Steve Bull's Blog, page 1354
June 27, 2017
If We Don’t Change the Way Money Is Created, Rising Inequality and Social Disorder Are Inevitable
Centrally issued money optimizes inequality, monopoly, cronyism, stagnation and systemic instability.
Everyone who wants to reduce wealth and income inequality with more regulations and taxes is missing the key dynamic: central banks’ monopoly on creating and issuing money widens wealth inequality, as those with access to newly issued money can always outbid the rest of us to buy the engines of wealth creation.
History informs us that rising wealth and income inequality generate social disorder.
Access to low-cost credit issued by central banks creates financial and political power. Those with access to low-cost credit have a monopoly as valuable as the one to create money.
I explain why in my book A Radically Beneficial World: Automation, Technology and Creating Jobs for All.
Compare the limited power of an individual with cash and the enormous power of unlimited cheap credit.
Let’s say an individual has saved $100,000 in cash. He keeps the money in the bank, which pays him less than 1% interest. Rather than earn this low rate, he decides to loan the cash to an individual who wants to buy a rental home at 4% interest.
There’s a tradeoff to earn this higher rate of interest: the saver has to accept the risk that the borrower might default on the loan, and that the home will not be worth the $100,000 the borrower owes.
The bank, on the other hand, can perform magic with the $100,000 they obtain from the central bank. The bank can issue 19 times this amount in new loans—in effect, creating $1,900,000 in new money out of thin air.
…click on the above link to read the rest of the article…
Why the Fed Will Fail Once Again
[Ed. Note: Jim Rickards’ latest New York Times bestseller, The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis, is out now. Learn how to get your free copy – HERE. This vital book transcends rhetoric from the Federal Reserve to prepare you for what you should be watching now.]
John Maynard Keynes once wrote, “Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”
Truer words were never spoken, although if you updated Keynes today, the quote would begin with “practical women” to take account of Fed Chair Janet Yellen. The “defunct economist” in question would be William Phillips, inventor of the Phillips curve, who died in 1975.
In its simplest form, the Phillips curve is a single-equation model that describes an inverse relationship between inflation and unemployment. As unemployment declines, inflation goes up, and vice versa. The equation was put forward in an academic paper in 1958 and was considered a useful guide to policy in the 1960s and early 1970s.
By the mid-1970s the Phillips curve broke down. The U.S. had high unemployment and high inflation at the same time, something called “stagflation.” Milton Friedman advanced the idea that the Phillips curve could only be valid in the short run because inflation in the long run is always determined by money supply.
Economists began to tweak the original equation to add factors — some of which were not empirical at all but model-based. It became a mess of models based on models, none of which bore any particular relationship to reality. By the early 1980s, the Phillips curve was no longer taken seriously even by academics and seemed buried once and for all. RIP.
…click on the above link to read the rest of the article…
European Gas Security 2017
On 22nd June, The Telegraph published an interesting article called Germany’s gas pact with Putin’s Russia endangers Atlantic alliance where Ambrose Evans-Pritchard made many of the correct observations but also managed to make some odd comments too. The article focussed on proposals to build Nord Stream II that would pipe more Russian gas directly into Germany, bypassing Belarus and Ukraine. This will clearly enhance German and European gas security, and yet Evans-Prichard manages to say:
The Nord Stream 2 venture creates a sweetheart arrangement with Germany while undermining the security and economic interests of Eastern and Central Europe, and leaves Ukraine at the mercy of Kremlin blackmail.
“It does nothing whatsoever to supply the EU with gas. It deprives the East Europeans of political leverage and rewards an aggressor state,” said Professor Alan Riley from the Institute for Statecraft.
I find these comments to be totally bizarre. Evans-Prichard seems to have forgotten that it was Ukraine stealing gas that crossed its territory that led Russia to periodically cut supplies to the whole of Europe. And I seem to recall that it was Western meddling in the Ukrainian elections that led directly to the civil war. Bypassing land pipeline routes that cross either Ukraine or Belarus of course improves European gas security. Evans-Prichard goes on to say:
What the project does is to erode Ukraine’s $2bn revenue from pipeline fees and to leave the country vulnerable to a Gazprom squeeze. It stops Ukraine transporting gas to Slovakia and then buying it back at EU prices to escape punitive tariffs.
It enables Russia to play a divide-and-rule game that splits the EU, and that sweetens Germany with preferential pricing. It really is a bizarre 1939-style pact.
