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The economy is like the weather; we are very good at making short-term predictions, but over the long-term, we don’t have a clue.
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High Anxieties: The Mathematics of Chaos (60:00)
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Tag: economy
Setting Up For Failure??
With the past year’s electoral comedy festival coming to a close today, and with Obama’s economy (let’s face it) in the toilet, is it any surprise that the Dow went up this morning? Futures are up, PMs are up, even CNN’s ratings are up, hope is on the rise, and change is in the air… change not even Obama could have foreseen.
Whether you voted for a billionaire, a billionaire wanna-be, or you stayed home and didn’t vote (majority,) you have just witnessed the most vitriolic fight ever to have rocked the airwaves on CNN. But was it, as is all the other ‘news’ on CNN, all just a show? One of your candidates would have been beholden to Goldman-Sachs, the other will be sipping lemonade with them at his country club(s.) Some choice. Some democracy.
Billionaires have been moving their money out of the markets and into gold for the last year or so. Out of risky investments (they are all risky these days) and into wealth storage goes the ‘smart’ money (I would call it the ‘informed’ money, but I digress) whereas the rest of us are being lulled into buying stock at the (obvious) top of the market. Someone is gonna’ make a killing, and somebody else is about to get fleeced… usually the sheep.
More and more experts are hedging against a catastrophic crash in the markets – they say it will make 2008 look like a minor hiccup – and betting on $5,000 gold, and many have been saying this for some time. Meanwhile, the manipulated markets are levitating on fumes. The crash is being postponed. Someone wants Obama to go out looking like a hero. Easy when unemployment numbers don’t include those who’ve stopped looking for work. Unemployment, by some estimates, could be as high as 20%, and with the national debt growing exponentially, population rates dropping, a soon-to-be-retired population aging fast, tax-havens for corporations, a growing prison population, and a bankrupt pension industry, the tax base is falling fast as spending (especially military) is going through the roof and government is growing faster and faster every year. Hell, even the cost of presidential libraries is more than doubling every term.
I used to think Trump was just thrown in to the mix in order to divide the Republican vote and get HRC elected. Could be, but Trump really was an anomaly. Did he really take the country by surprise, or were there those who had a plan all along? I’m starting to think that when Trump was first being seen as a champion for the people, others were taking advantage of the situation to further their own interests.
The economy could not be held up on ‘good news’ forever, they needed a way out of the downwardly-spiraling miasma beyond blaming the weather, or at least someone to pin it on. So the economy was propped-up for the exit of the Nobel prize-winner, and once Trump is inaugurated, the wheels will be allowed to come off. The end of 2017 could see the VIX at 100!
Since Brexit and talk of other countries leaving the EU, the big debate around the planet this year has been about one thing – globalism versus the dangers of populism. What if globalists are using Trump as a fall guy, a scapegoat to blame the coming crash on? What if they have their fingers on the markets just waiting to pull the plug? What better way to defeat populism than by using its own best champion to bring it down? “You see? We told you that he was dangerous, didn’t we? We told you globalism would prevail. Now show us your papers.” And that’s just the economic side… there’s also this situation in the middle-east involving Russia, Saud, Turkey, et al, but that’s another story.
Would it surprise me? No. Nothing, at this point, would surprise me.
*Update*
via Zerohedge: “Mario Draghi Hints Trump Will Be Responsible For The Next Financial Crisis”
“The Trump Collapse Scapegoat Narrative Has Now Been Launched”
The media was building the foundation of the narrative from the moment Trump won the election. Bloomberg was quick to publish its rather hilariously skewed propaganda on the matter, asserting that Trump was lucky to inherit an economy in ascendance and recovery because of the fiscal ingenuity of Barack Obama. This is of course utter nonsense. Obama and the Fed have created a zombie economy rotting from the inside out, nothing more. But, as Bloomberg noted rightly, any downturn within the system will indeed be blamed on the Trump administration.
Fortune Magazine, adding to the narrative, outlined the view that the initial stock rally surrounding Trump’s election win was merely setting the stage for a surprise market crash.
I continue to go one further than the mainstream media and say that the Trump administration is a giant cement shoe designed (deliberately) to drag conservatives and conservative principles down into the abyss as we are blamed by association for the financial calamity that will occur on Trump’s watch.
