ZeroHedge RSS Feed

Ebola In America: The Confirmed Case In Dallas, Texas Could Change Everything

Submitted by Michael Snyder of The Economic Collapse blog,

The day that many of us hoped would never arrive is here.  Ebola has come to America.  Air travel between the United States and the countries of Liberia, Guinea and Sierra Leone should have been totally shut down except for absolutely essential personnel but it wasn't.  And now our nation may end up paying a great price as a result.  On Tuesday, the CDC announced that there is a confirmed case of Ebola in Dallas, Texas.  We know that this individual is a male and that he traveled by air from Liberia to Texas on September 19th.  At that time, he was not exhibiting any symptoms.  It is being reported that he started developing symptoms on September 24th and that he sought out treatment two days later.  Incredibly, he was turned away and sent home.  Then on September 28th he went to a hospital again and this time he was admitted for treatment.  That means that he could have potentially been spreading Ebola to others for at least four full days before finally getting treated at a hospital.  Now he is in intensive care at Texas Health Presbyterian Hospital in Dallas.  The CDC says that "there is no doubt that we will stop it here" and is promising that "it will not spread widely in this country".  The CDC better be right on both counts.

At this point, the CDC is admitting that it is not known if others have been infected by this individual.  The CDC also says that it is tracking down everyone that he has been in contact with.  But over four days in a major U.S. city, you can be "in contact" with a whole lot of people.  And what about all of the people that those people were in contact with?

If I was in charge of this crisis, I would admit that we don't know the full scope of the problem yet but that we are dealing with it the best that we can.

Instead, the director of the U.S. Centers for Disease Control and Prevention is taking an entirely different approach.  Dr. Thomas Frieden insists that we have absolutely nothing to worry about...

"I have no doubt that we will control this case of Ebola, so that it does not spread widely in this country. It is certainly possible that someone who has had contact with this patient could develop Ebola. But there is no doubt in my mind that we will stop it here."

Frieden better be right about that.

Other "experts" are being even more dogmatic...

"There is no cause for concern," says Peter Hotez, dean of the National School of Tropical Medicine and professor at Baylor College of Medicine in Houston. "The Ebola virus is not easily transmitted from person to person, and we have an outstanding infrastructure in place both to contain the virus and trace contacts. There will not be an Ebola epidemic in the United States."

I have no idea how they can say these things when the outbreak over in Africa is completely and totally out of control.  Despite extreme precautions, hundreds of health workers have gotten the virus, and so far global health officials have not even been able to slow down the exponential growth of the Ebola pandemic in West Africa.

And our health officials should not be so dogmatic about how this virus spreads either.

In a previous article, I discussed a study that was conducted back in 2012 that demonstrated that Ebola could be transmitted through the air between pigs and monkeys that did not have physical contact with one another...

When news broke that the Ebola virus had resurfaced in Uganda, investigators in Canada were making headlines of their own with research indicating the deadly virus may spread between species, through the air.

 

The team, comprised of researchers from the National Centre for Foreign Animal Disease, the University of Manitoba, and the Public Health Agency of Canada, observed transmission of Ebola from pigs to monkeys. They first inoculated a number of piglets with the Zaire strain of the Ebola virus. Ebola-Zaire is the deadliest strain, with mortality rates up to 90 percent. The piglets were then placed in a room with four cynomolgus macaques, a species of monkey commonly used in laboratories. The animals were separated by wire cages to prevent direct contact between the species.

 

Within a few days, the inoculated piglets showed clinical signs of infection indicative of Ebola infection. In pigs, Ebola generally causes respiratory illness and increased temperature. Nine days after infection, all piglets appeared to have recovered from the disease.

 

Within eight days of exposure, two of the four monkeys showed signs of Ebola infection. Four days later, the remaining two monkeys were sick too. It is possible that the first two monkeys infected the other two, but transmission between non-human primates has never before been observed in a lab setting.

There is much that we don't understand about this disease.

I can understand the need to keep the public calm, but why don't these officials just tell us the truth?

At the same time that they are telling us that there is no chance that there will be an Ebola epidemic in the United States, they are also sending out guidelines to funeral homes on how to deal with dead Ebola victims...

CBS46 News has confirmed the Centers for Disease Control has issued guidelines to U.S. funeral homes on how to handle the remains of Ebola patients. If the outbreak of the potentially deadly virus is in West Africa, why are funeral homes in America being given guidelines?

 

The three-page list of recommendations include instructing funeral workers to wear protective equipment when dealing with the remains since Ebola can be transmitted in postmortem care. It also instructs to avoid autopsies and embalming.

Why are they doing this if there is "no chance" that the disease will spread widely?

Hopefully they isolated this Ebola patient in Dallas in time.

Hopefully he did not infect anyone else.

But we need to be honest about the situation that we are potentially facing.  So far, there have been more than 6,000 cases of Ebola in Africa and more than 3,000 of those have died.  Unfortunately, even WHO officials admit that those official numbers "great underestimate" the scope of this outbreak.  The number of official cases has been doubling approximately every three weeks, and the CDC says that under a "worst case scenario" we could be looking at 1.4 million cases by the end of January 2015.

Right now all of the treatment facilities in Liberia and Sierra Leone are completely full and more than 80 percent of Ebola patients have been turned away and sent home without being treated.  It is an absolute nightmare, and now it has come to America.

And as the virus continues to spread, it is inevitable that more carriers of the disease will get on airplanes headed for America.

Unfortunately for us, according to a recent Defense One article the screening done at airports actually does very little to stop the spread of Ebola...

The bad news is that thermal screenings of the international flying population at airports are not likely to yield much by way of improved safety.

 

Here’s why: fever can be a sign of a lot of different illnesses, not just Ebola. And thermal scanning proved to be a poor method of catching bird flu carriers in 2009 as well. So presenting with an elevated temperature at an airport checkpoint does not indicate clearly enough that the fevered person is carrying the deadly virus. More importantly, the incubation period for Ebola is two days. As many as 20 days can pass before symptoms show up. That means that an individual could be carrying the virus for two weeks or longer and not even know it, much less have it show up via thermal scan. So what good are these scanners?

When I first started writing about Ebola, a few people accused me of "spreading fear".

