Economics

Economics
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Updated: 4 hours 39 min ago

What Investors Can Learn From the Japanese Art of Kintsukuroi

1-Aug-2017

– What investors can learn from the Japanese art of Kintsukuroi or Kintsugi – art of repairing broken pottery with gold
– Investors and savers can protect their savings with gold

– Savers and investors are being punished by negative to low interest rates
– Global debt levels, stock bubbles and reduced liquidity will lead to crisis
– Reinforce cracks with gold prior to money pot shatters


Source: Wikimedia

Editor: Mark O’Byrne

Kintsukuroi or Kintsugi is the Japanese art of repairing broken pottery with gold and silver.

The Japanese like to consider it a way of not only repairing the item but also transforming it into something new which is pristine and has a new potential.

For the philosphers in the art world they like to ask how can something of such beauty be created from a shattered vase or bowl?

Our politics, markets and economy are broken. With each passing day we see more evidence of a globalised, interconnected world that is also increasingly politically and financially fragmented.

In turn this is raising tensions between and within countries. Especially between the ‘haves’ and ‘have nots.’

We have seen this before, many times in history, when the greed of mankind and his belief in infallibility leads us to believe we can perform unprecedented financial experiments. The more we push on with the experiments, rather than learning from history, the bigger the cracks and damage.

Jim Rogers recently expressed his disgust at banks’s claims that had they not acted as they had in response to the financial crisis then things would be worse.

Rogers disagrees, all they have done is papered over and widened the cracks… “propping up zombie banks and dead companies is not the way the world is supposed to work. … It’s been nine years and we have nothing to show for it [economically] except staggering amounts of debt.”

In order for Kintsugi to transpire the artist must ‘see’ a cracked pot differently. A new perspective has to be taken. The pot is not broken, it is not useless instead it is something which has potential to become stronger and better.

We must begin to look at our economy in a similar light. Our savings are not useless, in the same way our economic system is not useless.

But they are weak in their current state, they should be made stronger rather than forced to take on more pressure.

The art of seeing differently

Last week, came the news that global debt levels were 327% of world gross domestic product (GDP), at $217 trillion in the first quarter of 2017. We have added over $120 trillion since the financial crisis.

In the weeks before the world’s top money managers had rung the warning bell that this pot was ready to crumble. Marc Faber told CNBC that ‘everything’ is in a bubble with the risk that:

“One day this bubble will end,”  and as a result people will lose 50% of their wealth.

Mohammed El Erian, part of the global financial elite but someone who we should all listen to, has also expressed similar concerns to Faber.

He wrote on Bloomberg that because of reduced liquidity resulting from simultaneous policy tightening by central banks, he has some serious doubts about the sustainability of the current overextended bull market in stocks.

Meanwhile Bill Gross believes markets in the US are at their highest risk levels post-2008 as investors are paying a high price for taking chances.

The low (and negative) interest rates of  central banks are artificially driving up asset prices. This is creating little growth in the real economy and as a result is punishing individual savers and businesses.

Click here to read full story on GoldCore.com…

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

Meanwhile, Somewhere in the Pentagon…

31-Jul-2017

As North Korean supreme leader Kim Jong Un declares that “The Entire US Territory Is Now Within Our ICBM Range”, somewhere in the Pentagon, operational plans to neutralize North Korean nuclear and long-range missile capabilities are being refined.

There are undoubtedly two sets of operational plans: one deploying conventional weapons, and the second for deployment of nuclear weapons.

Nothing personal, Mr. Kim Jong Un, it’s just business. A core duty of planners in the Pentagon is to ask “What if” and draw up a range of scenarios and operational plans to carry out the civilian leadership’s policies and decisions.

One such scenario is “what if North Korea launches a ballistic missile that is tracking to strike U.S. territory?”

One response option in this scenario would be to wait and see if the North Korean missile hits the U.S. and if it is armed with a nuclear weapon, and if so, if the warhead detonates.

Another option is to respond immediately with a nuclear strike that neutralizes North Korea’s ability to launch any more nuclear-armed missiles.

The U.S. Armed Forces does not declare war or make the decision to launch a nuclear strike–that is the perogative and responsibility of the nation’s civilian elected leadership. The duty of the U.S. Armed Forces is to be prepared to execute the decisions and policies of the elected civilian leadership.

The ethical considerations of such a decision are not the Pentagon’s purview–those considerations rest with the elected civilian leadership. If North Korea is poised to kill 2 million Americans, South Koreans, Japanese, etc., then isn’t erasing North Korea’s capability to kill millions at the cost of 50,000 North Korean lives in a limited nuclear strike the more ethical choice?

Those considerations are not part of operational plans. The purpose of operational plans is to get the assigned job done. Limiting civilian casualties might well be part of the assigned mission. But it’s not the Pentagon planners’ job to make those mission decisions.

There are no small nuclear explosions, but there are smaller explosions and variations that have profoundly different consequences. Ground-burst detonations carve out craters and send shock waves through the earth that crumple tunnels, bunkers, elevator shafts, etc. Ground-burst detonations generate vast quantities of radioactive particles. Since it’s well known that North Korea has buried its most precious nuclear resources deep underground, ground-burst detonations would be the only way to disrupt the access routes to bunkers deep underground.

Air-burst nuclear detonations generate field effects, i.e. electromagnetic pulses across the spectrum. These can be “tuned” to some degree. Thus a neutron-type weapon is designed to sicken and kill enemy soldiers while leaving buildings and equipment intact. This might be the weapon of choice to neutralize any attempt by the North Korean Army to launch a devastating artillery attack on South Korea in retaliation for the destruction of North Korea’s missile and nuclear capabilities.

Air-burst field effects often include massive disruption of electronic equipment. This might limit the operational plans for air-burst nuclear detonations near ther DMZ, as technologically advanced South Korea might well suffer significant economic losses from an air burst near the border with North Korea.

By the same token, an air-burst nuclear detonation over North Korean military communications headquarters might be considered essential to distrupt the North Koreans’ command and control capabilities.

My point here is that operational plans to decapitate North Korean nuclear and ICBM capabilities exist and are constantly being revised and refined in light of new intelligence. It’s not the planners’ job to make the geopolitical or ethical calculations that inform such a drastic decision. It’s the planners’ job to make sure a strike ordered by the elected civilian leadership of the nation achieves its goal, i.e. eliminates North Korea’s nuclear and missile delivery capabilities completely.

It’s easy to say nuclear weapons should never be used, but what if conventional weapons can’t do the job, or create greater risks? Would you consider it a good ethical trade-off to wait for millions to die before killing thousands? That’s a political choice, and one that will always be second-guessed or disputed. But making such decisions is the purpose of elected civilian government.

The planners job is much more direct. If the elected civilian government orders the neutralization of North Korea’s ability to kill millions of civilians in South Korea, Japan or the U.S., then the job boils down to aligning existing resources and reckoning how many resources will be needed to get the job done in the most effective way available.