Personally, I think it less about left vs. right and more about us vs. them. It’s a class thing. Both conservatives and liberals will suffer through the next major crisis, but populism will be pummeled.
The Legend of the Oogy-Mi-Booli Tribe
Before glaciers covered all the lands, there lived a tribe of rather primitive people, the Oogy-Mi-Booli. They occupied the forested region bordering the mountain steppes of what is now Lower Slobbovia. The village was on the only river in the area.
Sure, they could write and add and irrigate and such, but they were primitive in their thinking, in their predominantly short-term thinking. However, they thought themselves sophisticated because their economy was so complex. More on that later.
One evening, to everyone’s astonishment, a group of hunters had brought home with them a gargantu-nocerus, alive! Despite dispatching many of it’s kin, they had spared this one from the kill. Apparently, the gargantu-nocerus had spoken to one of them, the shaman. It wanted to make a deal. The animal was a young mother (after experiencing child-birth, gargantu-nocerususes lactate for life) who had just lost her only offspring to an even more gianter beast.
[Gargantu-nocerus milk was extremely nourishing; it was what sustained the hunters and allowed them to haul back such massive quantities of meat for the women and children of the tribe. Unfortunately, it didn’t keep. During a hunt, it was customary for the fastest runner to bring back as much milk as he could carry so that all the children in the village could have a taste before it went sour. Animals would chase him. Often-times, when the hunt was far, or the weather was hot, he would return with nothing but rancid butter.]
Upon arrival at their village (called Kshepaw-Oozju-Rendoo, where everybody lived in the same lodge-house,) the shaman called out all the villagers (which they found troubling, given the late hour – they had been tending to their pagan rituals) and instructed them on what needed to be done.
The animal in question, in a bargain for it’s life, was to be revered, made sacred, and placed in what was to remain, for all time, the most prominent spot in the village… on the roof of the communal house. It would be pampered, and cleaned, and fed, and attended to, and most of all, it would be protected from it’s other natural enemy, the enormo-saurusus (which stayed far afield of the human village on account of the smell.) The animal would be their de-facto emperor. In exchange, it would provide them with all the fresh gargantu-nocerus milk they could drink.
So the villagers got to work. A throne needed to be built, scaffolding had to be erected to reinforce the roof, and stairs needed to be constructed for the scores of volunteers attending to the behemoth which slept above their beds. Their prayers to the new emperor overhead would mostly be about structural failure, design flaws, and engineering specifications, or a desired lack, thereof, and sometimes, during the dry season, about getting more rain. Being mostly carnivorous – they ate some fish and insects, too – they didn’t need the rain for crops. They just enjoyed playing outside in it. The only thing better than rain showers, in the eyes of the people, was being ‘blessed from above’ by the animal’s showers of excrement. What an honour that would be, to be shat upon by the emperor! But first, they had to get the beast up there. Once they did, they could harvest the super-nutritious milk.
Needless to say, the task was a monumental one, but little by little, the throne was fashioned, the scaffolding and the stairs were built, and it didn’t all come crashing down onto the villagers’ heads. With this new supplement to their diet, gargantu-nocerus milk, the children grew up healthy, and strong, and with the belief that this lifestyle had to be protected, for the sake of the next generation. Stronger hunters make for bigger hunts. Bigger hunts make for more people to go on bigger and bigger hunts. Can you say ‘exponential growth curve’ or ‘doubling function’?
Every year, the gargantu-nocerodes’ genitals would be rubbed down and its musk would imbibe the rags. These rags would then be used to lure other gargantu-nocerodes during the hunt, making it less time-consuming, hence, more beasts could be felled.
One year, the emperor’s health began to fail, and another had to be captured in order to take its place. This tradition grew with time as did the need to expand the lodge-house. The hunts had never been so successful, and gargantu-nocerus meat could be smelled cooking for miles around, all day long. Boom-times !!
Well, with all the additions to the lodge-house, and with all the fires used to cook the Oogy-Mi-Booli’s meat, the forest in which they lived began looking more and more like the adjacent steppes, where the gargantu-nocerus roamed, treeless. The tribe’s economists (who were necessary now that the economy was booming) started developing insurance schemes, derivatives contracts, and other tools to mitigate the losses should anything really bad ever happen (of course, ‘really bad’ had only one result: doomsday. Nevertheless it re-assured the people that the smart ones, the bankers and businessmen, really did know what they were talking about.) It had gotten so bad, that the trek to get wood was now even longer than the trek to the hunting grounds. A generation later, there was no wood to be found anywhere, not even up-river, where the bankers lived.