Well, now that Ebola has arrived in the United States, perhaps they will take a second look at some of my recent articles...

-"The Pure Hell At The Heart Of The Ebola Pandemic In Africa Could Soon Be Coming To America"

-"Computer Models Tell Us That This Ebola Pandemic Could Soon Kill Millions"

-"16 Apocalyptic Quotes From Global Health Officials About This Horrific Ebola Epidemic"

-"Ebola Among Health Workers: More Than 240 Sick, More Than 120 Dead"

-"It Is Becoming Clear – We Are NOT Prepared For An Ebola Pandemic"

Let us pray that this is just one isolated case and that there will not be a major outbreak in this nation.

Because if cases do start popping up around the country, fear will spread like wildfire and we could potentially be facing the greatest health crisis that any of us have ever seen.

One of the individuals that successfully survived this disease was Dr. Kent Brantly.  I think that the following quote from him really does a great job of summarizing what we are potentially facing...

"Many have used the analogy of a fire burning out of control to describe this unprecedented Ebola outbreak," Brantly said. "Indeed it is a fire—it is a fire straight from the pit of hell. We cannot fool ourselves into thinking that the vast moat of the Atlantic Ocean will protect us from the flames of this fire. Instead, we must mobilize the resources ... to keep entire nations from being reduced to ashes."

A virus like this could change everything if it starts circulating widely.

Like I have said so many times before, let us hope for the best, but let us also prepare for the worst.








Intelligence? President Obama Missed ~60% Of His Daily Briefings

Just days after President Obama infuriated some in the intelligence and defense communities with comments that "they underestimated what had been taking place in Syria," The Government Accountability Institute, a watchdog non-profit organization, found that as of Sept. 29, the President had attended only 42.4% of Presidential Daily Briefs (PDB) during his first term and 41.3% during his second term. As one former official blasted, "either the president doesn't read the intelligence he's getting or he's bullshitting."

 

As RT reports,

?US President Barack Obama has attended only 42 percent of his daily intelligence briefings since assuming office more than five and a half years ago, according to a new study.

 

The Government Accountability Institute, a watchdog non-profit organization, calculated the number of times Obama has received daily oral intelligence briefings, or the Presidential Daily Brief (PDB). The group found that as of Sept. 29, the President had attended 42.4 percent of PDBs during his first term and 41.3 percent during his second term.

 

The report came days after Obama told 60 Minutes that Director of National Intelligence James Clapper has “underestimated” the strength of Islamic State, the militant group currently the target of US-led airstrikes on its holdings in Syria and Iraq.

 

“I think our head of the intelligence community, Jim Clapper, has acknowledged that I think they underestimated what had been taking place in Syria,” Obama said.

 

The statement infuriated some in the intelligence and defense communities. One anonymous former senior Pentagon official told the Daily Beast that Obama is surely getting valuable information about Islamic State, also known as ISIS or ISIL, from intelligence reports.

 

"Either the president doesn’t read the intelligence he’s getting or he’s bullshitting,” said the former official who is familiar with jihadist actions in Syria and Iraq.

 

...

 

“It's pretty well-known that the president hasn’t taken in-person intelligence briefings with any regularity since the early days of 2009,” an Obama national security staffer told the Daily Mail on Monday. “He gets them in writing.”

 

The staffer added that Obama has been warned of Islamic State for years.

 

“Unless someone very senior has been shredding the president's daily briefings and telling him that the dog ate them, highly accurate predictions about ISIL have been showing up in the Oval Office since before the 2012 election,” the security staffer said.

*  *  *
And that's the guy in charge of the strategy...

 

Source: Investors








Global PMI Summary: 60% Of Nations Weakening

As PMI manufacturing surveys are released around the world, we get an early read on the state of glkobal manufacturing. As the below table shows, out of the 25 countries that have reported so far, 8 reported improvements in their manufacturing sectors in September, while 15 recorded a weakening, and 2 remained unchanged.

A reading above 50 reflects expansion, while below 50 indicates contraction.

 

As BofA notes,

There were 8 countries in negative territory and 17 in positive. In particular, Austria, Germany, Greece, Korea, and Norway moved from contraction to expansion, while Italy and South Africa did the reverse.

 

Our China economist note that, thanks in part to the easing measures implemented in the past month, the China PMI was stabilized, but is yet to rebound.

 

Our Europe economist notes that weakness in the Euro Area was mostly driven by Germany. Moreover, he highlighted that Euro Area PMIs (as well as German PMIs) are consistent with moderate expansion in 3Q.

 

Lastly, our UK Economist noted that the decline in the UK PMI was attributed primarily to slower exports growth to the Euro Area, and the index is at the lowest since May 2013.








How Bad Could It Get? US Government Order Of 160,000 HazMat Suits Gives A Clue

Now that Ebola is officially in the US on an uncontrolled basis, the two questions on everyone's lips are i) who will get sick next and ii) how bad could it get?

We don't know the answer to question #1 just yet, but when it comes to the second one, a press release three weeks ago from Lakeland Industries, a manufacturer and seller of a "comprehensive line of safety garments and accessories for the industrial protective clothing market" may provide some insight into just how bad the US State Department thinks it may get. Because when the US government buys 160,000 hazmat suits specifically designed against Ebola, just ahead of the worst Ebola epidemic in history making US landfall, one wonders: what do they know the we don't?

From Lakeland Industries:

Lakeland Industries, Inc. (LAKE), a leading global manufacturer of industrial protective clothing for industry, municipalities, healthcare and to first responders on the federal, state and local levels, today announced the global availability of its protective apparel for use in handling the Ebola virus.  In response to the increasing demand for specialty protective suits to be worm by healthcare workers and others being exposed to Ebola, Lakeland is increasing its manufacturing capacity for these garments and includes proprietary processes for specialized seam sealing, a far superior technology for protecting against viral hazards than non-sealed products.

 

"Lakeland stands ready to join the fight against the spread of Ebola," said Christopher J. Ryan, President and Chief Executive Officer of Lakeland Industries.  "We understand the difficulty of getting appropriate products through a procurement system that in times of crisis favors availability over specification, and we hope our added capacity will help alleviate that problem.  With the U.S. State Department alone putting out a bid for 160,000 suits, we encourage all protective apparel companies to increase their manufacturing capacity for sealed seam garments so that our industry can do its part in addressing this threat to global health.

