Steve Bull's Blog, page 1363
May 24, 2017
The Fallacy of Endless Economic Growth
What economists around the world get wrong about the future.
The idea that economic growth can continue forever on a finite planet is the unifying faith of industrial civilization. That it is nonsensical in the extreme, a deluded fantasy, doesn’t appear to bother us. We hear the holy truth in the decrees of elected officials, in the laments of economists about flagging GDP, in the authoritative pages of opinion, in the whirligig of advertising, at the World Bank and on Wall Street, in the prospectuses of globe-spanning corporations and in the halls of the smallest small-town chambers of commerce. Growth is sacrosanct. Growth will bring jobs and income, which allow us entry into the state of grace known as affluence, which permits us to consume more, providing more jobs for more people producing more goods and services so that the all-mighty economy can continue to grow. “Growth is our idol, our golden calf,” Herman Daly, an economist known for his anti-growth heresies, told me recently.
In the United States, the religion is expressed most avidly in the cult of the American Dream. The gatekeepers of the faith happen to not only be American: The Dream is now, and has long been, a pandemic disorder. Growth is a moral imperative in the developing world, we are told, because it will free the global poor from deprivation and disease. It will enrich and educate the women of the world, reducing birth rates. It will provide us the means to pay for environmental remediation—to clean up what so-called economic progress has despoiled. It will lift all boats, making us all rich, healthy, happy. East and West, Asia and Europe, communist and capitalist, big business and big labor, Nazi and neoliberal, the governments of just about every modern nation on Earth: All have espoused the mad growthist creed.
…click on the above link to read the rest of the article…
$100 Increase In Monthly Mortgage Payment Would Sink 75% Of Canadian Homeowners
According to a new survey from Manulife Bank, nearly 75% of Canadian homeowners would have difficulty paying their mortgage every month if their payments increased by as little as 10%. And, given that the average house in Canada costs roughly $200,000 and carries a monthly mortgage payment of $1,000, that means that most Canadians couldn’t incur and $100 hike in their monthly mortgage payments without possibly going under. Per CBC:
The bank polled 2,098 homeowners — between the ages of 20 to 69 with household incomes of $50,000 or higher — online in the first two weeks of February.Fourteen per cent of respondents to Manulife’s survey said they wouldn’t be able to withstand any increase in their monthly payments, while 38 per cent of those polled said they could withstand a payment hike of between one and five per cent before having difficulty. An additional 20 per cent said they could stomach a hike of between six and 10 per cent before feeling the pinch.
Add it all up, and that means 72 per cent of homeowners polled couldn’t withstand a hike of just 10 per cent from their current record lows.
Of course, such a huge sensitivity to small budget fluctuations isn’t a great sign when we’re in the midst of record-low interest rates and about to enter a period of sustained hikes.
“What these people don’t realize is that we’re at record low interest rates today,” said Rick Lunny, president and CEO of Manulife Bank.If mortgage rates increase by as little as one percentage point, some borrowers could be facing a hike of 10 per cent on their monthly bills. A bigger mortgage rate hike would bring more pain.
Meanwhile, 45% of millennials in the same survey said they had to borrow money from their parents to purchase their home and 25% admitted they have no savings.
…click on the above link to read the rest of the article…
May 23, 2017
Yuan Tumbles As Moody’s Cuts China’s Credit Rating To A1, Warns “Financial Strength Will Worsen”
Offshore Yuan tumbled as Moody’s cut China’s credit rating to A1 from Aa3, saying that the outlook for the country’s financial strength will worsen, with debt rising and economic growth slowing. This leaves the world’s hoped-for reflation engine rated below Estonia, Qatar, and South Korea and on par with Slovakia and Japan.
“While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt, and the consequent increase in contingent liabilities for the government,” the ratings company said in a statement Wednesday.