A conventional-weapons strike would likely require hundreds (and possibly thousands) of aircraft sorties, and all that such a monumental effort entails. It would also requires a significant amount of time to execute. A nuclear strike requires far fewer resources but has consequences far beyond those of conventional weapons.

There have been no nuclear weapons detonated with the express intention of destroying civilians since 1945. The stakes are high, and nobody wants to launch a nuclear attack unless it is in retaliation for a nuclear attack. But by then it’s too late to save the millions killed by the initial attack.

We all hope deterrence works. But deterrence very nearly failed a number of times in the Cold War between the USSR and the US. Given the possibility that deterrence might fail–over-ridden by a commander with launch authority, or a dozen other possibilities of miscalculation or impulse– plans must be made for a first-strike designed to neutralize a nuclear missile capability.

The decision to launch nuclear weapons is political, not military–but achieving the goal is the duty of the military.

It’s nothing personal, folks–it’s just a peculiar business. 

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.

Bitcoin Fork, Hyped ICOs – Immutable Gold and Silver

31-Jul-2017

– Latest developments show risks in crypto currencies
– Confusion as bitcoin may split tomorrow
– SEC stepped into express concern over ICOs
– ICOs have so far raised $1.2 billion in 2017
– ICOs preying on lack of understanding from investors
– Physical gold not vulnerable to technological risk
– Beauty and safety in simplicity of gold and silver

Editor: Mark O’Byrne

Forks and ICOs solves bitcoin v gold debate

There is still a huge amount of noise in the bitcoin and cryptocurrency space but there have been a few developments of late which have pushed the space further into maturity.

From what I can tell from dinner party conversations people who are vaguely aware of bitcoin now know that there are two terms they need to throw into the chat in order to sound like they know what they are talking about. These two terms are ICO and Fork.

Price is also a major talking point at present. As ever the price of bitcoin remains volatile and headline-worthy.

This week will mark a point in cryptocurrency history as the most powerful of cryptocurrencies, bitcoin will experience a major technical change and the US regulator SEC has just made a significant announcement about fundraising in the space.

We have written previously about how bored we are with the bitcoin vs gold debate, but for those who still like to peddle it then they would do well to see how these latest developments put the issue to bed.

The break-up of the year

For a long time there has been a debate about the scaling of the bitcoin network. What is ultimately a required software upgrade has caused many arguments and fall-outs in recent years.

Pressure has been ramping up within the bitcoin community as to how certain problems can be resolved. The discussion may seem like something which is just technical but has at times become philosophical and political.

The main items up for debate are as follows:

Bitcoin is currently limited in the number of transactions it can process. Today, it can only process up to 1MB of transactions roughly every 10 minutes.

Owing to this limit, transactions take longer to approve during times of heavy use.

As all users pay a fee to miners to make transactions, this limitation on space has increased average fee costs.

Increasing the block size makes network nodes more costly, as node operators must store the entire copy of the blockchain as computer files.

Click here to read full story on GoldCore.com….

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

People will Buy Fairy Dust if they think it’s a Gold Nugget!

31-Jul-2017

The Internet is a hive of activity for innovative ideas simply waiting to sprout. Without the Internet, there would be no online social media, no cryptocurrency trading, no online trading, and no blogs. Society as we know it would be slumbering in ‘backward isolation’. An absolute tragedy to say the least. Fortunately, the ones and zeros that pepper the online multiverse have allowed for the creation of an infinite reality where the only limitations are the constraints of the human mind.

The success of BTC is attributed to a person, a group, or a technological marvel known as ‘Satoshi Nakamoto’. This individual or group of individuals has never been unmasked by the public, and likely never will. Precisely who created such revolutionary technology remains a mystery. The viral nature of introduced technologies has exponential growth potential. We have seen this in the phenomenal popularity of social media hubs like Facebook, Snapchat, Pinterest, Twitter and the like. The viral power of new age marketing on YouTube has propelled the rise of digital currencies, modern technologies and Internet sensations.

Has Fiat Currency Lost Favour?

That being said, a myriad of opportunities in the trading realm is now available to all of us. Digital currency trading has exploded in recent years. Thanks to the failure of traditional banking enterprise, and the loss of confidence in central banks to prop up economies during recessionary times, we now have Bitcoin, Litecoin, Dogecoin, and Ethereum to name but a few. In next to no time at all, Bitcoin has exploded out of the blocks. This digital currency began trading in the aftermath of the global financial crisis.

By 2011, BTC reached a price of $1 – parity with the greenback. Fast-forward to July 24, 2017 and that same unit of Bitcoin is the equivalent of $2,758.55. What is driving the BTC phenomenon? For starters, we can safely say that this digital currency has enjoyed a strong uptick in popularity through wider acceptance in e-commerce circles. The blockchain technology that characterizes BTC trading is revolutionary, and banks, financial institutions and laypeople are quickly cottoning onto the concept that there is merit in blockchain technology.

For starters, the inclusion of middlemen and brokers are obstructions to the smooth functioning of the technology. BTC runs off a mathematical algorithm that allows miners to cultivate the currency. Presently, BTC transaction times take around 600 seconds. It is one of the slower blockchain technologies on the market, especially when compared to Ethereum transaction times that take just 15 seconds. ETH was launched in 2015, and it is similar in many respects to BTC.

Rapid Rise of Cryptocurrency Paves the Way for Success

ETH is also a blockchain-style system. It functions as an alternative digital currency with centralized applications. When it launched, it was priced at $2.80 per unit and it has rapidly risen to its current price of $228.42 (July 24, 2017). Much like BTC, it witnessed a dramatic spike in popularity in June and July 2017, swelling to all-time highs. There are some major differences between these cryptocurrencies, notably the fact that BTC will be capped at 21 million units by 2040. The supply of Ether (Ethereum) is infinite however.

This means that it is not a finite resource like other commodities (gold, silver, BTC etc.), which could limit its overall price/growth differentials. Presently most of the BTC that exists was fully mined by early adopters of this digital technology, while ETH is owned by buyers of the digital currency. ETH, DOGE and others are heavily reliant on the price of BTC. The strong correlation drives demand for all of them. We have seen a strong surge in demand for these cryptocurrencies, and traders certainly see this fairy dust as the perfect gold nugget in the modern age. It’s relatively easy to buy Ethereum on trading platforms, and this digital currency is fast gaining favour as a strong-growth cryptocurrency.

A Modern Day Marvel – Finding Your Fairy Dust

Sometimes it’s a technology that explodes out of the blocks (blockchain technology) and at others, it’s an entrepreneur with a unique vision such as the Tai Lopez success story. The latter character has been described as a modern-day marvel – the quintessential American dream. Lopez lived a poor man’s life, surfing couches and the Internet. Lopez didn’t rely on luck to build his brand. He touts information and guru advice as the reasons for his phenomenal success. In Lopez’s world, every day is an opportunity for personal enrichment. Not of the pocket, but of the mind. Today, he’s got a garage filled with Lamborghinis and exotic sports cars, and that’s just the beginning of how the Internet’s fairy dust became his gold nugget.