The emperor’s excrement was gathered with nets (it was fibrous enough, given her vegetarian diet) and was used to stoke some of the fires (so much for manna showers – austerity became a noble goal,) but it was not enough. Eventually, people started to use wood from the lodge-house to cook their plentiful meat. When all the walls and the roof had been consumed they had reverted back to covering those surfaces with gargantu-nocerus skins. After the floorboards had been used, the scaffolding was next.
Life became like a game of ‘shortest straw’, nobody knowing when the shavings of wood they salvaged from the structural members of the scaffold would weaken it enough to initiate its collapse. The architects and the engineers (all the chief’s men) were called in by the shaman to reassure the people that “…at the present rate, the structure could withstand this whittling for decades to come, long enough, surely, to find a more permanent solution to this most pressing, but not by any means urgent situation. Everything’s fine; nothing to see here. No need to panic.” But ‘present rates’ tend not to stay ‘present’ for long; they grow.
One morning, while everyone else slept, the emperor’s head attendant peeled off some splinters of wood from the creaking structure to boil a pot of water for the emperor’s morning tea. Before anyone knew what had happened, they were all crushed by the weight of their utopic dream. All but the bankers, that is, but they all starved to death within a month.
Growth kills.
The Most IMPORTANT Video You’ll Ever See (part 1 of 8) (9:17)
Eh You (Au)
If someone is vehement about not wanting you to buy something, it’s probably because they want it for themselves.
Additionally, if they vehemently want you to sell them that same thing, this can only serve to reinforce the impression that gold really is the only thing worth having.
“Awww, forget about gold, it’s so ‘passé.’ What you want are these financial instruments – ‘paper gold’. They’re more modern, and sexier, easier to trade, and no storage fees; not to mention that there are 400 times as many of these as gold! By the way, if you want to sell me some of your gold, I have a few of these choice opportunities for you. Besides, would you prefer carrying a briefcase, or a trunk? C’mon let’s go have a drink and talk it over.”
“Yeah I could really use one or two of those, what with work, mortgage, loans, an education for the kids, and don’t get me started about my…”
If you can’t spot the sucker, the sucker is you.
AGW – Calamity or Strategy?
There are those who believe that ‘global warming’ is a consequence of natural forces, there are those who believe that ‘global warming’ is man-made, and there are some who don’t believe it is happening at all.
Most reputable scientists seem to agree that there was a warming trend noticed in the mid-eighties (when satellite data became ‘de rigueur’) which lasted until 1998. Most would also agree that this warming has plateau’d and that the average global temperature has been steady for the last two decades. Many say that CO2 is to blame, many don’t.
Let’s, for the sake of argument, put all that aside for the moment. It really doesn’t matter, anyhow. What does matter in the AGW (anthropogenic global warming) debate is whether or not there are some people who have been trying to get the earth to warm up. Dane Wiggington is of the opinion that the earth is warming and that the result will be catastrophic. He also believes that geo-engineering is (partly) to blame. The implications are surreal.
There are three reasons for which this scenario is plausible: derivatives; market share; and commodities.
Derivatives (without getting too technical) are insurance. They are side bets made by financiers in order to protect themselves against investments gone bad. A farmers’ crops may be worth a million dollars, but if a natural disaster strikes, the failed crop might be worth two million through the derivatives market. This is the basis for ‘disaster capitalism.’ The derivatives market is said to be worth hundreds of trillions. Profits depend on failures in more traditional enterprises.
Market share is what drives corporations to monopoly. The more market share, the more customers, the more sales. Companies such as Monsanto have been developing techniques which would assure them almost complete market dominance. They, along with their partners, have been researching seed technology which could grow in almost any condition such as drought, flood, and even radiation.
Commodities are everything the world uses. They are raw materials. They are food. They are mineral resources such as gold (debatable,) oil, uranium, and coal. Some say that they are running out, or at least, that the low-hanging fruit has already been picked. There could be a new source of commodities, though. There could be an entire ocean of virgin ground awaiting exploration.
This would satisfy all three conditions.