And the most obvious reaction was Yuan selling…
Full Statement: Moody’s Investors Service has today downgraded China’s long-term local currency and foreign currency issuer ratings to A1 from Aa3 and changed the outlook to stable from negative.
The downgrade reflects Moody’s expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows. While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt, and the consequent increase in contingent liabilities for the government.
The stable outlook reflects our assessment that, at the A1 rating level, risks are balanced. The erosion in China’s credit profile will be gradual and, we expect, eventually contained as reforms deepen. The strengths of its credit profile will allow the sovereign to remain resilient to negative shocks, with GDP growth likely to stay strong compared to other sovereigns, still considerable scope for policy to adapt to support the economy, and a largely closed capital account.
…click on the above link to read the rest of the article…
In Emerging Markets, It’s Time To Dump Most Central Banks, And Their Currencies Too
On March 16th, the New York Times carried reportage by Peter S. Goodman, Keith Bradsher and Neil Gough, which was titled “The Fed Acts. Workers in Mexico and Merchants in Malaysia Suffer.” The theme of their extensive reportage is that U.S. monetary policy is the elephant in the room. It is the elephant that swings exchange rates and capital flows to and fro in emerging-market countries, causing considerable pain.
The real problem that all of the countries mentioned in the New York Times reportage face is the fact that they have central banks that issue half-baked local currencies. Although widespread today, central banks are relatively new institutional arrangements. In 1900, there were only 18 central banks in the world. By 1940, the number had grown to 40. Today, there are over 150.
Before the rise of central banking the world was dominated by unified currency areas, or blocs, the largest of which was the sterling bloc. As early as 1937, the great Austrian economist Friedrich von Hayek warned that the central banking fad, if it continued, would lead to currency chaos and the spread of banking crises. His forebodings were justified. With the proliferation of central banking and independent local currencies, currency and banking crises have engulfed the international financial system with ever-increasing severity and frequency. What to do?
The obvious answer is for vulnerable emerging-market countries to do away with their central banks and domestic currencies, replacing them with a sound foreign currency. Panama is a prime example of the benefits from employing this type of monetary system. Since 1904, it has used the U.S. dollar as its official currency. Panama’s dollarized economy is, therefore, officially part of the world’s largest currency bloc.
The results of Panama’s dollarized monetary system and internationally integrated banking system have been excellent (see accompanying table).
…click on the above link to read the rest of the article…
If You Care About Privacy, You Should Change Your Twitter Settings Right Now
(ANTIMEDIA) Since Wednesday, Twitter has been sending out emails and notifications to its over 300 million monthly users to inform them of changes to their privacy policy.
The new policy, which goes into effect on June 18, includes changes to data collection, data sharing, and digital advertising. The policy is being run on an ‘opt-out’ basis, meaning that if users do not actively change their settings, these policies will automatically be applied to their accounts.
While Twitter hailed the new policy in their mass email sent out Sunday as one that “dovetails with our heartbeat as a company — a commitment to protecting and defending your privacy,” groups like the Electronic Frontier Foundation are not so enthusiastic.
“Contrary to the inviting ‘Sounds good’ button to accept the new policy and get to tweeting, the changes Twitter has made around user tracking and data personalization do not sound good for user privacy,” EFF researcher Gennie Gebhart writes.
EFF, along with Life Hacker and CNET, are encouraging users to customize their privacy settings now before the new changes are automatically enabled in June.
With the new policy, Twitter will be keeping logs for users’ web histories for 30 days instead of 10, a move that Jules Polonetsky, CEO of the Future of Privacy Forum, says expands the pool of people it can track and allows Twitter to make more comprehensive profiles of users.
Interestingly, this change will not apply to E.U. member countries because Europe’s restrictive privacy laws prohibit it.
Twitter also discontinued support for the Do Not Track browser option, which previously allowed users to protect against targeted advertising.
The reason for the change, says TopTechNews.com writer Barbara Ortutay, is therefore clearly not about privacy, but money.