Politics is Moving the Markets Again, All Eyes on Gold

31-Jul-2017

It is no longer news that some political events happening in Washington, Europe, and the rest of the global political landscape often has huge effects on the financial markets. Interestingly, the effects of politics on the financial markets tend to have the biggest shockwaves on the stock, forex, and  commodities market. In the last couple of days, Washington has been agog with news about the latest scandal rocking the presidency of Donald Trump.

The New York Times report that President Trump’s eldest son, Donald Trump Jr. has revealed messages indicating that he was willing to accept “very high level and sensitive information” from a Russian lawyer “part of Russia and its government’s support for Mr. Trump”  during the build up to the 2016 U.S. presidential elections. This piece looks at how the latest political scandal is rocking the financial markets with a special emphasis on how gold is faring and how the yellow metal is likely to fare going forward.

Here’s how the latest Washington scandal is influencing the price of gold

The news of the latest scandal caused the dollar to fall as investors lost short-term faith in the ability of the U.S. government to stay focused on its economic goals. The U.S. Dollar Index, which tracks the greenback against a basket of currencies declined from 96.174 to 95.592 when the documents of the correspondence was released to the public. The Yen strengthened against the dollar rising from 113.38 to 114.45. The Dollar also declined against the Euro as the Euro climbed from under $1.14 to $1.1483.

Blake Vasquez, an analyst at ECN Capital observes that “gold also benefited from the scandal in Washington as investors found compelling reasons to put money to safe haven assets ahead of potential political uncertainty.” The yellow metal climbed from a trading price of $1,208 per ounce to $1,220.35 an ounce and analysts expect the bullion to climb higher as the drama continues to unfold in Washington.

Analysts at Citi believe that gold has increased upside potential ahead because “we believe the risk of impeachment proceedings is now higher than before, even if still not our base case.”

Here’s why the latest Trump scandal is moving the markets

Donald Trump’s presidency seem to have developed a reputation for jumping from one scandal to the next – of course, one could make a case that the media has a penchant for sensationalizing every tidbit and blowing it out of proportion. However, one of the biggest headwinds that Trumps presidency has been facing has to do with allegations that Trump enjoyed Russian interference to win the presidential election against Hillary Clinton.  

Hence, it made sense that Washington was jolted when news broke that Donald Trump Jr. did have correspondence with Russia. The younger Trump has maintained that the correspondence was opposition research and that “in retrospect, I probably would have done things a little differently.”  He has also maintained that Trump was not privy to such correspondence and that Russia did not provide any such information.

However, the news of the scandal has definitely forced the Trump administration into a place of weakness and the presidency would want to hold off pushing its economic plans until the storm subsides.

[KR1103] Keiser Report: Wall Street’s ‘Dean of Valuation’

29-Jul-2017

In this episode of the Keiser Report from Freedom Fest in Las Vegas Max and Stacy talk about Wall Street’s ‘dean of valuation’ declaring that bitcoin is replacing gold as the ‘go to’ trade in a time when investors don’t trust governments. In the second half Max interviews legendary investor, Jim Rogers, about China and Germany stepping up to lead the world as the U.S. retreats. They also discuss China’s One Belt, One Road policy and bitcoin as disruptors to U.S. hegemonic power.

We Need a Social Economy, Not a Hyper-Financialized Economy

28-Jul-2017

We all know what a hyper-financialized economy looks like–we live in one:central banks create credit/money out of thin air and distribute it to the already-wealthy, who use the nearly free money to buy back corporate shares, enriching themselves while creating zero jobs. Or they use the central-bank money to outbid mere savers to scoop up income-producing assets: farmland, rental properties, etc.

This asymmetric wealth accumulation and avoidance of risk creates a self-reinforcing feedback loop, as the super-wealthy financiers and corporations use a slice of their income to buy political protection of their income streams, creating cartels and quasi-monopolies that are impervious to competition and meaningful regulation.

The only possible output of a hyper-financialized economy is rapidly increasing wealth and income inequality–precisely what we see now.

What we need is a social economy, an economy that recognizes purposes and values beyond maximizing private gains by any means necessary, which is the sole goal of hyper-financialized economies.

Given the dominance of profit-maximizing markets and the state, we naturally assume these are the economy. But there is a third sector, the community economy, which is comprised of everything that isn’t directly controlled by profit-maximizing companies or the state.

What differentiates the community economy from the profit-maximizing market and the state?

1. The community economy allows for priorities and goals other than maximizing profit. Making a profit is necessary to sustain the enterprise, but it is not the sole goal of the enterprise.

2. The community economy is not funded by the state.

3. The community economy is locally owned and operated; it is not controlled by distant corporate hierarchies. The money circulating in the community stays in the community.

4. The community economy is not dominated by moral hazard; the community must live with the consequences of the actions of its residents, organizations and enterprises.

The community economy includes small-scale enterprises, local farmer’s markets, community organizations, social enterprises and faith-based institutions. Its structure is decentralized and self-organizing; it is not a formal hierarchy, though leaders naturally emerge within civic and business groups.

Few Americans have worked on a plantation. I am likely one of the few who has lived and worked in a classic plantation town (Lanai City, circa 1970; I picked pineapples along with my high school classmates as a summer job).

In my analysis, the current financial system is akin to a Plantation Economy:highly centralized and hierarchical, devoted to maximizing profits for distant owners, a finance-fueled machine for extracting wealth from local economies.

I call this the Neocolonial-Financialization Model:

The E.U., Neofeudalism and the Neocolonial-Financialization Model (May 24, 2012)

Wal-Mart and the Plantation Economy (August 24, 2010)

Colonizing the Plantation of the Mind (August 25, 2010)

Greece and the Endgame of the Neocolonial Model of Exploitation (February 19, 2015)

We can differentiate the community economy by comparing it to a hyper-financialized Plantation Economy. In a Plantation Economy, a once-diverse landscape of decentralized, locally owned small enterprises is displaced by corporations that are dependent on the state for their profits via direct subsidies, tax breaks, or a cartel/monopoly enforced by the state. (Think Big Pharma, Big Defense, the Higher Education Cartel, etc.)

The corporate Plantation’s low wages leave many of its workers’ families dependent on state aid to survive, and so it prospers on the backs of taxpayers who subsidize its low wages and the externalization of costs.

The current system rewards those with access to cheap capital and the power of the state. The community economy has neither.

The Plantation Economy institutionalizes poverty, parasitic finance, externalized costs, moral hazard (since the corporate/state overseers do not live in the community being cannibalized) and centralized wealth and political power. These are the only possible outputs of the hyper-financialized Plantation Economy.

Once the Plantation Economy has displaced the community economy, opportunities for work and starting small enterprises shrivel, and residents become dependent on state social welfare for their survival. By eliminating the need to be a productive member of the community, the welfare state destroys positive social roles and the inter-connected layers of the community economy between the state and the individual.