Of course, purchases by the US government are bought and paid for by taxpayers. For everyone else there's $1200 mail-order delivery:

 

That said... 160,000 HazMats for a disease that is supposedly not airborne? Mmmk.








Gold, Global Growth, & The Schism In The High Church Of Bernanke

Submitted by Ben Hunt via Salient Partners' Epsilon Theory blog,

 

Everything under the sun is in chaos. The situation is excellent.
– Mao Zedong (1893 – 1976)

Forget it, Jake. It’s Chinatown.
– Chinatown (1974)

Language is conceived in sin and science is its redemption.
– W.V.O. Quine (1908 – 2000)

I am, as I am; whether hideous, or handsome, depends upon who is made judge.
– Herman Melville (1819 – 1891)

All -ism’s end up in schisms.
– Huston Smith (b. 1919)

What Asians value may not necessarily be what Americans or Europeans value. Westerners value the freedoms and liberties of the individual. As an Asian of Chinese cultural background, my values are for a government which is honest, effective and efficient.
– Lee Kuan Yew (b. 1923)

Two years ago, the new seven-member Standing Committee of the Chinese Communist Party Politburo – the most powerful political entity in the country – was introduced to great fanfare. All seven men walked on stage wearing a dark suit and a red tie, but to me the most striking aspect of their appearance was their hair. Yes, their hair. Their dark, immaculately coifed, powerful hair. Despite an average age of 65, not one of these men has EVER been seen in public without sporting a mane that would make their grandsons proud.

On the other hand, consider this handsome man, Bo Xilai. Once the princeling of princelings, the son of a Long March vet, Bo was enormously popular for his Redder-than-Thou politics and enormously rich from his mayoral “crackdown” on organized crime in Chongqing, a municipality with about the same urban population as New York City. To put Bo Xilai in a US context, he was richer than Michael Bloomberg and more politically ambitious than Rudy Giuliani, if either of those two qualities can be imagined. And of course, this 65 year old politician had the luxurious jet-black hair as befits a man of his position.

But alas, Bo’s political reach exceeded his political grasp. Undone publicly for abuse of office and a murder conspiracy, privately for his creation of a top-notch intelligence operation that spied on his fellow Politburo princelings (again to put in a US context, imagine if a mega-billionaire mayor of New York City created his own electronic FBI that could monitor everyone’s market activities … crazy, right?), Bo found himself on the wrong end of a show trial and is currently living out the rest of his days in a Madoff-style cell. How do we know that Bo is gone for good, that he has lost whatever political support he formerly commanded? Because they took away his hair dye. He’s “gone gray”, as they say in the Chinese political lingo, portrayed to the world as a frail old man who not only lost his freedom but much more importantly lost his mojo.
 

 

Patrick Henry famously said, “Give me liberty or give me death!”, a sentiment that makes sense in Western political culture but is met with puzzled looks in the East. Personal liberty is, in an important sense, everything in Western political culture. In Chinese political culture … not so much.  On the other hand, signifiers of personal potency – like maintaining dark hair – have enormous meaning in China and, at times, a diametrically opposed meaning in the West. 
 

    *********************************************************************  

Okay, Ben, kinda interesting in a cultural anthropology sort of way, but what in the world does this have to do with investing?

Simply this, and it’s a core Epsilon Theory tenet: the meaning of events and market signals differ hugely from country to country, tribe to tribe, generation to generation. Ferguson does not mean the same thing as Hong Kong. Hong Kong does not mean the same thing as Tahrir Square or even Tiananmen Square. Monetary policy does not mean the same thing in Beijing as monetary policy means in Washington, which in turn does not mean the same thing as monetary policy in Paris or Rome. But we have an innate tendency to act as if these signals DO mean the same thing, and we can totally wrong-foot our investments as a result.

The biggest thing happening in the world today is the growing divergence between US monetary policy and everyone else’s monetary policy. There is a schism in the High Church of Bernanke, with His US acolytes ending the QE experiment in no uncertain terms, and His European and Japanese prelates looking to keep the faith by continued balance sheet expansion.

That divergence plays out mostly in exchange rates, and it has three HUGE implications, one for investment strategy selection, one for global growth, and one for … (gulp!) gold.

First, this is great news for global macro strategies and their low-cost, populist cousins, so-called “alternative beta” strategies. Global macro performance has been absolutely atrocious over the past five years, driven primarily by a coordinated global monetary policy regime that squeezed out the historical patterns of difference between geographies and asset classes. Now that monetary policy is uncoordinated, with every major economic region essentially fending for itself, global macro and alternative beta strategies have “room” to work. To be sure, some of these strategies will still be confounded by an investment regime where monetary policy trumps economic fundamentals at every turn, but the sine qua non for ANY active investment strategy is distinction and dispersion. For the first time in more than five years, we can see this sort of distinction and dispersion in regional macroeconomic policies, giving traditional global macro strategies at least a chance of success. Vive la difference!

Second, this divergence in regional monetary policy creates enormous strains on the tectonic plates of modern international trade – currency exchange rates. In the absence of a re-convergence of monetary policy I don’t see any compelling reason why recent dollar appreciation should slow down, much less reverse itself, with the obvious consequences for US S&P 500 earnings (negative), commodity prices and commodity-related securities (negative), most EM markets (negative), and European and Japanese earnings (positive). But the greatest risk for global economic stability from a dollar on steroids is, for my money, China. Why? Because as I’ve tried to point out in prior Epsilon Theory notes (here, here, and here), China’s political stability depends on economic growth – it’s the mojo of the Party just as surely as jet-black hair is the mojo of Party leaders – and Chinese growth depends on exports. So long as the yuan is effectively tethered to the dollar, a stronger dollar means a stronger yuan, which means weaker exports to Europe, Japan, and EM’s. Sure, it’s cheaper now to buy more iron ore and copper, so I suppose you could build another ghost city or two to keep the growth train on track, but the Politburo’s only serious answer to the politically existential question of growth is to sell more advanced products to more people, most of whom don’t live in China. That means selling medical devices to Japan and telecom equipment to Germany, tasks made much more difficult by a stronger dollar/yuan. To be clear, I do NOT see some imminent economic collapse in China. But growth is much less certain in China today, and that’s a political problem that the Politburo will stop at nothing to fix. I expect the 180-degree shift in Chinese monetary policy that began this January and paused this summer to accelerate again, which in turn will accelerate political tensions abroad with the US and Japan, as well as political tensions domestically with the mega-rich princeling families. And speaking of domestic political tensions …