“Targeted ads that are tailored to your whims and tastes are more lucrative than generic ones,” Ortutay writes.
…click on the above link to read the rest of the article…
“This Is Probably Just The Beginning” – Chinese Banks Are In Big Trouble
That’s not supposed to happen…
With the crackdown on financial system leverage underway, Chinese banks (and securities firms) are in big trouble. As we noted previously, China’s bond curve is inverted, yields are surging, and Chinese regulatory decisions shutting down various shadow-banking pipelines has crushed securities firms’ stocks. However, as Bloomberg points out, as China’s deleveraging efforts cut into banks’ profit margins, rising base funding costs and interbank credit risk concerns have pushed banks’ cost of borrowing beyond the rate they charge customers for loans for the first time in history.
As the chart above shows, the one-year Shanghai Interbank Offered Rate has exceeded the Loan Prime Rate, the first time this has happened since the latter was introduced in 2013.
“This is probably just the beginning” and interbank funding costs will rise further amid the drive to reduce leverage, said Xu Hanfei, chief fixed-income analyst at China Merchants Securities Co. in Shanghai.
Does the World End in Fire or Ice? Thoughts on Japan and the Inflation/Deflation Debate
Japan has managed to offset decades of deflationary dynamics, but at a cost that is hidden beneath the surface of apparent stability.
Do we implode in a deflationary death spiral (ice) or in an inflationary death spiral (fire)? Debating the question has been a popular parlor game for years, with Eric Janszen’s 1999 Ka-Poom Deflation/Inflation Theory often anchoring the discussion.
I invite everyone interested in the debate to read Janszen’s reasoning and prediction of a deflationary spiral that then triggers a monstrous inflationary response from central banks/states desperate to prop up their faltering status quo.
Alternatively, economies can skip the deflationary spiral and move directly to the collapse of their currency via hyper-inflation. This chart of the Venezuelan currency (Bolivar) illustrates the “skip deflation, go straight to hyper-inflation” pathway:
If we set aside the many financial rabbit holes of the inflation/deflation discussion, we find three dominant non-financial dynamics in play:demographics, technology and energy.
As populations age and retire, the resulting decline in incomes and spending are inherently deflationary: less money is earned, and less money is spent, reducing economic activity (gross domestic product).
The elderly also sell assets such as stocks, bonds and their primary house to fund their retirement, and if the elderly populace is a major cohort (due to low birth rates and increasing life spans, etc.), then this mass dumping of assets is also deflationary, as the increasing supply of sellers and the stagnating supply of buyers pushes prices lower.
Recession and stagnation are also deflationary. Shift 10 million workers from secure fulltime employment with full benefits to low-paid, insecure part-time jobs with few benefits, and you have a self-reinforcing deflationary spiral in action: a significant percentage of the workforce is now receiving far less income, which necessarily slashes their spending and just as importantly, their ability to borrow huge sums of money to buy vehicles, homes, overseas vacations, etc.
…click on the above link to read the rest of the article…
May 22, 2017
Atlantic Coast Pipeline Corporate Backers Fund Faulty Pro-Pipeline Poll
On May 9th, 2017, a group called EnergySure tweeted:
EnergySure @EnergySureDon’t believe the hype. Majority of #VA voters support reliable energy & the #AtlanticCoastPipeline. #VADemDebatehttp://ow.ly/xxr330bAfc6
8:15 PM – 9 May 2017
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EnergySure – Standing Up for Reliable Energy
The EnergySure Coalition is a group of businesses, organizations and individuals across North Carolina, Virginia, West Virginia and beyond that is standing up for reliable energy in our region.
energysure.com
The tweet was referring to the results of an October 2016 poll by the Tarrance Group that claimed 55% of likely Virginia voters supported the controversial Atlantic Coast Pipeline (ACP).
This claim is dubious, however. The underlying poll was based on a single loaded question, performed by a pro-industry conservative polling company with ties to a pro-ACP politician, and backed and paid for by the same corporate interests that are pushing for the pipeline.