When the individual receives social welfare from the state, that individual has no compelling need to contribute to the community or participate in any way other than as a consumer of corporate goods and services. State social welfare guts the community economy by removing financial incentives to participate or contribute.

Why is the community economy so important? The community economy is first and foremost the engine of social capital, which is the source of opportunity and widely distributed wealth.

Social capital is the sum of all the connections and relationships that enable productive collaboration, commerce, exchange and cooperation. (I cover all eight kinds of capital in my book.)

Corporations offer a limited version of social capital–for example, meeting a manager in another department at a company picnic–but most of this capital vanishes once an individual leaves the company (or is “right-sized” into unemployment). This social capital is only superficially embedded in a place and community, as corporations routinely move operations in pursuit of their core purpose: expanding profits.

Corporations cannot replace communities for the simple reason each organization has different purposes and goals. The sole purpose and goal of a corporation is to expand capital and profits, for if it fails to do so, it falters and expires.

The purpose of a community is to preserve and protect a specific locale by nurturing social solidarity: the sense of sharing a purpose with others, of belonging to a community that is capable of concerted, collective action on the behalf of its members and its locale.

Political scientist Robert Putnam has described this structure as a web of horizontal social networks. Unlike corporations and the state, community economies are horizontal networks, i.e. networks of peers connected by overlapping memberships and interests.

It is not accidental that the current system of hierarchical corporations, banks and the state increases inequality and erodes the community economy: the only possible output of low social capital is rising inequality.

Putnam identified a correlation between the inequalities enforced by oppressive elites (slavery being the most extreme example) fearful of the potential of egalitarian (horizontal) networks to organize resistance to their exploitation.

Areas with low social capital are characterized by limited social mobility and rising economic inequality. In other words, the only way to lessen economic inequality is to nurture the horizontal peer-to-peer community economy that creates social capital.

This makes sense, as communities stripped of social capital offer limited access to the other forms of capital needed to launch local enterprises and construct ladders of social mobility.

A vibrant community economy provides members with an infrastructure of opportunity, i.e. multiple pathways to building capital, gaining knowledge and connecting with others.

The key to broadly distributing capital and reversing inequality is to nurture the source of social capital: the community economy.

This essay is drawn from my book A Radically Beneficial World: Automation, Technology and Creating Jobs for All: The Future Belongs to Work That Is Meaningful.

“Certainly the author is decades ahead of his time. Humanity will eventually adopt the author’s principles written in all of his books. Currently, humanity lives in delusion that the system will continue to serve them. We will see massive changes even in the next decade. Don’t waste your money on college–buy the author’s books and succeed.” Book Reader (via Amazon.com) 

This Is Why Shrinkflation Is Making You Poor

28-Jul-2017

– Shrinkflation has hit 2,500 products in five years
– Not just chocolate bars that are shrinking
– Toilet rolls, coffee, fruit juice and many other goods
– Effects of shrinkflation been seen for “good number of years” – Consumer Association of Ireland
– Shrinkflation is stealth inflation, form of financial fraud
– Punishes vulnerable working and middle classes
– Gold is hedge against inflation and shrinkflation


Editor: Mark O’Byrne

“…Oompa Loompa doo-pa-dee doo…I’ve got another puzzle for you…”

…so sing the Oompa Loompas in Roald Dahl’s classic Charlie and the Chocolate Factory. They sing this after each revolting child suffers a mishap during their visit to his glorious production plant. One child’s mishap results in him being shrunk down to a tiny miniature version, in perfect proportion to his full-size self.

This might have given confectioners and manufacturers an idea. Over 2,500 products have fallen victim to shrinkflation. A phenomenon whereby a product’s price either increases or remains the same whilst the size and or quality is reduced.

Currencies have been and are being debased in recent years and now goods and products are being reduced in size and debased.

It seems that despite a massive global financial crisis, rising debt levels, increasing inflation, especially in rents and mortgages, and a decline in real household income there is virtually nothing that will make people realise how vulnerable and fraudulent the current financial system is.

But shrinkflation and chocolate bars might be the catalysts required to get people to wake up. Us Irish are a nation of sweet-tooths and chocolate lovers. When they feel short-changed in the confectionary department, hell hath no fury like a sugar-addict scorned.

To make matters worse, the phenomenon has now gone past chocolate bars and includes a whole variety of household items from fruit juice to toilet paper.

Click here to read full story on GoldCore.com

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

[KR1102] Keiser Report: MAGAnomics

28-Jul-2017

In this episode of the Keiser Report’s annual Summer Solutions series, Max and Stacy talk to JP Sottile of Newsvandal.com about whether or not MAGAnomics will help make America Great Again. They discuss trade deals and automation: which has played more in making American jobs not so great. They also look at the role of opioid addiction and whether or not a universal basic income might help the likes of Mark Zuckerberg maintain monopoly-style control over the internet.

Gold A Store Of Value In $217 Trillion Global Debt Bubble

27-Jul-2017

– ‘Mother of all debt bubbles’ keeps gold in focus
– Global debt alert: At all time high of astronomical $217 T
– India imports “phenomenal” 525 tons in first half of 2017
– Record investment demand – ETPs record $245B in H1, 17
– Investors, savers should diversify into “safe haven” gold
– Gold good ‘store of value’ in coming economic contraction

by Frank Holmes, U.S. Global Investors

Gold’s medium- to long-term investment case, I believe, looks even brighter. Many unsettling risks loom on the horizon—not least of which is a record amount of global debt—that could potentially spell trouble for the investor who hasn’t adequately prepared with some allocation in a “safe haven.”

According to the highly-respected Institute of International Finance (IIF), global debt levels reached an astronomical $217 trillion in the first quarter of 2017—that’s 327 percent of world gross domestic product (GDP). Notice that before the financial crisis, global debt was “only” around $150 trillion, meaning we’ve added close to $120 trillion in as little as a decade. Much of the leveraging occurred in emerging markets, specifically China, which is spending big on international infrastructure projects.

It goes without saying that this is a huge risk. Some are calling this mountain of debt “the mother of all bubbles,” and we all remember how the last two bubbles ended, in 2000 (the tech or dotcom bubble) and 2007 (the housing bubble).

Paying down this debt will not be easy. As Scotiabank mentioned in a note last week: “Higher interest rates are going to make the burden of refinancing the debt considerably heavier, and as more money goes into servicing the debt, it means less money is available to spend on other things, which could lead to less infrastructure spending and increased austerity.”

Add to this the fact that global pension levels are also sharply on the rise, with people living longer and population growth—and therefore workforce growth—slowing in many advanced economies. In May, the World Economic Forum (WEF) estimated that by 2050, the size of the retirement savings gap—unfunded pensions, in other words—could be as much as $400 trillion, an unimaginably large number.

Click here to read full story….

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

FED Holds! | USD Drops, AU Pops, AG Pops!

26-Jul-2017

DON’T THINK THIS WAS SUPPOSED TO HAPPEN IN THE METALS?

