Steve Bull's Blog, page 1172
March 6, 2018
Currency Exchange Value Dynamics
In a recent article I postulated that the dollar could lose all its purchasing power with a rapidity that will come as an unpleasant bombshell, even to those who already see inflation as society’s greatest problem in the future. The key to understanding why this may be so lies in human reactions to the monetary consequences of the next credit crisis. The undermining of the dollar as a currency affects all other fiat currencies, because it is the reserve currency and all financial markets use it as the pricing medium for commodities and for much of international trade.
A comprehensible analysis of currency exchange dynamics must therefore concentrate on the dollar, only bringing in the broader picture when appropriate. In this article’s context, currency exchange dynamics refers primarily to events that lead to a change in the dollar’s purchasing power.
The dollar has suffered monetary inflation ever since the Federal Reserve Board was created, both in terms of the expansion of base money and of bank credit. The effect in terms of loss of purchasing power has so far come in two shifts. The first was in 1934, when the dollar was devalued against gold by 40%, and the second following the collapse of the London gold pool in the late 1960s, since when the dollar has lost a further 97.4%.
The precedent has therefore been set for a continuing trend, that will eventually conclude with the destruction of the current monetary system. We know this because monetary regimes come and go, leaving gold and silver as the only solid forms of money throughout human history. Therefore, the end of the dollar, along with the whole fiat currency system, just like the end of empires, is one of the monetary certainties. But only a small minority of analysts are conscious this is so and appear to assume the current monetary state will continue indefinitely.
…click on the above link to read the rest of the article…
Italy’s Results are Truly Forza Italia!
Europe is headed for a breakup. But, after a year of watching the EU establishment work the polls just enough to maintain the status quo in the Netherlands, France and Germany I wasn’t expecting much from yesterday’s Italian elections.
But with turnout over 73% we got just that. Voters were clearly motivated to change the course Italy is on. Now, we knew that Silvio Berlusconi’s center-right coalition would do well alongside upstart Five Star Movement.
The question was always going to be, however, how well would they do?
It looks like it was much better than the polls wanted us to believe. Last week I told you the markets were getting nervous about this election. This weekend the news was all about how subdued the reaction was to the polling.
As if a major technical breakout to the upside on Italian bond yields in the face of furious ECB buying wasn’t a strong enough market response?
But, that’s doesn’t fit the plan to gaslight voters and traders to worry about the potential outcome here.
The League of 5-Star Gentlemen
It looks like Five Start Movement will take more than 30% of the final tally, which is a couple of points above where polling had it tracking when the blackout went into effect two weeks ago.
The bigger result is that of The League (formerly The Northern League) who came off their secessionist mountain and ran hard on a platform of euroskepticism and anti-immigration.
The most important person in Italian politics right now is The League’s leader, Matteo “The EU can go F&%k itself” Salvini.
When the final votes are revealed, if The League out-polled Silvio “Establishment Stalking Horse” Berlusconi’s Forza Italia! then he has the hammer in coalition negotiations.
…click on the above link to read the rest of the article…
March 5, 2018
Stop Blaming Russian Bots For Everything
“I’m not convinced on this bot thing,” said one of the men behind the Russian bot thing.
BuzzFeed News; Getty Images
By now you know the drill: massive news event happens, journalists scramble to figure out what’s going on, and within a couple hours the culprit is found — Russian bots.
Russian bots were blamed for driving attention to the Nunes memo, a Republican-authored document on the Trump-Russia probe. They were blamed for pushing for Roy Moore to win in Alabama’s special election. And here they are wading into the gun debate following the Parkland shooting. “[T]he messages from these automated accounts, or bots, were designed to widen the divide and make compromise even more difficult,” wrote the New York Times in a story following the shooting, citing little more than “Twitter accounts suspected of having links to Russia.”
This is, not to mince words, total bullshit.
The thing is, nearly every time you see a story blaming Russian bots for something, you can be pretty sure that the story can be traced back to a single source: the Hamilton 68 dashboard, founded by a group of respected researchers, including Clint Watts and JM Berger, and currently run under the auspices of the German Marshall Fund.
But even some of the people who popularized that metric now acknowledge it’s become totally overblown.
“I’m not convinced on this bot thing,” said Watts, the cofounder of a project that is widely cited as the main, if not only, source of information on Russian bots. He also called the narrative “overdone.”
The dashboard monitors 600 Twitter accounts “linked to Russian influence efforts online,” according to its own description, which means the accounts are not all directly traced back to Kremlin efforts, or even necessarily to Russia. “They are not all in Russia,” Watts said during a phone interview last week.
…click on the above link to read the rest of the article…
Britain Buried in Snow Thanks to Global Warming & No Food?
The British Government forecasters have today issued the first red snow warning for five years as the UK braces for potentially the worst blizzards since 1962. Britain has seen as much snow as the Bizzard of 1962 and of course, they are blaming Global Warming. If it gets hot it is caused by man. When it gets cold, it’s our fault too. To the Global Warming crowd, God just simply does not exist. We are to blame for all things natural or unnatural. We have to respect that the historical record demonstrates that things can freeze very fast.