EnergySure is a business-backed coalition that in part operates as a public relations wing for the ACP. The group is funded by the four companies behind the pipeline — Dominion, Duke Energy, Piedmont, and Southern Company Gas. EnergySure and its members include the companies behind the ACP, local and state chambers of commerce, and a who’s who list of energy and construction industry backers and business organizations, from the Virginia Coal and Energy Alliance to the North Carolina Petroleum Council.
The timing of the EnergySure tweet is not coincidental. Dominion, the main force behind the ACP, is facing political heat at home, with a leading Democratic gubernatorial candidate sharply opposing the pipeline.
Grassroots action is also escalating. On May 10th, scores of protesters demonstrated outside its annual shareholders’ meeting. This poll result that EnergySure tweeted about last week was the same one it first tweeted about last October — a move back then that was also brought on by a sense of growing resistance to the pipeline.
…click on the above link to read the rest of the article…
All Power to the Banks! The Winners-Take-All Regime of Emmanuel Macron
A ghost of the past was the real winner of the French presidential election. Emmanuel Macron won only because a majority felt they had to vote against the ghost of “fascism” allegedly embodied by his opponent, Marine Le Pen. Whether out of panic or out of the need to feel respectable, the French voted two to one in favor of a man whose program most of them either ignored or disliked. Now they are stuck with him for five years.
If people had voted on the issues, the majority would never have elected a man representing the trans-Atlantic elite totally committed to “globalization”, using whatever is left of the power of national governments to weaken them still further, turning over decision-making to “the markets” – that is, to international capital, managed by the major banks and financial institutions, notably those located in the United States, such as Goldman-Sachs.
The significance of this election is so widely misrepresented that clarification requires a fairly thorough explanation, not only of the Macron project, but also of what the (impossible) election of Marine Le Pen would have meant.
From a Two Party to a Single Party System
Despite the multiparty nature of French elections, for the past generation France has been essentially ruled by a two-party system, with government power alternating between the Socialist Party, roughly the equivalent of the U.S. Democratic Party, and a party inherited from the Gaullist tradition which has gone through various name changes before recently settling on calling itself Les Républicains (LR), in obvious imitation of the United States. For decades, there has been nothing “socialist” about the Socialist Party and nothing Gaullist about The Republicans.
…click on the above link to read the rest of the article…
Cyberattacks & the Vulnerability of a Cashless Society
QUESTION: Cyberattacks vs. Cash elimination – an argument against eliminating cash. Hello Mr. Armstrong, it is quite apparent that no government, no financial institution, Anti-virus software developer, or either ‘whatever’ is is really capable to stop cyberattacks. Now these people want to eliminate cash, make larger cash amounts illegal. So theoretically these cyber attackers could/ maybe will, eventually just stop the whole economy. Nobody may even be able to buy food. So instead of eliminating cash, should it not be policy people carry at least a month’s worth of expenses in cash? Your reply should be quite interesting to us, your readership!
Best,
AP
ANSWER: The WannaCry ransom attack is actually variant from a February 2015 sample attributed to the Lazarus Group, a Kaspersky-tracked actor tied to the North Korean government. Parts of the code go beyond shared code. It appears to be written by the same programmer.
Let’s get something straight here. At the core of those responsible is really the NSA and Microsoft itself. The attack exploited a Windows networking protocol to spread within networks, and while Microsoft released a patch nearly two months ago, it’s become very clear that patch didn’t reach all users particularly because institutions often do not install patches fearing that proprietary software may not function.
If behind the curtain we have government demanding back-doors into iPhones and computer so they can listen to everything everywhere, well guess what – so can everyone else. Patches will work for individual users, but not major institutions. Trying to upgrade their operations is a real effort. They are slow to act and thus vulnerable.
…click on the above link to read the rest of the article…