Fed Complacency now too???

FED Holds! | USD Drops, AU Pops, AG Pops!

Click Here For The Full Story On SilverDoctors.com

Well what do you know.  There’s this from Bloomberg:

You have to look hard to find the word “unchanged” in the first paragraph there, and just notice how one’s eyes tend to drift towards the “relatively soon” quote.  And for those looking for a more exciting headline, well, you get a whole lot of nothingburger.

Then there’s this leading headline from Marketwatch:

Really, The dollar is dopping faster than the blue light special and a K-mart running and going out of business sale and they focus on the “unchanged stock market”?

Then there’s Yahoo Finance’s version of Where’s Waldo, Fed style:

OK, so I put in a little pointer, but what is the point?  Very bland.  Bland indeed.

Hmmm…We have seen this before.  Though don’t count out the insignificance of a dove and headline blandness just yet.  Metals are trying to get a start going, but the dollar, well, the greenback isn’t too happy after the just released FOMC:

We have decent volume coming into and out of the announcement.  If the metals were on hold before, well, they are not on hold any longer. The dollar is downright U-G-L-Y.

We will see if the momentum continues through the close.  So far, so good.

Maybe Now Is Time To Back Up The Truck???

And while the Fed came out with deer in the headlights pause, now might be a good time for a quick reminder of how this magic show is done:

The Fed communicates where it is attempting to move the various markets by the release of their statement at precisely 2:00PM EST.  “News outlets” such as Bloomberg run the headlines through their tickers.  Traders, hedge funds and others pay BIG BUCKS for this nifty little subscription called “Bloomberg Terminal” (but the banks probably get if for free).  Trading Firms (AKA the banks and big money funds) then program their computer algorithms to cue off of specific words and headlines and make market buy and sell orders based off of the headlines.  Knee jerk reactions going into and immediately following the release of the headlines  are common because the computers first react to the headline.  Once the headline is scanned, the news release, AKA the Fed statement, is further scanned, parsed, ground up, calculated, and spit out the other side and further buying or selling takes place.

Now, depending who has the most updated algorithms and who has the fastest internet speeds, well, that is who gets in on the trading action first.  If this was a duel in the Wild West, first mover has the advantage.  At that point, the computers trade off of each other and we see the initial result turn into the momentum, and thus the markets reprice.

Since the Fed will never, ever say anything good about gold or silver, and for that matter, won’t even mention the metals, most trading firms rest assured knowing the Fed has their backs.  They day the Fed does not have their backs, most will know this and abruptly, but rest assured, some will indeed know, especially those in the revolving door of the banks/Treasury/Fed/attorney perches.  They WON”T be losing.

We have been following the prices of gold and silver closely this week.  Silver especially.  Silver is at one of those make-it or break-it points.  Of course we want silver to make it, and perhaps the first indication that it has will be a daily close above $16.66.  That will put our price higher than the average of the last 50 days, and for what it’s worth, the chart will be painted nicely and set-up for a move higher.  Go ahead and fire away on the comments, because like it or not, charts matter, and whether we want to admit it or not, we are all rooting for the silver chart.

Though the day the Fed REALLY loses control, we will know it and we will be rewarded for our hard work and stacking.  No, there will be no advanced notice, and yes, it will probably be a little bit nuts at first…

CHECK BACK WITH SILVERDOCTORS.COM ON FRIDAY FOR THE SD WEEKLY METALS AND MARKETS, IN ADDITION TO END OF THE WEEK MARKET COMMENTARY.

 

Why Surging UK Household Debt Will Cause The Next Crisis

26-Jul-2017

– Easy credit offered by UK banks is endangering “everyone else in the economy”
– UK banks are “dicing with the spiral of complacency” again
– Bank of England official believes household debt is good in moderation
– Household debt now equals 135% of household income
– Now costs half of average income to raise a child
– Real incomes not keeping up with real inflation
– 41% of those in debt are in full-time work
– £1.537 trillion owed by the end of May 2017


Editor: Mark O’Byrne

Why UK household debt will cause the next crisis

“Household debt is good in moderation,” Alex Brazier, executive director of financial stability at the Bank of England (BoE), told financial risk specialists earlier this week. But, it “can be dangerous in excess.”

The problem with ‘in moderation’ is that no-one knows what a moderate measure of something is until they have had too much of it. Sub prime borrowers in the U.S. and property buyers in Ireland and the UK did not know they would contribute to a global debt crisis. Central bankers in Germany in the early 1920s and more recently in Zimbabwe never thought they were doing something that would be as detrimental as it ultimately was.

The same may go for  levels of debt in western countries today and indeed the QE schemes and modern monetary experiments of western central banks. And, a moderate measure of something can be too much or too little from one person (or economy) to the next.


For example, four glasses of wine for me are too much, for my Glaswegian cousin it is merely an aperitif.

We only discover what is too much when ‘oh just one more’ happens time and time again. Another example, two credit cards are too much for me to manage, for my mother (a demon in money-management) it is fine.

What about when it is two credit cards and a car loan and a mortgage? Is that too much debt for one household? Who knows, it depends on the household.

Brazier believes that we are now on the brink of household debt being in excess and therefore dangerous.

Why? Because we are seeing a 10% yoy increase in car loans, credit card balances and personal loans. This is due to a “spiral of complacency” from lenders who are offering cheap, easily available credit to households which have only seen their incomes rise by 1.5% over the same time period.

This is something we have talked about previously. Brazier’s comments made headlines and rightly so.

Click here to read full story on GoldCore.com

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

There Is Only One Empire: Finance

26-Jul-2017

There’s an entire sub-industry in journalism devoted to the idea that China is poised to replace the U.S. as the “global empire” / hegemon. This notion of global empire being something like a baton that gets passed from nation-state to nation-state is seriously misleading, in my view, for this reason:

There is only one global empire: finance. China and the U.S. both exist within the Empire of Finance. Virtually every mercantile nation with access to global markets lives, works and thrives/dies within the Empire of Finance. Every nation that allows capital to flow into its economy is subservient to the Empire of Finance. Every nation with capital and debt markets exposed to (or dependent on) global financial flows is just another fiefdom in the Empire of Finance.

China has thrived within the Empire of Finance by creating more debt and at a faster rate of expansion than any other fiefdom. 

China has brought 20 years of future growth and income forward, and eventually that vein of “wealth” runs out as time advances into the stripmined future.

The same can be said of all nations that have borrowed heavily from future growth and income to fund consumption/GDP “growth” today.

The Empire of Finance has few requirements for hegemony in its realm, but they are big ones.

1. If you want your national currency to act as a global reserve currency (or the global reserve currency), you must run permanent large trade deficits to export your currency in size to the rest of the world. This is the essence of Triffin’s Paradox, which I have covered many times.

Understanding the “Exorbitant Privilege” of the U.S. Dollar (November 19, 2012)

Triffin’s Paradox Revisited: Crunch-Time for the U.S. Dollar and the Global Economy(April 5, 2016)

2. Your national currency must float freely in the global marketplace and be liquid enough to trade $1 to 2 trillion per day in global foreign exchange (FX) markets.