I have been warning that the greatest danger we face is Global COOLING – not warming, and this is entirely a natural cycle. The heavy snow in Britain does more than keep people in their homes. It also prevents the delivery of food as supermarkets have nothing to sell. It is the cold that fosters disease and leads to pandemics. We will be praying for some heat by 2032. Be wise to stockpile extra food just in case.
I previously warned that the North Pole, which does move, was headed straight to Europe. The poles do MIGRATE and have NEVER been fixed. 2016 was the coldest year Britain has seen in 58 years. Even last winter, Europe was seriously frozen. Looks like 2018 is beating that record. There have been DEEP FREEZEevents during 1700s. Britain is moving into an Ice Age and the sooner we respect that, the better off we will be.
The energy output of the Sum is declining toward a Solar Minimum which is the Fastest Decline in almost 10,000 Years. This is highly unusual and it is hard to forecast specific regions.
…click on the above link to read the rest of the article…
Are Subprime Debt Slaves, a Leading Indicator, Worrying the Fed?
Credit problems always appear first at the margins.
The new Fed remains a somewhat unknown quantity: There are still four vacancies on the Fed’s seven-member Board of Governors that forms the core of the policy-making FOMC. The new Chairman, Jerome Powell, has already shown in his testimony before Congress last week that he may use a little more straight talk than his predecessors, and the markets took notice.
No one knows for sure what this new Fed will look like once the four vacancies are filled. But this new Fed will likely try to push interest rates back to a somewhat more normal level and lighten their balance sheet so that they have some options when the business cycle trips over balled-up credit problems.
With consumers, the credit problems appear first among the most fragile, most at risk, and most strung-out – borrowers with subprime credit ratings, and with lenders that went after these consumers aggressively. And this is happening now.
Small banks pushed with all their might into credit cards, loosening credit standards, lowering credit score requirements, raising credit limits, and offering new cards to people who had already maxed out their existing cards and had limited or no ability to service them from their income, and no way of paying them off – and thus are stuck with usurious interest rates that make these credit card balances impossible to service.
For small banks it was the Holy Grail: to profit from the American debt slave.
There are about 4,888 commercial banks in the US. There are the top 100 banks, and there are the 4,788 smaller banks – those with less than $14 billion in assets. These smaller banks have seen this irresistibly sweet deal. Banks were paying next to nothing in interest to their depositors, but they could charge 25% or 30% interest on outstanding credit card balances.
…click on the above link to read the rest of the article…
Trump’s Trade Wars Could Spark A Massive Drop In Oil
Today, I am breaking with two of my rules in writing these pieces. I generally try to steer clear of politics and to avoid being alarmist or overly sensational. What has forced me to ignore both rules is the announcement on Thursday by Donald Trump that he is going to enact tariffs on steel and aluminum next week. Politicians in general have less influence on economies than they think, but they can cause disruption, and particularly when they make economic decisions for political reasons. That is what this is, and it has the potential to cause a massive selloff of oil and other commodities.
You may feel that this is ultimately good policy and given the circumstance, a strong argument can be made that is true. Here though, the timing of the announcement suggests that it is in response to what looks like increasing chaos in the administration and a Special Counsel’s investigation that seems to be moving inexorably closer to the President himself. In other words, it is a political play, regardless of the potential short-term economic consequences. The actual results of imposing tariffs and sparking retaliation, however, are not the point. What matters, as is so often the case, is perception, and the perception of traders will be that measures such as those proposed could pose a serious threat to global growth and thus cripple demand for oil.
(Click to enlarge)
There has been a lot of focus during oil’s recovery back into the 60s on supply, with the output cuts from the OPEC led group of producers leading to a reduction in the worldwide glut of crude. But, those cuts are only effective if demand continues to grow.
…click on the above link to read the rest of the article…
Should Facebook, Google and Twitter Be Public Utilities?
This opaque corporate censorship amounts to a private-sector Stasi, pursuing an Orwellian world of profits reaped from the censorship and suppression of dissent
My longtime friend GFB recently suggested I revisit my position on RussiaGate, the investigation into Russian interference in the 2016 US election.
I have been dismissive of the investigation because the idea that a pinprick of Facebook advertising ($100,000) could influence the sprawling ocean of public opinion struck me as preposterous.
But GFB suggested I look a bit deeper and consider the consequences of the Russian interference, however modest it might have been; and I have taken his sage advice and reconsidered.
I’ve reached the conclusion that Facebook, Google and Twitter should be operated as public utilities, not as for-profit corporations beholden solely to their shareholders and managers.
Here is my thinking:
1. As GFB so insightfully observed, Facebook says it sells advertising, as this is uncontroversial. But what Facebook is actually selling is data on its users. This enables enterprises to deliver adverts to highly specific audiences (surfers between the ages of 18 and 34 with an interest in traveling overseas, etc.), campaigns that are known only to the advertiser and Facebook, not to the targeted users. But it also enabled the Russian crew to target audiences most likely to be receptive to divisive, inflammatory content.