Look, I don’t think the meaning of Hong Kong – even to the participants – is some pro-democracy uprising a la the Arab Spring or any of the “color revolutions” our media is so quick to christen. Maybe if we start to see fewer English-language signs and fewer teenagers lifting their smartphone “candles” I’ll change my mind, but right now it seems a lot more like a tepid expression of political identity than a determined effort by determined citizens to change the political system at a fundamental level. This isn’t a release-the-hounds moment like Deng believed Tiananmen Square to be, and it looks like the Gang of Seven in Beijing have decided as much with new orders to pull the police back and let the protesters block traffic and annoy everyone in the city who just wants to get back to business.

But I do think there’s a deeper implication of the Hong Kong protests, one likely to be missed by Western investors who want to project a Western meaning on the events taking place. I think the most important lesson that mainland leaders in the CCP and PLA will take away from the Hong Kong protests is not that the population must be brought to heel, but that they can’t be trusted, that they’re not really one of us. And that’s okay to a certain degree … the potential of “contagion” from Hong Kong to, say, Chongqing seems really remote given the State’s control over media and information flow … but it’s not okay if the “transmission wires” of Hong Kong’s financial system can’t be trusted. Hong Kong is an indispensable financial intermediary for the Chinese State, and I have zero doubt that Beijing will move to cement their control over the sinews of real power here, by any means necessary. One of those sinews of real power is the Hong Kong dollar, which means that Hong Kong monetary policy and the Hong Kong Currency Board – already reduced to a semi-independent satrap – is about to make the transition to full-fledged puppet. This lesson won’t be lost on the mega-rich Chinese princelings, either. The days of parking your mainland wealth in Hong Kong are now over, as it’s no longer a safe haven from the long arm of the CCP. Let the capital flight begin, and watch out below for the Hong Kong dollar.

As for my third point – the implications of monetary policy divergence on gold – I’m always reticent to write about gold because it incites such passion (and I don’t just mean the gold bug camp … poke pretty much any academically-trained economist and you will unleash a furious anti-gold tirade). To be clear, I believe that the meaning of gold today is NOT as a store of value but as an insurance policy against central banks losing control. With market faith in the Narrative of Central Bank Omnipotence at an asymptotic top, the price of that insurance policy – call it $1,200/oz – is as low as it’s going to go. And now with a schism in the High Church of Bernanke, monetary policy divergence, and growing pressures on the tectonic plates of exchange rates we have catalysts for both a generic and geographically specific central bank loss of control.

Now I understand that gold means different things to different people, and to the degree that gold trades as a commodity or a dollar-denominated store of value it can trade cheaper as the dollar advances. I get that. But I don’t think that’s been the principal meaning of gold for the past 5+ years, and if you think as I do that this is the beginning of the end for the Golden Age of the Central Banker (or at least the end of the beginning), gold is pretty interesting here.








"Not A Good Sign" Argentine Stocks, Bonds Crash As Central Bank Chief Resigns

Just a day after Argentine President Cristina Kirchner, in a televised speech, accused central bank employees of helping local bankers to speculate against the Argentine peso in hopes of forcing the government to devalue the currency, Juan Carlos Fabrega - the head of Argentina's Central Bank - has quit. As WSJ reports, unable to borrow abroad due to a legal dispute with creditors, Mrs. Kirchner has relied on money printing to cover spending deficits at the expense of inflation that is thought to be around 40%; and it appears the sanity of Mr. Fabrega was too much to bear for Kirchner (and Kiciloff - who had reportedly clashed with the Central Banker also). The reaction - not good - the stock index collapsed over 8%, bond yields spiked and the black-market peso dumped to record lows at 15.65 to the USD (drastically worse than the 8.51 official peso rate).

Fabrega’s departure is "Not a good sign," said Alberto Ramos, a Goldman Sachs analyst Alberto Ramos, Reuters reports. 

 

"Fabrega was perceived to be a moderating voice and someone that really understood financial market dynamics."

As The Wall Street Journal reports,

Argentine President Cristina Kirchner replaced the head of the central bank Wednesday, marking the second overhaul of her economic team in less than a year.

 

Mrs. Kirchner named her top securities and exchange regulator, Alejandro Vanoli, as central bank governor after she accepted Juan Carlos Fabrega's resignation, according to a statement posted on the presidency's press website.

 

Mr. Fabrega's resignation came a day after Mrs. Kirchner in a televised speech accused central bank employees of helping local bankers to speculate against the Argentine peso in hopes of forcing the government to devalue the currency. Argentina's central bank has little autonomy from the federal government and the president in practice can hire and fire its senior executives at whim.

 

"You blame me for the flight of capital and the rising dollar, that's fine," said Kirchner speaking to Fabrega in the front row of her public speech. "I feel for the dollar losses and not another one should leave the country. Besides that, you continue to have a problem with the economy that I don't have to solve. Just be sure another dollar does not leave the country."

 

Mr. Vanoli, who had served as head of the National Securities Commission since November 2009, takes the helm of a central bank whose main task is financing the federal government. Unable to borrow abroad due to a legal dispute with creditors, Mrs. Kirchner has relied on money printing to cover spending deficits at the expense of inflation that is thought to be around 40%.

 

Since 2010, the Kirchner administration has also borrowed tens of billions of U.S. dollars from the central bank's reserves to pay creditors. High inflation and declining reserves, now at $27.9 billion, have undermined faith in the currency and spurred some Argentines to seek the safe haven of the U.S. dollar.

 

Mr. Fabrega was widely respected among the country's bankers thanks to a career of more than 40 years at the country's largest bank, state-run Banco de la Nacion.

*  *  *

Stocks crashed...

 

Bonds tumbled...

 

and the Dolar Blue collapsed...

 

*  *  *

Good luck Mr. Vanoli...








