcement/judiciary system that has plenty of resources to pursue a costly, destructive, failed War on Drugs, but no resources to pursue white-collar financial crime. Have a low-level drug dealer in your sights? Hey, the DEA et al. have essentially unlimited resources to nail the perp: SWAT teams, surveillance, helicopters, you name it.

But when a bank embezzles/defrauds to the tune of $100 million, law enforcement and the judiciary throw up their hands: it’s too complicated and costs too much. Really? So there’s billions of dollars available to bust small-time drug dealers, but only pennies to pursue financial criminals stealing billions?

Financial rackets, fraud and embezzlement are now rewarded rather than punished. If a bank scams $100 million by rigging a market (for example), if the Feds even catch on the fine is a measely $10 million.

In effect, finance-based criminals are being told: go ahead and run your rackets–we’ll impose a 10% fee on your skim.

Corporate-white-collar criminality is pervasive. Please read No Wrongdoing Here, Just 6,300 Corporate Fines and Settlements (May 2015):

I am honored to share a remarkable data base of Corporate Fines and Settlements from the early 1990s to the present compiled by Jon Morse. Here is Jon’s description of his project to assemble a comprehensive list of all corporate fines and settlements that can be verified by media reports:

“This spreadsheet is all the corporate fines/settlements I’ve been able to find sourced articles about, mostly in the period from the 1990’s up to today (with a few 80’s and 70’s). This is by far the most comprehensive list of such things online. At least that I could find, because the lack of any decent list is what made me start compiling this list in the first place.”

What struck me was the sheer number of corporate violations of laws and regulations–thousands upon thousands, the vast majority of which occurred since corporate profits began their incredible ascent in the early 2000s–and the list of those paying hundreds of millions of dollars in fines and settlements, which reads like a who’s who of Corporate America and Top 100 Global Corporations.

I encourage you to open one of the three alphabetical tabs at the bottom of the spreadsheet on Google Docs and scroll down to find your favorite super-profitable corporation.

Many have a long list of fines and settlements, and many of the fines are in excess of $100 million. Many are for blatant cartel price-fixing, not disclosing the dangers of the company’s heavily promoted medications, destroying documents to thwart an investigation of wrong-doing, etc.

In other words, these were not wrist-slaps for minor oversights of complex regulations— these are blatant violations of core laws of the land.

Correspondent Ron G. summarized a core reason why the status quo can no longer self-correct politically: the middle class has been so diminished, it has lost its essential function as a political counter-balance to the financial-political elites:

“The American economy and people are not being served by a government that was designed to be a Democratic Republic, whose architecture and balance of power depended on a property-owning middle class to be the countervailing force against Oligarchy; given the irreversible nature of the market and technology that contributed to the decline of the US middle class, (globalization, automation and AI), it is apparent that we will stay on this downward track of the middle class for the immediate future, and therefore more disparity, dispossession, and coercion will be needed to maintain control, and to me this means a future of intimidation, censorship and continued involuntary servitude.”

You may have seen these charts before, but they tell the story of a middle class in decline: declining income, declining wealth and declining political influence as the elites (the few) rig elections (bye-bye Bernie), control the dominant narratives (official “fake news” isn’t fake news, it’s from the Ministry of Truth!) and siphon off the nation’s wealth at the expense of the many.

Bread (SSI, welfare, Universal Basic Income, etc.), circuses (the corporate media, social media, etc.) and social “progressive” crumbs (gender-neutral bathrooms, etc.) are highly effective means to distract us from the core dynamic of our status quo: the transformation of our middle-class society to a neofeudal society of New Nobility, debt-serfs and a bread-and-circus-consuming lumpen-proletariat class.

Though this chart is from 2010, the recent data is even more lopsided in favor of the top tranche of wealth: data updated to 2013 (latest available):

Rather than address this rising inequality directly, the self-serving Elites have promoted propaganda and policies that protect their gains while obfuscating the reality that most American households have been losing ground for decades, a decline that has been masked by replacing real income with rising debt.

The rapid concentration of wealth has also concentrated political power in the hands of a few who seamlessly combine public and private modes of power.