3. Your sovereign debt/bonds must float freely in the global credit/debt marketplace and be liquid enough to trade in size (tens of billions of dollars) daily.

4. Global capital must be free to flow in and out of your currency, debt, assets and economy without restriction. (Ease of capital flow is the core of liquidity, risk management, and profitability.)

Any nation-state that meets these four requirements is fully exposed to a global loss of faith in its economy, debt, balance of payments and currency.The Empire of Finance is a harsh master; any nation-state that wants to secure the privileges of hegemony must first be willing to accept the risk of full exposure to skittish global markets and capital flows.

Nothing wipes out “wealth” quite as quickly or effectively as a currency meltdown resulting from a sudden loss of faith / risk-averse capital exodus.Such a loss of faith or fear of loss quickly kills a nation’s ability to float more debt on the global marketplace.

There’s an irony in all this talk of empire: only nation-states that operate within the unforgiving global Empire of Finance can establish hegemony in that Empire, but only nations that become autonomous autarkies (i.e. self-sufficient and independent of global markets, resources, credit, capital, etc.) can thrive outside the global Empire of Finance.

There’s only one global empire, that of Finance. If you want global hegemony, you must accept the dominance of global finance and pay tribute. If you don’t want to submit to the empire, then you cannot be a global hegemon.

When the Empire of Finance collapses under the weight of its debt, perverse incentives, exploitation and inequality, the financial system of every nation-state within the Empire of Finance will collapse, too. Being the hegemon within the collapsing system won’t protect the hegemon from collapse. Every nation-state that has submitted to the Empire of Finance will collapse.

These charts are snapshots of an unsustainable global financial system.

Debt is outracing “growth” everywhere, including China:

To the moon, baby! There’s no upper limit on debt–until there is.

There’s no limit on the sale of claims on future energy, income and “wealth”–i.e. bonds:

The global economy, by one (flawed) measure (GDP):

As for hegemony and empire–be careful what you wish for. Life outside the financial bubble is much more contingent and risky than life inside the bubble–until it pops. 

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 Seasonal Sweet Spot – August and September – Coming

25-Jul-2017

– Gold seasonal sweet spot – August and September – is coming
– Gold’s performance by month from 1979 to 2016 – must see table
– August sees average return of 1.4% and September of 2.5%
– September is best month to own gold, followed by January, November & August

 by Palisade Research

Looking back at gold’s performance since 1979, August and September are big months for the yellow metal. What is the cause? No one really knows but there are some theories that have been thrown around.

The adage “sell in May and go away” is common in the mining sector. Investors are back from vacation and ready to deploy their cash in a big way. Concurrently, the largest financial crashes have occurred in September and October, investors are also buying gold to hedge their portfolios.

Indian wedding season is huge for gold, and if you have ever been to a traditional Indian, its easy to see why India is the World’s largest consumer of gold jewelry. Throw Christmas into the mix, and you have the perfect retail storm.

Lastly, the European Central Bank and 20 other European central banks are currently governed by a Central Bank Gold Agreement, which ensures all banks operate with transparency and do not engage in large uncoordinated gold sales. The Agreement dictates the limit in sales, and resets every September, meaning the market may see less selling activity.

In the 38 years we used for the chart, August had only 14 years of negative returns, while September had 13. Regardless if these theories are true or not, its hard to ignore the decades of data that suggest the best months of gold are yet to come.

Click here to read full story….

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

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China’s Largest Wine Importer Wants to Place Wine on a Private Blockchain

25-Jul-2017

Counterfeit wine is a billion dollar market – approximately $3 billion per year says Maureen Downey, an expert on fake wine. One wine fraudster, Indonesian Rudy Kurniawan, is serving time for selling $500,000,000 worth of fake wine.

Shanghai-based blockchain company BitSE and Direct Imported Goods (DIG), China’s largest importer of fine wines, are working together to place wine on a proprietary blockchain to solve the counterfeiting of fine wine. Empowered by an Ethereum-based design, DIG is in the process of placing one million bottles of wine on BitSE’s VeChain platform.

Operating at exhibitions and in the Shanghai Pilot Free Trade Zone, China’s first free-trade zone, DIG imports 30% of the wine brought into the country. The 2016 figures released by China’s Customs Department show its wine imports were 638 million litres in 2016, representing a 15% increase over 2015. The import value in 2016 for wine imported into China was US $2.364 billion.

“We are able to significantly enhance the efficiency of the supply chain management system by integrating it with blockchain technology,” says DIG Vice President Cici Li in a video by professional services network PwC China, which brought the two companies together for the initiative.

According to Li, the major improvement is full-traceability from wineries overseas and informal participants throughout the life cycle of the wine.

“[C]onsumers will be able to access relevant information through a mobile application with the blockchain technology,” explains Li. “This can involve different players to update information on a single trusted and real-time database instead of the current time-consuming mechanism of isolated systems maintained by different players, and prone to security risks. Consumers can easily obtain trusted information, such as ingredients, origin, year of production, and the name of the producer from an immutable source.”

The VeChain app, or the VeChain-enabled DIG app, provides information about the winemaker, a particular wine’s history, the date of manufacture, shipment to China, logistics information and any certifications provided by DIG or other organizations.

The companies can also communicate with customers through the app to get feedback on specific wines, as well as information on how many bottles have been consumed. Such a wellspring of information about one bottle of wine among thousands in a supply chain is unfeasible in centralized databases, for each company in a supply chain generally has its own management system. Blockchain, too, presents its own challenges.

“Blockchains such as Ethereum and Bitcoin were designed to store the transaction hash and the transaction hash is designed in a very simple standard format,” says DJ Qian, founder of VeChain. “But for commercial data, it cannot be stored on such a format because each company has a lot of data. Some companies have over 1 petaflop stored in their centralized database. We cannot easily put such data in blockchain-based product products for commercial enterprises themselves.”

Qian, a former 12-year vet at IBM, adds: “We need to get creative in the way we store data on commercial blockchains. To do this, we store some key information on the blockchain itself, just as in Ethereum and Bitcoin. For other data, we use a combination of traditional databases and blockchain hash technology.”

VeChain currently provides several types of chips to DIG, which are used depending on the value of wine. Some can even retrieve environmental parameters, like vibration and temperature.

“For high end wine and high end spirits, we have one chip as thick as a sheet of paper you can put on top of the bottle,” elaborates Mr. Qian. “When the bottle is open, the chip’s antenna is destroyed. This protects the wine bottle from being refilled with different wine and counterfeited.”

This Max Keiser exclusive article was written by Justin O’Connell, a financial technology researcher focusing on blockchain. He founded the companies Gold Silver Bitcoin and Cryptographic Asset, as well as helped to launch the largest Bitcoin ATM software provider in the world. His work has appeared in Bitcoin Magazine, Coin Desk, Crypto Coins News, Hacked, Merry Jane, NASDAQ and VICE.