If the world was warming, the polar ice caps would melt. This would wreak havoc with the global economy and the derivatives market would prove very profitable for the psychopaths praying for (and betting on) plague conditions. Environmental devastation would also prove very profitable for large conglomerates that could supply (very expensive) food which could not be grown anywhere else anymore. Thirdly, if the poles did melt, great swaths of new land would be exposed and exploited immediately.
This doomsday scenario begs the question, are there those who would sabotage the world for their own gain? If history is any indication, the answer is a resounding, “Yes!” If these people do exist, are they presently putting their resources to work in trying to achieve this goal? Is geo-engineering being used to warm the planet further and faster?
Whether or not this is being implemented, the people in Davos have just put together a plan to ensure that whatever happens, they will control the outcome. “Scott Minerd (who before Guggenheim worked at Credit Suisse and Morgan Stanley) …joined a World Economic Forum advisory council. Its task? Develop guidelines for those nations looking to do business at the top of the world. That framework is to be released Thursday, in Davos.”
“The Arctic guidelines are voluntary, like many other sustainable investment initiatives, including the Principles for Responsible Investment or even the WEF’s own work on “sustainable competitiveness.” How does anyone expect to protect the Arctic environment in such a gold rush? The project is designed to complement the United Nations Sustainable Development Goals, and while the green earth is littered with do-good business pledges, the notion received a shot in the arm recently. In December, almost 200 nations agreed in Paris to adhere to the first-ever universal climate goals. How nations contribute to progress toward them is their call, since there are no binding demands to cut greenhouse gas emissions.”
The above taken from Bloomberg’s “The World Has Discovered a $1 Trillion Ocean.”
So cui bono? Who are the people who would benefit from a world destroyed, what tools would they employ to see such a strategy implemented, and just how far would they go to dominate and control the earth and its resources?
One would expect to find the answer just north of 66 degrees.
Trickle-Up Carbon Taxes
Here are some points about carbon taxes which may have passed under the radar gleaned from Canada’s Ecofiscal Commision (a Canadian think-tank.)
The commission had what they refered to as a debate today between Chris Ragan, chair of Canada’s Ecofiscal Commission and Merran Smith, Executive Director or Clean Energy Canada moderated by the Globe and Mail’s Editorial Page Editor Tony Keller. It wasn’t much of a debate, it was more like publicity. The live event was aimed at corporate oil sector executives.
The participants mostly echoed each others’ comments. Even pre-recorded clips and guest questions simply regurgitated the day’s talking points. They were few, but seemed to encourage oil companies to accept the incentivization programs aimed directly at them. The public, and its concerns, were for the most part, ignored.
The one point which kept coming up was that carbon taxes should be revenue-neutral. What this means is that while companies would be taxed for their share of carbon emissions (again, there was no distinction between CO, CO2, and CH4) at about $30/tonne, the money would then come back to the company through special programs, tax breaks in other areas, or subsidies. BC’s cement industry was cited saying that some $25M had already been given in order to reduce GHG emissions. So is the government trying to get some of its money back, or is it trying to get corporations to pay for their own subsidies?
BC uses a revenue-neutral system whereas the system in Quebec is cap and trade (Quebec carbon is taxed at about $14/tonne.) The problem here is the perception of oil companies; if they feel the taxes are not revenue-neutral, the ‘debators’ conceded, there would be an exodus of mostly manufacturing jobs towards cheaper emerging markets. In other words, ‘the working man’ suffers.
They then pointed out that manufacturing jobs were being replaced with other jobs (in Ontario total hires went up.) If those jobs are being replaced with better jobs (R&D,) (re)education will cost more for the workers and saddle them with more debt – if Canadians are even qualified to do these jobs – which is doubtful. But if the jobs (as is more probably the case) are being replaced with lesser jobs (service sector) as is the current trend, again it is ‘the working man’ who suffers.
Emerging market countries have been quick to point out that most of this ‘pollution’ was made by developed market countries who then counter that the pollution from the next fifty years will be mostly EM, and much worse. We got it on credit, but you have to pay up front.
Finally, the ‘leftover’ taxes would be used to help subsidize public transport. Since less people will be able to afford cars, this seems reasonable. Again it is ‘the working man’ who suffers. Those who can afford it will be encouraged to buy newer cleaner cars. More money being spent by the public which already owes a tremendous amount of new car debt in favour of the car companies who produce the pollution in the first place. This is all getting rather circular. Who suffers? You guessed it.