Ebola-Stricken West African Economies Are Crashing

We warned five weeks ago of the potential economic damage that the Ebola virus could do to West African economies, and now it appears The IMF, The World Bank, and the United Nations Food and Agricultural Organization have warned that Liberia and other West African economies, as WaPo reports, begun a frightening descent into economic hell. Fear that "that people would abandon the fields and factories, that food and fuel would become scarce and unaffordable, and that the government’s already meager capacity to help, along with the nation’s prospects for a better future, would be severely compromised" are no longer scenarios - they are real! Annual inflation rates have doubled, fuel sales are down 35%, Liberia's productivity is down 50-75%, and "micro-trade" financing is "completely depleted."

The IMF warns “In addition to exacting a heavy human toll, the Ebola outbreak is having a severe economic and social impact, and could jeopardize the gains from a decade of peace.”

With WHO and CDC expecting a worst case scenario now, the $809 million collapse in GDP across Sierra Leone, Guinea, and Liberia is stunning...

 

As The Washington Post reports,

Three recent reports from international organizations that seem to bear out the worst-case scenarios of months ago: that people would abandon the fields and factories, that food and fuel would become scarce and unaffordable, and that the government’s already meager capacity to help, along with the nation’s prospects for a better future, would be severely compromised.

 

They are no longer scenarios. They are real. While these trends have been noted anecdotally, the cumulative toll is horrific.

 

The basic necessities of survival in Liberia — food, transportation, work, money, help from the government — are rapidly being depleted, according to recent reports by the United Nations Food and Agricultural Organization, the International Monetary Fund and the World Bank.

 

...

 

The International Monetary Fund said in a separate report that restrictions on public transport, internal travel and trade are burdening the country’s ability to distribute the food that is available.

 

The combination is driving up food prices rapidly, said the IMF even as “panic buying” is boosting demand, according to the World Bank. The IMF is projecting an inflation rate of 13.1 percent by year’s end, compared with 7.7 percent before the Ebola epidemic started taking its toll.

 

Transportation has been badly disrupted, one indicator being a drop of between 20 and 35 percent in fuel sales.

 

The services sector, about half of Liberia’s economy, employing about 45 percent of the work force, has experienced a drop in turnover of 50 to 75 percent, the World Bank says.

 

Savings and loan programs, called “susu,” that finance “micro-trade” and small businesses — especially those run by women — have been “completely depleted,” with participants no longer able to pay their debts, said the FAO.

 

Projections for short-term and long-term economic growth are getting ratcheted downward, with the worst-case estimates nothing short of catastrophic. The World Bank, looking at 2014 alone, projected a reduction in growth in Liberia from 5.9 percent to 2.5 percent, a plunge that would be considered calamitous in any country. In 2015, under its most dire but altogether realistic scenario, Liberia’s output could decrease by nearly 12 percent in 2015.

 

Projections for inflation are moving upward, with the IMF estimating an inflation rate of 13.1 percent by year’s end, compared with 7.7 percent the year before.

 

On top of it all, the revenue coming in to the Liberian government has dropped sharply, by 20 percent, Liberia’s foreign minister Augustine Kpehe Ngafuan told the United Nations earlier this week. “Consequently, our ability to provide for basic social services and continue to fund key development projects are significantly diminished.

*  *  *
“The Ebola epidemic is washing away years of progress and hard work,” said the FAO in its Sept. 23 report.








Former Czech President Blasts "The West's Lies About Russia Are Monstrous"

Authored by Neil Clark, originally posted at The Spectator,

Václav Klaus has made a habit of saying things others shy away from saying, but it doesn’t seem to have done him much harm in the popularity stakes. Quite the opposite: the 73-year-old ardently Eurosceptic free-marketeer has legitimate claims to be regarded as the most successful ‘true blue’ conservative politician in Europe over the past 25 years. He was, after all, prime minister of the Czech Republic from 1992 to 1998 and then his country’s president for a further ten years, from 2003 to 2013.

So when we meet after a typically hearty Serbian lunch — at the International Science and Public Conference in Belgrade — I am keen to ask if he has any advice for David Cameron and the British Conservative party.

‘I was invited to a conference last year in Windsor which was called the Conservative Renewal Conference,’ he says. ‘I made a speech in which I asked the question: “Do you really need a renewal — or don’t you think it would be sufficient to have a return?” My speech stressed the need to return to standard conservative ideas and approaches. I am afraid the current leadership of the Conservative party are not exactly doing that.’

Klaus’s message clearly resonates more with activists than with the serial ‘modernisers’ at the top of the party. ‘After I had finished my speech, two or three older ladies came up to me and said, “It was like Maggie’s speech!” So I find the Conservative party now rather confused in its ideas. The party is playing with the green ideas in a way I can’t accept.’

Klaus is not too keen — to say the least — about another element of the ‘modernising’ agenda. ‘The same-sex marriages and all that stuff about family, to put it broadly, is for me another tragic misunderstanding by the current leaders of the party and I am very sorry about that.’

We move on, inevitably, to Europe. What effect does Klaus think a British referendum on EU membership — and the prospect of a UK withdrawal — might have for the Continent? ‘It would send a strong signal. I was very angry, even in the communist era, looking at Britain from the outside, from behind the Iron Curtain, that Britain decided to leave EFTA to join the EEC in the early 1970s.’

It was a Conservative prime minister, Edward Heath, who took that momentous step. What, I wonder, does Klaus think of the present Conservative leader’s line on Europe? ‘I have met Mr Cameron several times and I am not so sure about his credentials on the EU. I understand he must somehow reflect the division in the whole country and in his party, but nevertheless I don’t think that in a secret ballot in a referendum that he would vote yes [for Britain to remain in the EU] — but this is only my guesstimate.’

Listen to Klaus in full flow on the absurdities of the EU and it’s hard to think why any sane individual — on left or right — would want their country to stay in it. ‘A few days ago I studied the names of the EU commissioners under Mr Juncker, and their portfolios. We in my country say that 16 is already too high for having meaningful portfolios. But the EU now has 28, more than in any country in our part of the world. If you look at the names of those portfolios, I really don’t believe my eyes. The former Estonian prime minister is a commissioner for digital markets. As an economist I really don’t know what the term “digital markets” means. Plus there is another, a German politician, Günther Oettinger, who is the commissioner for “digital economy and society”. We would laugh in the communist era to have such names for the members of our cabinet. I can’t imagine what these commissioners are doing.’