The Changing Face of the European Gas Market
…click on the above link to read the rest of the article…
Australia’s oil stock coverage on record low
In prime time evening news of the Australian public broadcaster ABC TV, on 21 June 2017, the business presenter Alan Kohler tried to explain a fall in oil prices by “record oil inventories around the world”
http://www.abc.net.au/news/business/kohler-report/
Well, let’s go around the world on a map and stay where we are, in Australia. In google, type in the search word “Australian Petroleum Statistics” and you get this website:
http://www.environment.gov.au/energy/petroleum-statistics
Click on the latest issue and then on the download PDF file, in this case April 2017
Search for the word “stocks” and that brings you to tables 6 and 7
Table 7 End of month stocks of petroleum, consumption cover
In the last column “IEA days of net imports coverage it is 89.5 days for 2010/11 and 55.2 days for 2015/17. Go to the bottom of the column and it’s 50.5 days. The year-on-year decline is 3.1%. That doesn’t look like a record now. If anything, it’s a record low. Let’s put that into a graph:
Fig 1: Australia’s net imports coverage in days as defined by IEA
Australia is a member of the IEA (International Energy Agency)
Fig 2: Australian Prime Minster shaking hands with IEA’s Fatih Birol, Feb 2017
We check the coverage on the IEA website and find 48 days for March
…click on the above link to read the rest of the article…
“Massive Cyberattack” Spreads Across Europe, Hits Ukraine, Russia, UK, Denmark
Update 2: RUSSIAN CENBANK SAYS AS A RESULT OF ATTACKS THERE HAVE BEEN ISOLATED CASES WHERE IT SYSTEMS INFECTED
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Update: in addition to the below listed companies, all of which appear to have been targeted in the global cyberattack including Russia’s Rosneft and metals giant Evraz, Danish shipper Maersk, UK ad company WPP, the Ukraine central bank, government and airport, more targets are emerging including Norway’s national security authority which has said that a Ransomeware attack is ongoing in Norway “similar to the attack on Maersk”, while Russia’s Home Credit Bank said all domestic branches are closed because of the cyber attack.
As the Spectator adds, companies in Spain are also now affected by the cyberattack which appears to be a modification of the “WannaCry” virus, and has been named “Petya.”
A Moscow-based cyber security firm, Group-IB, said it appeared to be a coordinated attack simultaneously targeting victims in Russia and Ukraine, according to Reuters.
* * *
Now that CNN is officially out of the “Russia hacking” fake news business, the Ukraine has decided to fill in the void, and moments ago Ukraine’s Deputy Prime Minister Pavlo Rozenko said that the government’s computer network was down, in what he claimed was a “massive cyberattack”, one which has also impacted the central bank, power plant and airport, and promptly blamed Russia for being behind the attack without a shred of evidence. To “prove” the accusation, he posted a picture on Twitter of a computer screen showing an error message.
“We also have a network ‘down’,” he wrote. “This image is being displayed by all computers of the government.” The photo showed his PC displaying a message claiming a disk “contains errors and needs to be prepared”, urging the user not to turn it off.
…click on the above link to read the rest of the article…
Syria Denies Plans For A Chemical Attack As Russia Accuses US Of “Provocation”
The Syrian government dismissed the White House’s unsubstantiated, and bizarrely ominous late Monday night allegations that it was preparing a new chemical weapons attack. According to AP, Ali Haidar, the Syrian minister for national reconciliation, dismissed the White House’s warning and said it foreshadowed a diplomatic campaign against Syria at the U.N., according to the AP. Or maybe military campaign.
The Kremlin also dismissed the White House statement, which had warned that Assad and his military would “pay a heavy price” if it goes ahead with the attack. Russian President Vladimir Putin’s spokesman Dmitry Peskov said that “such threats to Syria’s legitimate leaders are unacceptable.” As a reminder, Russia sided with Assad when he denied responsibility for a chemical weapons attack that killed dozens of people in Idlib province on April 4. Days later, President Donald Trump ordered a retaliatory cruise missile strike on a Syrian air base.
Peskov also criticized the Trump administration for using the phrase “another chemical weapons attack,” arguing that an independent investigation into the April attack was never conducted despite Russia’s calls for one. The US has so far not explained why it is against an impartial third party determining all the facts.
A senior Russian lawmaker dismissed the U.S. warning as “provocation.” Frants Klintsevich, first deputy chairman of the defense and security committee in the upper chamber of the Russian parliament, accused the United States of “preparing a new attack on the positions of Syrian forces.” The U.S. strike in April was the first direct American assault on the Syrian government and Trump’s most dramatic military order since becoming president. Trump said at the time that the chemical attack crossed “many, many lines,” and called on “all civilized nations” to join the U.S. in seeking an end to the carnage in Syria.
…click on the above link to read the rest of the article…
The Dynamics of Depletion
Paul Klee Ghost of a Genius 1922The Automatic Earth has written many articles on the topic of EROEI (Energy Return on Energy Invested) through the years, there’s a whole chapter on it in the Automatic Earth Primer Guide 2017 that Nicole assembled recently, which contains 17 different articles.
Still, since EROEI is the most important energy issue there is at present, and not the price of oil or some new gas find or a set of windmills or solar panels or thorium, it can’t hurt to repeat it once again, in someone else’s words and from someone else’s angle. This one comes from Brian Davey on his site CredoEconomics, part of his book “Credo”.
It can’t hurt to repeat it because not nearly enough people understand that in the end everything, the survival of our world, our way of life, is all about the ‘quality’ of energy, about what we get in return when we drill and pump and build infrastructure, what remains when we subtract all the energy used to ‘generate’ energy, from (or at) the bottom line.
Anno 2017, our overall ‘net energy’ is nowhere near where it was for the first 100 years or so after we started using oil. And there’s no energy source that comes close to -conventional- oil (and gas) when it comes to what we are left with once our efforts are discounted, in calories or Joules.