This wealth and power protects the self-serving Elites from the perverse consequences of their dominance. Their precious offspring rarely serve at the point of the American military’s spear, they never lose their jobs or income when corporations shift production (and R&D, etc.) overseas, and they are never replaced with illegal immigrants paid under the table.

The self-serving elites’ accountability? Zero.

Systems that lose their ability to self-correct collapse. The self-serving elites and fiefdoms that have crippled the system’s feedback mechanisms to protect their power, wealth and income think they’re “winning” by imposing a new neofeudal order. But all they’re really doing is insuring the demise of the entire system.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Survey Shows a Majority of European Youth Would Participate in Uprising to Overthrow Status Quo

2-May-2017

As the title of today’s piece implies, something very rotten is happening across the Western world and it’s starting to push many people, especially the youth, toward a breaking point. In the U.S., much of the problem relates to increased corporate power and monopoly, which has resulted in a less dynamic economy characterized by a neo-feudal plantation model where a small group of people continue to rent-seek profits at the expense of society at large.

Surprisingly enough, today’s piece will zero in on the observations of fund manager Jeremy Grantham to make the point. In his quest to understand why P/E multiples and corporate profit margins have failed to revert to the prior mean over the past couple of decades, Mr. Grantham of GMO made some very important points about how the American economy has changed for the worse during the 21st century. Indeed, much of what he observes can be seen as key factors in rising income equality, which in turn leads to social instability.

Read the rest here.

London Property Bubble Vulnerable To Crash

2-May-2017

– London property market vulnerable to crash
– House prices in London are falling
– London property up 84% in 10 years (see chart)
– House prices have risen over 450% in 20 years

– Brexit tensions as seen over weekend and outlook for U.K. economy to impact property
– Global property bubble fragile – Risks to global economy
– Gold bullion a great hedge for property investors

by Jan Skoyles, Editor Mark O’Byrne

For the bargain price of 36 AED (£5) I can buy Global Property Scene magazine, here in Dubai. This month it is running the headline ‘ Could Brexit be the making of the UK Property market?’

Property here in Dubai is a big deal, everywhere you look there are cranes and in the middle of the Malls developers have spent a small fortune placing a stand with a 3D model of their latest development.

The Emirate is looking to position itself as the financial safe haven of the Middle East and with that, they know, comes a solid property market.

London property has long been the poster child for countries such as the UAE who are looking to develop what has for a while appeared to be an indestructible real estate market.

Since 2011 London house prices have climbed by 65%. Between 2006 and 2016, average house prices in the capital grew from £257,000 to £474,000 or by a very substantial 84.4%. These large gains were ‘built’ on the back of the very large appreciation that was seen in prices between 1996 and 2006 (see chart below).

Average house prices in London in 1997 were below £85,000 meaning that in 20 years prices have risen over 450%.

This has created an air around the city’s property markets – residential and commercial – that they are invincible and that they are a safe haven.


House Prices: UK & London Average (KPMG, March 2017)

But London property values might not be as invincible as the world thinks.

UK’s Land Registry data for three London boroughs shows transaction volumes in London — the number of houses being bought and sold — are at an all-time low. Back in December asking prices in London dropped 4.3% in December with inner London down 6%, more exclusive areas dropped by as much as 10%.

Read full story here…

Access Award Winning Daily and Weekly Updates Here

International Workers’ Day: Profitable Work Will Be Automated, The Rest Will Be Left to Us

1-May-2017

What’s abundant and what’s scarce? The question matters because as economist Michael Spence (among others) has noted, value and profits flow to what’s scarce.What’s in over-supply has little to no scarcity value and hence little to no profitability.

What’s abundant is unprofitable work, commoditized goods and services, and conventional labor and capital (which is why wages are declining and yields on capital are near-zero).

What’s scarce is profitable work, highly profitable niches that are immune to commoditization/ automation, and meaningful work.

Everyone wants an abundance of “good paying” jobs, but employers can only afford to pay employees if the work being done is profitable. Paying people to do unprofitable work is a one-way street to bankruptcy.

Those who want the government to fund “good paying” jobs forget that government tax revenues depend on profitable enterprises and the private-sector wages they pay.