I put it to Klaus that in the bloated and bureaucratic EU economic model, we have the worst of all worlds — one which pleases neither genuine socialists, nor Thatcherite free-marketers, and he readily agrees. ‘What we have in Europe now is not the German Soziale Marktwirtschaft — the social market economy — but the German model deteriorated by another adjective, “ecological”.’

‘I started my political career after the fall of communism with a well-known slogan: “I want to introduce markets without adjectives.” There was a big fight in the country about this phrase. They said, “Klaus wants to introduce markets without social policy.” “No,” I said. “There can be a social policy, but the slogan means a market economy with an additional social policy and not a social market.”The sequence of the words is all important. At present we are going deeper and deeper and deeper into the ecological and social market economy.’

Whatever we decide to call the current system, he adds, it clearly isn’t working for Europe. ‘I am really shocked to see leading EU and European politicians pretending that everything is OK, which is ridiculous and funny,’ Klaus says. ‘I recently read an article by a well-known German economist, Professor Sinn, who has studied the situation in Italy. He presented statistical data which showed that GDP in Italy has declined by 9 per cent since 2000. It’s unimaginable! I don’t think communist Czechoslovakia would have survived such a long-term decline. At the same time, industrial output declined in the same period by 25 per cent! One quarter of the economy simply disappeared.’

Klaus believes the EU is beyond reform and has called for it to be replaced with an ‘Organisation of European States’ — a simple free trade association which would not pursue political integration. He recalls his own experience at the forefront of Czechoslovakia’s Velvet Revolution in 1989. ‘When we started to change my country we quite deliberately did not use the term “reform” — we used the word “transformation”, because we wanted a systemic change. Such a systemic change is needed in Europe today.’

It’s not just on the economy that Europe has got it wrong, says Klaus. He doesn’t agree with the western elite’s current hostility towards Russia, which he believes is based on a false and outdated view of the country. ‘I remember one person in our country who at one moment was minister of foreign affairs, telling me that he hated communism so much that he was not even able to read Dostoevsky. I have remembered that statement for decades and I am afraid that the current propaganda against Russia is based on a similar argument and way of thinking. I spent most of my life in a communist Czechoslovakia under Soviet domination. But I differentiate between the Soviet Union and Russia. Those who are not able to understand the difference are simply not looking with open eyes. I always argue with my American and British friends that although the political system in Russia is different from the system in our countries and we wouldn’t be happy to live in such a system, to compare the current Russia with Leonid Brezhnev’s Soviet Union is stupid.’

He says, with finality: ‘The US/EU propaganda against Russia is really ridiculous and I can’t accept it.’

Klaus wants to transfer other democratic decision-making powers back to the nation states. ‘I’m not just criticising the EU arrangements — at the same time I’m very critical of global governance and the shift to transnationalism. A week ago I was in Hong Kong and I criticised the naive opening up of countries without keeping or maintaining the anchoring of the nation state. Doing this leads either to anarchy, or to global governance. My vision for Europe is a Europe of sovereign nation states, definitely. But we have already gone well beyond simply economic integration. The EU is a post-democratic and post-political system.’

Klaus has spent his political career standing up for sovereignty and rejecting the dominant orthodoxies of the day. Unlike other leaders in the former Soviet bloc countries, he did not feel inhibited about criticising western policies when the Berlin Wall came down. He was one of the few to oppose the Clinton/Blair ‘humanitarian’ bombardment of Yugoslavia in 1999 (he was also strongly critical of the Iraq war).

Yet he feels the freedom to hold — and express — ‘unfashionable’ views in the West is now under increasing threat.

‘If you ask me whether I think liberty is under huge attack in Europe now, I would say yes. I feel repressed by not being allowed to express my views. I have permanent troubles with this. Suddenly I have discovered, for the first time in 20 years, having been invited to be a keynote speaker at a conference, that the organisers find out I have reservations about the EU, about same-sex marriages, about the Ukraine crisis, and they say, “We are very sorry, we have already found a different keynote speaker, thank you very much.” This is something I had experienced in the communist era but not in so-called free Europe. Only a very narrow range of opinions is now considered politically correct.’

It’s to fight this worrying trend that Klaus has decided to launch a new project. ‘I am planning, if we can get the money and people together, to start a new quarterly journal in 2015 called Europe and Liberty.’

It’s hard not to wish him well. In the not too distant past, Europe did have leaders who had clear and distinct visions: on the left, the likes of Sweden’s Olof Palme and Austria’s Bruno Kreisky; on the right, de Gaulle and Margaret Thatcher. You could agree or disagree but you could never say you didn’t know what they believed in, or that the views they held were not sincere. But they’ve been replaced by a generation of bland, uninspiring, consistently ‘on-message’ politicians.

Václav Klaus is different, a throwback to the days when our leaders did stand for something and weren’t afraid to speak their minds. Let’s hope he does not turn out to be Europe’s last conviction politician.








How New Jersey's Creeping Wage Hikes Are Crippling Mom-And-Pop Restaurants

Another day, another unintended consequence of the socialist state's eagerness to "make things better" for everyone, blowing up in its face.

For today's anecdote we go to New Jersey where legislation introduced by Assemblywoman Shavonda Sumter, D-Paterson which passed in the Assembly’s Labor Committee on a party-line vote last March, calls for an increase in the minimum wage for tipped workers. It would increase the federal minimum of $2.13 per hour to $3.39 by the end of this year and $5.93 by 2016.

Assemblywoman Shavonda Sumter wants an increase in the
minimum wage for tipped workers from the federal minimum of
$2.13 per hour to $3.39 by the end of this year. (Photo:
New Jersey Assembly Majority Office)

So far so good: after all, in isolation, it's a tiny amount, and will hardly impact the employer, while it should boost the bottom line of minimum wage employees, leading to a win-win for everyone right?

Well, no, because nothing is ever "in isolation." However, to grasp the practical implications of how minimum wage hikes flow through the system one needs to actually be a small business owner - the person paying the wage - not a politician, who may have the best intentions in mind (if only for one's own bank account and delusions of grandeur) yet have zero practical understanding that such centrally-planned meddling in the free market always does more bad than good.