All this is based upon the notion that this entire carbon market will not be a free market, but a highly manipulated one; one in which the price of carbon can never be high enough, much like the already carbon-tax-laden airline ticket. Prices will be set, because if the market were left to its own devices, and it turns out that CO2 does nothing to raise global temperatures, the >$1T market would collapse taking everything out with it.
Canada’s Ecofiscal Commision has no literature referencing sources for CO2 harm, cites no peer-reviewed papers backing up its claims, will not provide any references, and says the science is settled which negates the need for any pesky proof.
The commission has also indicated that all forms of carbon emissions should be subject to taxation. Get ready for a breathing tax, Canada.
To Vote Or Not To Vote…
The CBC has been on a fact-finding mission; they want to know why so many people, and young people in particular, are uninvolved in politics. They have asked ‘experts’ (self-proclaimed, no less) to chime in, they have brought forth their own opinions, they have even tried to compare politics to sporting events. None of it has brought them any closer to the truth.
There are many legitimate reasons for the lack of interest, but none of these have been considered. Young people are not uninterested in politics; young people are uninterested in politicians. If anyone doubts this, they need only try to tell a young person what to do (or what not to do.) The youth are fiercely independant and do not easily subject themselves to the trappings of authority, to their credit. The youth have always been an energetic and enthousiastic voice for change when it was needed (do you remember the ‘Printemps Érable’?) They just don’t like the system as it stands, and they are simply not hypocritical enough to use it for the obtention of their objectives. After all, politics is full of old people, and old people don’t listen to the young.
This is not about apathy. If the youth understood to what extent politics affects their lives, they would say so aggressively. Futility is probably a better word. No matter how hard we push, some things never get done, some promises are never kept, and some people can never be trusted. In essence, trust in the government is a more important consideration. Dissatisfaction with the results of misplaced trust is another leading factor. Politicians tend to promise many things which they cannot deliver, whether or not they know this when making those promises speaks to the trust issue once again. Is it ignorance or deception? If we do not know, we will assume the worst. Neither do we seem surprised if it is deception. For once, we might say, expectations were met. If the above reasons are true (or can be shown to have some merit,) the only conclusion we can come to is that there is a tremendous waste of time and money involved.
With apathy not being the case, and futility, dissatisfaction, and mis-trust being the key issues, how can we re-engage the populace to take more action when it comes to picking a leader? Given that most leaders tend to act in similar fashion when elected, and that most of them are not particularily charismatic to begin with, perhaps, as was positied by one of the CBC’s guest analysts, all which needs be done is to jazz up the look of advertising. Saying that the young are so superficial that an improved ad campaign would change everything is naive and insulting. The truth is that the ads reflect the state of politics: black and white and boring, the way it should be. We certainly don’t need to put lipstick on this pig; we need to explain that this is where bacon comes from.
Speed Wobbles Kill (Why Boring is Good on Wall Street)
If any of you have ever experienced a speed wobble, you’ll know that it is a time of sheer panic and massive (over) corrections. Speed wobbles happen when stability is lost.
What does this have to do with Wall Street? Well, this is exactly what is going on with US monetary policy. The single steering pivot is the Fed. The quick oscillation is the recent volatility of the markets. The stolen energy (see following graph) is the intervention in the markets. The high speeds are the algos and the massive volumes generated when they read the headlines. Normally, volumes have been very low of late, but with very high rates of acceleration, wobbles, not bubbles are created (well, bubbles too, but the wobbles are what burst the bubbles.)
The simple fact that stability indicates growth and volatility spells panic is what investors rely upon in order to place their bets. That which has been seen in the markets would tend to indicate that with ‘wobbliness’ increasing, the crash may be imminent.
A good explanation of the effect this has on markets can be found here.
Did Trump Miss His Best Chance?
With Donald Trump’s appearance in Alabama on Friday night, and with the Dow’s 500 point ‘correction’ that day (about 1000 points down that week,) he may just have missed his best opportunity to win the election outright. If he had said “Liquidate!” (whether markets were going to crash or not) he would have caused the crash and would have secured the election instantly.
* Update
This is the master stroke.
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atokenman blog 