Image source: Shutterstock

In the Footsteps of Rome: Is Renewal Possible?

24-Jul-2017

Is renewal / recovery from systemic decline possible? The history of the Roman Empire is a potentially insightful place to start looking for answers. As long-time readers know, I’ve been studying both the Western and Eastern (Byzantine) Roman Empires over the past few years.

Both Western and Eastern Roman Empires faced existential crises that very nearly dissolved the empires hundreds of years before their terminal declines.

The Western Roman Empire, beset by the overlapping crises of invasion, civil war, plague and economic upheaval, nearly collapsed in the third century C.E. (Christian Era, what was previously A.D.) — 235 to 284 C.E., fully two hundred years before its final dissolution in the fifth century (circa 476 C.E.).

Meanwhile, the Eastern Roman Empire (Byzantine Empire) faced similar crises in the seventh and eighth centuries, as its capital of Constantinople was besieged by the Persians in 626 C.E. and the Arab caliphate in 674 C.E. and again in 717 C.E. The invasions which preceded the sieges stripped the empire of wealthy territories and the income those lands produced.

In both cases, the Empire not only survived but recovered a substantial measure of its former resilience and stability. Fortune delivered strong leadership at the critical moment: leadership that was able to protect itself from petty, self-aggrandizing domestic rivals, force the reorganization of failed, self-serving bureaucracies, inspire the populace to make the necessary sacrifices for the common good, win decisive military victories that ended the threat of invasion, and generate a moral claim to leadership via personal rectitude and/or participation in a religious revival.

Absent such strong, stable, legitimate leadership, neither empire would have survived their existential crisis.

But strong leadership alone isn’t enough. A strong military leader can win battles, and a strong political leader can aggregate power, but these are merely steps to the ultimate goal of strong leadership, which is to reform the Imperial system so it once again serves the needs of the entire Empire rather than just the greed of the few at the top of the wealth-power pyramid.

The system itself must still hold the potential to be reformed. If the systems of communication, trade, control and finance have all eroded beyond the point of no return, then the victories of a strong leader die with that leader.

The army must still have the means to recruit new legions, the Treasury must still have a system to collect tax revenues, the central leadership must have a way to communicate with far-flung commanders and local leaders, and so on.

The collective shared memory of imperial cohesion and competence must still exist in the general populace. Any political group identity, be it tribe, village, nation or empire, is anchored by a shared awareness of membership, i.e. the rights and responsibilities of belonging, and a collective memory of the group / empire as a functioning whole that served the many and not just the few.

Once the shared memory of the Empire as a functioning whole is lost, the entire notion of empire is lost.

The leadership in these existential crises of the third century C.E. in the West and the eighth century in the East could still draw upon a collective memory of a functioning empire. Residents had not yet lost the shared memory of serving in the army, of paying taxes, of stable trade protected by the Empire, of a stable Imperial currency, and so on.

Once the shared memories of these values are lost, the Empire ceases to exist; there is nothing left to reform or renew.

We are far down the road to a system that serves the few at the expense of the many. The collective memory of a system that once served the common good is fading. Strong leadership can still wrest popular political power from the self-serving elites atop the wealth-power pyramid and wield this political power to reform the system so it serves the many instead of just the few, but the window for such reform /renewal is closing fast.

In another decade, a living system that served the common good rather than just the interests of a few will be as distant as the shattered monuments of ancient Rome. 

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.

Saving Illinois: Getting More Bang for the State’s Bucks

24-Jul-2017

Illinois is teetering on bankruptcy and other states are not far behind, largely due to unfunded pension liabilities; but there are solutions. The Federal Reserve could do a round of “QE for Munis.” Or the state could turn its sizable pension fund into a self-sustaining public bank.

Illinois is insolvent, unable to pay its bills. According to Moody’s, the state has $15 billion in unpaid bills and $251 billion in unfunded liabilities. Of these, $119 billion are tied to shortfalls in the state’s pension program. On July 6, 2017, for the first time in two years, the state finally passed a budget, after lawmakers overrode the governor’s veto on raising taxes. But they used massive tax hikes to do it – a 32% increase in state income taxes and 33% increase in state corporate taxes – and still Illinois’ new budget generates only $5 billion, not nearly enough to cover its $15 billion deficit.

Adding to its budget woes, the state is being considered by Moody’s for a credit downgrade, which means its borrowing costs could shoot up. Several other states are in nearly as bad shape, with Kentucky, New Jersey, Arizona and Connecticut topping the list. U.S. public pensions are underfunded by at least $1.8 trillion and probably more, according to expert estimates. They are paying out more than they are taking in, and they are falling short on their projected returns. Most funds aim for about a 7.5% return, but they barely made 1.5% last year.

If Illinois were a corporation, it could declare bankruptcy; but states are constitutionally forbidden to take that route. The state could follow the lead of Detroit and cut its public pension funds, but Illinois has a constitutional provision forbidding that as well. It could follow Detroit in privatizing public utilities (notably water), but that would drive consumer utility prices through the roof. And taxes have been raised about as far as the legislature can be pushed to go.

The state cannot meet its budget because the tax base has shrunk. The economy has shrunk and so has the money supply, triggered by the 2008 banking crisis. Jobs were lost, homes were foreclosed on, and businesses and people quit borrowing, either because they were “all borrowed up” and could not go further into debt or, in the case of businesses, because they did not have sufficient customer demand to warrant business expansion. And today, virtually the entire circulating money supply is created when banks make loans When loans are paid down and new loans are not taken out, the money supply shrinks. What to do?

Quantitative Easing for Munis

There is a deep pocket that can fill the hole in the money supply – the Federal Reserve. The Fed had no problem finding the money to bail out the profligate Wall Street banks following the banking crisis, with short-term loans totaling $26 trillion. It also freed up the banks’ balance sheets by buying $1.7 trillion in mortgage-backed securities with its “quantitative easing” tool. The Fed could do something similar for the local governments that were victims of the crisis. One of its dual mandates is to maintain full employment, and we are nowhere near that now, despite some biased figures that omit those who have dropped out of the workforce or have had to take low-paying or part-time jobs.

The case for a “QE-Muni” was made in an October 2012 editorial in The New York Times titled “Getting More Bang for the Fed’s Buck” by Joseph Grundfest et al. The authors said Republicans and Democrats alike have been decrying the failure to stimulate the economy through needed infrastructure improvements, but shrinking tax revenues and limited debt service capacity have tied the hands of state and local governments. They observed:

State and municipal bonds help finance new infrastructure projects like roads and bridges, as well as pay for some government salaries and services.

. . . [E]very Fed dollar spent in the muni market would absorb a larger percentage of outstanding debt and is likely to have a greater effect on reducing the bonds’ interest rates than the same expenditure in the mortgage market.