Case in point, the following story of Rob Pluta who owns and operates Leonardo’s II, an Italian eatery in Lawrenceville, New Jersey as recounted by The Daily Signal

Pluta wasn’t wild about the constitutional amendment New Jersey voters approved last year that raised the state’s overall minimum wage from $7.25 to $8.25 and linked annual increases to the Consumer Price Index. But he’s even more concerned about legislation introduced by Assemblywoman Shavonda Sumter, D-Paterson. Sumter’s bill, A857, which passed in the Assembly’s Labor Committee on a party-line vote last March, calls for an increase in the minimum wage for tipped workers. It would increase the federal minimum of $2.13 per hour to $3.39 by the end of this year and $5.93 by 2016.

 

For restaurant owners, that’s even worse than it sounds, Pluta says. Under current law, if employees don’t make $8.25 counting tips and base, the employer makes up the rest. Pluta says he’s never had to pay—his employees routinely make $15 to $20 per hour or more.

 

If this legislation passes—a companion bill in the state Senate has not moved, and it’s unclear if Republican Gov. Chris Christie would sign it if it did reach his desk—Pluta would have to pay out up to $24,000 more per year, plus payroll taxes. His employees, however, would see little difference in their paychecks.

In short, "This is not a logical proposal,” he says. “It’s an additional cost and an additional burden." However, there is no populism in being logical: one wins relection by pandering to the lowest common denominator even if it means a wholesale increase in food prices which has a ripple effect on demand, and ultimately, may likely lead to the evisceration of the mom and pop restaurant industry of New Jersey.

Pluta’s customers understand what this will mean. Kevin and Eve Connelly are regulars. They like to order a shrimp platter with cocktail sauce. It’s not on the menu and is supplied only by request.

 

“If the restaurant suddenly has to pay for something it didn’t have to pay before, one way to cover that cost is to raise menu prices,” Kevin Connelly says. “So we are probably going to have to pay more for that shrimp.”

 

And that, says Eve Connelly, will have a ripple effect. Higher prices mean people go out less often, which means less in tips for the wait staff at Leonardo’s II. “I wonder if this is something the politicians understand,” she says.

No, they don't. But they are not paid to understand. If they were, they would grasp that corporations will pass on costs first, middle and last, to the point where the business crosses its viability point and competitors come and, pardon the pun, eat its lunch. 

“What I keep trying to drive home is that we are forced into paying costs we never had to cover before in addition to the minimum wage increase that is already in motion,” he says. “This will cripple the restaurant industry. This is especially true for start-ups and other borderline businesses operating at the margins.”

Ironically, in pursuing this kind of wealth redistribution, politicians are crushing the small and medium businesses, those which traditionally are the biggest sources of new jobs, and handing over their business to established, franchised mega corporations, which have the economy of scale to offset such cost hikes.

T.C. Nelson, who owns the Trenton Social on South Broad Street in Trenton, told The Daily Signal the winners will be chain restaurants, which “have the economy of scale to absorb these costs.” The losers, Nelson says, will be neighborhood bars that can’t survive the extra expense.

 

“What this proposal does is take the art of service and hospitality out of the hands of the small business,” he says. “Right now, it’s hard to know how much this will cost. But you can be sure some of the smaller, local neighborhood places will go under.”

 

Pluta is not optimistic.

 

“This is an easy issue to demagogue,” he says. “If this bill does go through it will mean higher consumer costs and less business in restaurants, which works to the disadvantage of the very workers the politicians say they are trying to help.”

Well yes, but it will also help the major restaurant chains, most of which are subsidiaries of publicly owned holding companies (which most likely have been buying back their shares hand over fist courtesy of Bernanke's policies and rewarding management for doing... nothing at all) and which have also spent countless dollars lobbying the Shavonda Sumters of the world to do their bidding, while masking this corporatist hypocrisy with the pleasant face of "we are just trying to make lives better for the minimum wage earners" populism.

That, like the stock market, only works until it doesn't, until all small businesses are ultimately crushed or simply decide to go away, and there is no marginal creator of any jobs left, period. Which, needless to say, leads to a far worse outcome for everyone.








US Government Promises To Forgive Student Debt... If You Work For Them

Submitted by Simon Black via Sovereign Man blog,

He had a vision for what the state could be.

 

His vision was a state that was intricately involved in every person’s life from cradle to the grave.

 

It was responsible for their education, it was their place of work and source of income, and it would monitor and guide the entertainment for all of the society.

 

Life would be characterized by the government provision of care and support throughout. People would grow to rely upon the state in every aspect of their lives, and they would have no reason to seek out alternatives.

 

Eventually people would become dependent on the state’s survival for their survival. Thus their lives would then be dedicated to the ‘greater good’, with the individual existing simply for the state.

This terrifying vision of a dystopian society could only be the construct of an author like George Orwell or Ayn Rand, right? Something you would only see elaborated on the pages of fiction.

In fact, this was the vision of Otto von Bismarck, Chancellor of Imperial Germany in the 19th century.

And this wasn’t just a dream. It was a strategy.

From government healthcare at birth to education in a government school, followed by a career in civil service, and a government pension in old age, the state was with you from beginning to end.

One of the most important stages in the life-long relationship between the state and the individual in Bismarck’s mind was through employment.

There you were directly working to support the government’s aims (for the greater good of course), while at the same time being wholly dependent on them for your survival.

This was the cornerstone of his plan for the strength of the empire—having a populace entirely dependent on (and thus committed to) the state.

“My idea was to bribe the working classes, or shall I say, to win them over, to regard the state as a social institution existing for their sake and interested in their welfare,” Bismarck explained.

You can be sure that Bismarck would approve of modern society.

Today in the Land of the Free, everyone is required to pay into the Social Security system, and over 90% of students go to public schools.

With the passage of the Affordable Care Act, the state is exerting its control over your medical care. And now with a new bill comes the crown jewel of state employment.

Presenting Senate Bill 2726: the Strengthening Forgiveness for Public Servants Act.

If passed, the bill aims to get young people into government employment by promising to forgive their student loan debt.

Could they be any more devious?

First they’ve managed to let inflation absolutely explode, especially when it comes to the cost of university education.

Then they actively encourage students to pay for said education by going deeply into debt, often with government loans funded by the [Chinese] taxpayer.