(Borrowing from our grandkids to pay public-sector wages today is immoral and financially unsustainable.)

If we look at urban slums and impoverished rural communities, we find the problem isn’t a lack of work that needs to be done–it’s a lack of paid work and a lack of profitable work.

Businesses have pushed unprofitable work onto the customer. Paying people to pump customers’ gas is not profitable (if it was, some corporation would be doing it). Rather than lose money by paying employees to pump gas, the industry shifted that unprofitable labor onto customers.

A great amount of useful work is not profitable and can never be profitable. We need to differentiate useful work from profitable work. One example that illustrates the difference is building and maintaining bikeways to serve commercial areas. (By this I mean bikeways not devoted to leisurely rides through parkways but bikeways that one can use to reach grocery stores, banks, post offices, cafes, childcare centers, etc.)

The work of building and maintaining safe bikeways is clearly useful. Safe bikeways have multiple benefits for commerce, communities, the environment and for individuals: safe commuter bikeways cut traffic congestion, improve the health of the bicyclists, lower healthcare costs, boost small businesses along the bikeways and reduce air pollution.

Safe bikeways (i.e. those which are dedicated to bikes so riders aren’t sharing the road with semi-trucks and autos wandering over the pavement while the driver is texting) are win-win-win, yet they can never be profitable unless bicyclists are charged a toll, which defeats the entire purpose of the bikeway.

Impoverished areas are impoverished because there are few highly profitable scarcities to fill and few people with the surplus income to pay for profitable services. Taking money from one community to fund make-work jobs in another community (the essence of government redistribution schemes) deprives one community of income while providing a temporary injection of income in the other community–income that is controlled by a government that is itself controlled by lobbyists and privileged elites.

Redistribution schemes act as bread and circuses to suppress social disorder, but they don’t address local scarcities in a sustainable way or foster the expansion of long-term solutions to a lack of work.

There are two fundamental solutions to a lack of profitable work. One is to pay people to do useful work that is not profitable and do so with a labor-backed crypto-currency that isn’t borrowed or taken from some other community, and the second is to nurture community-economy entrepreneurship that works within decentralized networks and groups rather than through central states and global corporations.

I explain how these solutions work in my book A Radically Beneficial World: Automation, Technology and Creating Jobs for All.

Slums that get Universal Basic Income transfers from the government remain slums. All the work that needs to be done isn’t being paid,soit doesn’t get done.

Communities that rely on global corporations sink quickly into impoverishment when those corporations pull up stakes and move to cheaper locales or automate the profitable work.

Communities that foster small-scale entrepreneurship, local efforts to address local scarcities and paid useful work thrive in ways that contrast sharply with communities dependent on bread and circuses and global corporations.

The model of expecting global corporations and Big Government to solve the scarcity of paid work is broken. Paul Mason does an excellent job of explaining why in this article from mid-2015: The end of capitalism has begun: the rise of non-market production, of unownable information, of peer networks and unmanaged enterprises.

Isn’t it obvious that we need a new system?

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

‘Apptrade’ is here to add technology to your portfolio, launches Crowdsale to attract investors

1-May-2017

‘Apptrade’ is a platform which enables you to have apps in your portfolio and to trade in them like stockmarket. Hence it has been branded as the “Stockmarket of Apps” by Forbes. When linked, a portfolio of apps has the potential to become a competent asset whose value changes over time.

Read More

The Relentless Push Towards War

30-Apr-2017

This is a very volatile moment in the world, so it’s critically important to ask: Why now? Why has beating North Korea into submission become such a sudden national priority?

In addressing that, it bears repeating that most of what passes for “news” in the West is actually well-crafted talking points put out by self-interested players whose main objectives are to remain in power and accumulate wealth.

Click here to read the full article

 

The Truth About Markets – 29 April 2017

30-Apr-2017

It’s Truth About Markets time! Download show here.

In this episode, we discuss Trump’s 100 days, Obama’s $400,000 wink and nod speech to Wall Street and the Brexit induced reunification of Ireland.

Truth About Markets time!

Download show here.

Pages