2. If we follow this dynamic to its conclusion, we realize that these for-profit corporations are threats to democracy, or incompatible with democracy, if you prefer that wording, as they directly enable the relatively affordable and easy sowing of intentionally divisive content.
A recent wired.com article, Inside the Two Years that Shook Facebook–and the World, describes Facebook CEO Mark Zuckerberg’s realization that the technology he’d assumed was both incredibly profitable and helpful could be used as a force for exploitation and propaganda.
…click on the above link to read the rest of the article…
Housing Collapse Coming Right Up
Mortgage rates are high and rising. Refinancing opportunities are nonexistent; home affordability has collapsed.
The latest Black Knight Mortgage Monitor is worth a very close look.
Here’s what the report says about the feature chart.
Recent rate jumps coupled with climbing home prices have increased the cost to purchase the median home by $67/month (+6 percent) over the past six weeks.
Overall, it costs $1,141 in monthly principal and interest to purchase the median home using a 30-year fixed mortgage with 20 percent down, the largest monthly payment required since late 2008.
It currently takes 23 percent of the median income to purchase the median home, the highest share since 2009.
However, overall affordability remains better than long-term historical averages, even taking the recent rate jump into consideration. Purchasing the median home requires one percent less of the median income than 1995-1999, three percent less than 2000-2003 (before the sharp run-up in home prices) and two percent below those combined benchmarks (1995- 2003).
Average incomes are more than 20 percent higher today than in 2006 (according to the Census Bureau) and interest rates 2.3 percent lower. As such, affordability remains much better than at the pre-recession peak, even though today’s home prices have surpassed 2006 levels.
Assuming all else remains equal, to return to 2006 affordability levels, interest rates would have to climb north of 8.0 percent or the median home price increase to $420K.
Statistical Nonsense
Black Knight is correct on points 1-3. Statistically, it is correct on points 3-6. However …
Regarding point 5: It’s not average incomes that matter, it’s median incomes.
And real median incomes have declined in seven out of the last 11 years.
Regarding points 4 and 6: Those who want a home and can afford a home have a home. The rest struggle because incomes have not kept up with home prices.
…click on the above link to read the rest of the article…
Ignorance and Greed: Trump’s War on the Environment
Under Donald Trump, the environment has been the hardest hit of any sector of society, carried out by executive actions, the overturning of Obama-era regulations, and the enactment of new rules via cabinet review. This assault is occurring just as NASA reports that we’ve just had another near-record year of global warming. It’s insanity, and a classic example of willful ignorance. Trump, EPA director Scott Pruitt, and other officials simply choose not to inform themselves lest their position on climate change, which is based entirely on self-interest, be undermined. Since these people only know what Fox News and the fossil fuel industry tell them, they probably are unfazed about portents such as the three-year drought that has brought Cape Town, South Africa, to “Day Zero” when the water pipes will be shut off and water strictly rationed.
Behind the rules changes lies a telling fact: Trump does not have a science adviser—a director of the Office of Science and Technology Policy in the White House. But since he has no interest in science, he evidently sees no reason to learn from or defer to anyone who does. The president’s science adviser typically advises on everything from outbreaks of disease to global warming and nuclear weapons. By leaving empty a position all previous presidents have filled, Trump is sending a message that he is not merely a climate-change denier but also a science denier. Only one person sits in the OSTP office: a Silicon Valley financier.
As has been widely reported, the resignations, retirements, and constraints placed upon government scientists crimp the executive branch’s preparedness for what is to come. As just one example, geologists in the interior department are being systematically constrained from presenting their research at major conferences.
…click on the above link to read the rest of the article…
US Meddling in Foreign Elections: A CIA Tradition Since 1948
US Meddling in Foreign Elections: A CIA Tradition Since 1948
In a shocking display of relative independence from the post-Operation Mockingbird control of the media by the Central Intelligence Agency, a recent article in The New York Times broke with current conventional pack journalism and covered the long history of CIA meddling in foreign elections. A February 17, 2018, article, titled, “Russia Isn’t the Only One Meddling in Elections. We Do It, Too,” authored by Scott Shane – who covered the perestroika and glasnost for The Baltimore Sun in Moscow from 1988 to 1991 during the final few years of the Soviet Union – reported the US has interfered in foreign elections for decades. However, a couple of old US intelligence hands were quoted in the article as saying the US meddling was for altruistic purposes. The CIA veterans charged that Russia interferes in foreign elections for purely malevolent purposes. The belief that American interference in global elections was to promote liberal democracy could not be further from the truth.
The CIA never meddled in foreign elections for purposes of extending democratic traditions to other nations. The chief purpose was to disenfranchise leftist and progressive voters and political parties, ensure the veneer of “democracy” in totalitarian countries, and protect the interests of the US military bases and US multinational corporations.
In double-talk that is reminiscent of the Cold War years, the CIA considers its election interference to fall under the category of “influence operations,” while the same agency accuses Russia of “election meddling.” In truth, there is no difference between the two categories. Election interference represents intelligence service “tradecraft” and it has been practiced by many intelligence agencies, including those of Israel, France, Britain, China, India, and others.
…click on the above link to read the rest of the article…