. . . [L]owering the borrowing costs for states, cities and counties should not only forestall tax increases (which dampen individual spending), but also make it easier for local governments to pay for police officers, firefighters, teachers and infrastructure improvements.

The authors acknowledged that their QE-Muni proposal faced legal hurdles. The Federal Reserve Act prohibits the central bank from purchasing municipal government debt with a maturity of more than six months, and the beneficial effects expected from QE-Muni would require loans of longer duration. But Congress was then trying to avoid the “fiscal cliff,” so all options were on the table. Today the fiscal cliff has come around again, with threats of the debt ceiling dropping on an embattled Congress. It could be time to look at “QE for Munis” again.

Getting More Bang for the Pensioners’ Bucks

Scott Baker, a senior advisor to the Public Banking Institute and economics editor at OpEdNews, has another idea. He argues that the states are far from broke. They may not be able to balance their budgets with taxes, but a search through their Comprehensive Annual Financial Reports (CAFRs) shows that they have massive surplus funds and rainy day funds tucked away around the state, most of them earning minimal returns. (Recall the 1.5% made by the pension funds collectively last year.)

The 2016 CAFR for Illinois shows $94.6 billion in its pension fund alone, and well over $100 billion if other funds are included. To say it is broke is like saying a retired couple with a million dollars in savings is broke because they can earn only 1.5% on their savings and cannot live on $15,000 a year. What they need to do is to spend some of their savings to meet their budget and invest the rest in something safe but more lucrative.

So here is Baker’s idea for Illinois:

  1. Make an iron-clad pledge by law, even in the State Constitution if they can get quick agreement, to provide for pension payouts at the current level and adjusted for inflation in the future.
  2. Liquidate the current pension fund and maybe some of the other liquid funds too to pay off all current debts.
  3. This will leave them with a great credit rating . . . .
  4. Put the remaining tens of billions into a new State Bank, partnering with the beleaguered small and community banks . . . . Use that money to finance state and local businesses and individuals instead of Wall Street schemes and high fund manager fees that will no longer be necessary or advisable, saving the state hundreds of millions a year.

The Public Bank could be built roughly on the model of the hugely successful Bank of North Dakota example, one of the country’s greatest banks, measured by Return on Equity, and scandal-free since its founding in 1919.

The Bank of North Dakota (BND), the nation’s only state-owned bank, has had record profits every year for the last 13 years, with a return on equity in 2016 of 16.6%, twice the national average. Its chief depositor is the state itself, and its mandate is to support the local economy, partnering rather than competing with local banks. Its commercial loans range from 2.4% to 7.5%. The BND makes cheaper loans as well, drawing on loan funds for special programs including infrastructure, startup businesses and affordable housing. Its loan income after deducting allowances for loan losses was $175 million in 2016 on a loan portfolio of $4.7 billion. (2016 BND CAFR, pages 28-29.)That puts the net return on loans at 3.7%.

Illinois could follow North Dakota’s lead. Looking again at the Illinois CAFR (page 45), the amount paid out for pension benefits in 2016 was only $1.833 billion, or less than 2% of the $94.6 billion pool. An Illinois state bank could generate that much in profit, even after paying off the state’s outstanding budget deficit.

Assume Illinois guaranteed its pension payouts, as Baker recommends, then liquidated its pension fund and withdrew $10 billion to meet its current budget shortfall. This would significantly improve its credit rating, allowing it to refinance its long-term debt at a reduced rate. The remaining $85 billion could be put into the state’s own bank, $8 billion as capital and $77 billion as deposits. [See chart below.] At a loan to deposit ratio of 80%, $60 billion could be issued in loans. At a return similar to the BND’s 3.7%, these loans would produce $2.2 billion in interest income. The remaining $17 billion in deposits could be invested in liquid federal securities at 1%, generating an additional $170 million. That would give a net profit of $2.37 billion, enough to cover the $1.8 billion annual pensioners’ payout, with $570 million to spare.

The salubrious result: the pension fund would be self-funding; the state would have a bank that could create credit to support the local economy; the pensioners would have money to spend, increasing demand; the economy would be stimulated, increasing the tax base; and the state would have a good credit rating, allowing it to borrow on the bond market at low interest rates. Better yet, it could borrow from its own bank and pay the interest to itself. The proceeds could then go to its pensioners rather than to bondholders.

Where there is the political will, there is a way. Politicians and central bankers will take radical, game-changing steps in desperate times. We just need to start thinking outside the box, a Wall Street-imposed box that has trapped us in austerity and economic servitude for over a century.

____________________

Property Market In Dublin Is Inflated and May Burst Again

24-Jul-2017

Commercial Property Market Is Inflated and May Burst Again

by David McWilliams

Dublin property investors had better hope that Brexit happens soon.

They should also hope that it’s not just a ‘hard’ Brexit, but a granite Brexit — a Brexit that’s as hard as possible. They should be betting on the buffoonery of Boris Johnson, down on both knees praying for a massive barney between Davis and Barnier.

A granite Brexit might prompt the migration of hundreds of corporate refugees from isolated London to the freewheeling safe haven of Dublin. If Brexit doesn’t drive a massive uptake in demand for prime property, we are in for a massive wobble in our inflated commercial property market.

Before we remind ourselves how this property story goes, let’s have a look at the facts: the glossy brochures are back, stockbrokers are packaging all sorts of property-related products to “investors”, the price of ad space in the property porn sections of the press is surging and of course the skyline is full of cranes and Armagh flags.

CBRE – a property-flogging outfit – tells us there are currently 31 office schemes under construction in Dublin, which is more than 380,000sqm in the pipeline. They tell us that more than 30% of this stock is already let. It also gushes that 44% of the office stock due for completion before the end of this year has already been pre-let. Meanwhile, agents tell us that prime office rents in the Dublin market stand at approximately €673 sqm.

It looks like things couldn’t be healthier.

Office take-up in Dublin surged 101,000sqm in the past three months, bringing total take-up in the first half of this year to more than 150,000 sqm. That’s a lot of space. 81 individual large office lettings were signed in Dublin since March (45 to Irish companies; 18 to US firms and 11 to the Brits). This is more than double the figure for the period from January to March.

The market is tight, hence all the building. The vacancy rate in the city centre is only 4.5% and yields for investors are stable at 4.6%. This is only because rents have been surging to keep up with the soaring prices.

Before we get carried away, remember rents are a cost and Ireland is competing with other European countries, so let’s compare our prices, not with some of Europe’s poorest countries, but why not with its richest, Germany? This will give a bit of perspective.

Click here to read full story on GoldCore…

 
“It is important to note that all portfolios under all conditions actually perform better with exposure to gold and silver” – David Morgan

In the short video above, David Morgan, the Silver Guru, speaks briefly about the importance of owning silver bullion coins and bars as financial insurance in an uncertain world. He speaks about GoldCore Secure Storage and how he recommends GoldCore’s ultra secure allocated and segregated gold, silver, platinum and palladium bullion storage (Zurich, London, Singapore and Hong Kong) to his retail and high net worth clients.

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