The upshot of this is that even if we can ‘gain’ 10 times more than we put in, in energy terms, that won’t save our complex societies. To achieve that, we would need at least a 15:1 ratio, a number straight from our friend Charlie Hall, which is probably still quite optimistic. And we simply don’t have it. Not anymore.
…click on the above link to read the rest of the article…
The Age of No Privacy: The Surveillance State Shifts Into High Gear [SHORT]
“We are rapidly entering the age of no privacy, where everyone is open to surveillance at all times; where there are no secrets from government.” ― William O. Douglas, Supreme Court Justice (1966)
The government has become an expert in finding ways to sidestep what it considers “inconvenient laws” aimed at ensuring accountability and thereby bringing about government transparency and protecting citizen privacy.
Indeed, it has mastered the art of stealth maneuvers and end-runs around the Constitution.
It knows all too well how to hide its nefarious, covert, clandestine activities behind the classified language of national security and terrorism. And when that doesn’t suffice, it obfuscates, complicates, stymies or just plain bamboozles the public into remaining in the dark.
Case in point: the National Security Agency (NSA) has been diverting “internet traffic, normally safeguarded by constitutional protections, overseas in order to conduct unrestrained data collection on Americans.”
It’s extraordinary rendition all over again, only this time it’s surveillance instead of torture being outsourced.
In much the same way that the government moved its torture programs overseas in order to bypass legal prohibitions against doing so on American soil, it is doing the same thing for its surveillance programs.
By shifting its data storage, collection and surveillance activities outside of the country—a tactic referred to as “traffic shaping” —the government is able to bypass constitutional protections against unwarranted searches of Americans’ emails, documents, social networking data, and other cloud-stored data.
The government, however, doesn’t even need to move its programs overseas. It just has to push the data over the border in order to “[circumvent] constitutional and statutory safeguards seeking to protect the privacy of Americans.”
…click on the above link to read the rest of the article…
Italy’s newest bank bailout cost as much as its annual defense budget
Italy’s newest bank bailout cost as much as its annual defense budget
Two more Italian banks failed over the weekend– Banco Popolare di Vicenza and Veneto Banca.
(In other news, the sky is blue.)
The Italian Prime Minister himself stated that depositors’ funds were at risk, so the government stepped in with a bailout and guarantee package that could cost taxpayers as much as 17 billion euros.
That’s a lot of money in Italy– around 1% of GDP. In fact it’s basically as much as the 17.1 billion euros they spent on national defense last year (according to an estimate by Italian think tank IAI).
You don’t have to have a PhD in economics to figure out that NO government can afford to spend its entire defense budget every time a couple of medium-sized banks need a bailout.
That goes especially for Italy, whose public debt level is already 132% of GDP… and rising. They simply don’t have the money.
Moreover, the European Union actually has a series of new rules collectively known as the “Bank Recovery and Resolution Directive” which is supposed to prevent failing banks from being bailed out with taxpayer funds.
Here’s the thing– Italy has LOTS of banks that are on the ropes.
So with taxpayer resources exhausted (and technically prohibited), who’s going to be on the hook next time a bank goes under?
Easy. By process of elimination, the only other party left to fleece is the depositor.
Here’s how it works:
Let’s say a bank takes in $1 billion in deposits.
Naturally the bank doesn’t just keep $1 billion in cash sitting in its vault. They invest the money. They make loans. They buy assets.
So the bank’s balance sheet shows $1 billion worth of assets, and $1 billion worth of deposits that they owe to their customers.
But sometimes banks screw up when they invest their customers’ funds. Loans go bad. Borrowers default.
…click on the above link to read the rest of the article…
June 26, 2017
Edward Snowden Asks Ron Paul If Intelligence Reports Ever Swayed His Vote
During an appearance on the Liberty Report last week, Dr. Ron Paul interviewed former NSA contractor Edward Snowden about the rise of the Deep State and how intelligence agencies are threatening Americans’ freedom. But in the closing moments of that interview, Snowden surprised Paul with an unexpected request:
“I was thinking I could ask you a question Dr. Paul, again about the intelligence stuff…I think it’d be interesting to people and I don’t think we’ve ever heard it from your perspective…”
As a former intelligence analyst and operative, Snowden wondered how well the intelligence community had performed in its mission to keep US policymakers informed on important world events, given that Paul had for more than two decades been a “consumer” of the intelligence community’s products.
“In the intelligence community at the working level, not the policy level, everyone is taught that the work that they do is to inform policy makers…to understand what the facts are so they can make the best decisions.”
“You were in Congress for an extraordinary time…and one question I’ve always wondered is during all your time in Congress, how many times did the intelligence community provide some reports that they briefed to you…and the material was so impactful…so valuable that they’d been breaking all these laws to get it…how many times did it impact your vote?”
Paul’s response? Not once.
Paul says he was almost never provided with unadulterated intelligence reports, and on the one occasion when he attended a briefing with the intelligence agencies, the information more closely resembled propaganda than credible intelligence.
…click on the above link to read the rest of the article…