This created a massive class of young people who are now deeply enslaved by their state debt as they vie for jobs as assistant manager at the Gap.

And now the government has created a way out. Young people need only become public servants. Emphasis on ‘servants’.

Somewhere Otto von Bismarck is smiling.








David Tepper: Bill Gross "Who Cares?", Regrets FNMA, Economy "Good", Stocks Not Expensive

He's back. A month after Appaloosa's David Tepper explained the end of the bond bull market was here (and 10Y rates are now 5bps lower), the trend-following master-of-the-universe explained to Bloomberg TV's Stephanie Ruhle and Erik Schatzker how the departure of Bill Gross from PIMCO was "nothing... who cares?"; why "the US economy is pretty good", how junk bonds are at "fair value" and stocks are cheap as "multiples are not high." Finally he explains how he "wished he didn't have any investment" in Fannie Mae and Freddie Mac and clarifies in his billionaire-all-knowing-ness how he is sure the United States can contain Ebola.

 

Headlines:

  • *APPALOOSA'S TEPPER COMMENTS ON ECB ACTIONS IMPACTING BONDS
  • *TEPPER SAYS DRAGHI HASN'T DONE ANYTHING YET
  • *TEPPER SAYS DRAGHI HAS TO STOP THE NONSENSE
  • *TEPPER SAYS BILL GROSS EXIT MEANS NOTHING FOR MARKETS
  • *TEPPER SAYS BILL GROSS EXIT LONG-TERM NOT RELEVANT
  • *TEPPER SAYS U.S. EQUITIES INTERESTING ON MULTIPLES BASIS
  • *TEPPER SAYS U.S. ECONOMY PRETTY GOOD, STOCKS NOT HIGH MULTIPLES
  • *TEPPER SAYS HIGH YIELD IS AT MID-POINT OF FAIR VALUE
  • *TEPPER SAYS HE WISHES HE DIDN'T HAVE FANNIE, FREDDIE INVESTMENT
  • *TEPPER SAYS APPEAL FOR FANNIE, FREDDIE POSSIBLE

Full clip:

 

Excerpted Transcript:

On Bill Gross:

RUHLE: What does this Bill Gross exit mean for the market?

 

TEPPER: Nothing. Who cares?

On Draghi:

TEPPER: They haven't done any QE yet. So let them start some QE. But the beginning of the end was basically saying that when you create inflation and some inflation in the eurozone, then the bond market is going to start going down. If you don't create inflation in the eurozone of some sort or you don't stop the deflation, then that might not happen. But I do think that if they go in action, if they get in action, if they really get in action you will start creating inflation at some point in time. Until you do that, things will go where they go. And you can look at the curves over there.

 

TEPPER: Yeah, I think that's probably right to a certain extent. I don't think you want to fight it, but you've got to understand what it's going to mean. So the extent that if he's really in action then you don't want to fight him, but he has to really get in action. You have to start QE. This negative interest rates doesn't necessarily have the effect of creating money. It doesn't necessarily have the effect of creating inflation. So if you want to do that, do that. But right now he's done nothing. So let him start.

On Stock Valuations:

TEPPER: Look, the US economy's pretty good. That's all. But with the stock markets, I think that you really aren't at – at high multiples right now.

 

TEPPER: Well I don't think it's high because if you – if you believe interest rates are 4 or 4.5 percent, 16.5 seems like about the right multiple. But I don't think we're at the 4.5 percent 10-years. We're at 2.5 percent 10-years or unfortunately 2.43 or something like that right now. And next year at 14

On Bonds:

One big employment print and you will go down to – these yields here will come down in the US, okay?

 

However, you’re so close to go the other way.

 

That's what makes this a very tricky market. So if you have – listen, if you have big employment numbers that take you into the 5s, it's going to start worrying the Fed about labor push (ph) inflation at some point. And if you do get inflation in Europe to start – stop going down, inflation to stop going down or deflation looks like it'll start taking over, at the same time you'll have the market's yields turn up here. So it's tricky. And until that happens, you could have pressure on yields down.

 

So the question is is there enough – are you getting paid enough for the risks in any kind of place in the yields? Because there's a lot of chances to lose money.

On US Equities:

TEPPER: Well I kind of told you. Listen, it's – it's interesting on a multiple basis and – but you have to have certain things happening. You’ve got to have Europe stop – stop the nonsense, so to speak, Draghi stop the nonsense. So that's kind of it.

On Warren Buffett:

TEPPER: Warren Buffett? He's an interesting guy. I'll say that.

On Ebola:

TEPPER: I think the United States, if any country can contain the risk, the United States can contain the risk.

*  *  *

SCHATZKER: Summing Up: the high-yield market in the mid-point of fair value. The bond bubble if Draghi undertakes QE is going to blow up. Equities okay with next year's earnings.








Deflation As A Precursor Of A Weimar-like Inflation

Most people consider deflation the biggest enemy of the gold price, as gold is generally seen as an excellent hedge against inflation. Whilst this is generally correct, it doesn’t mean that a (short) period of deflation is a prelude of a crashing gold price.

As the very low inflation rate (and as there’s even official deflation in Italy and Belgium at this point in time), the European Central Bank is taking additional measures to pump several hundreds of billions of euros into the financial system which should theoretically boost the consumption pattern of the Eurozone citizens. It’s no secret the ECB wants the inflation rate to be ‘close to but not exceeding’ 2%, which is deemed to be the most sustainable number by several economists. At an inflation rate of 2% companies can increase their revenues fast enough, without the consumers being hit too hard.

The ECB has no problem to expand its balance sheet to the level of 2012, when the total balance was approximately 1000 billion euros higher than where it is today. On top of purchases of asset-backed securities, the ECB will directly pump cash in the banking system by making 400B EUR in 4-year loans available for the banks of the Eurozone at a cost of 0.15% per year. This should lead to an increased spending and increase the inflation rate as well, until the inflation rate is out of the danger zone and is hovering around the 2% mark again.

Not everybody in the board of the ECB is happy with this, and the president of the Bundesbank has openly criticized the ECB for causing inflation. In several interviews, president Jens Weidmann has stated that the ECB shouldn’t really intervene to actually create inflation. One would think that the governing council of the ECB would listen to a man whose country has experienced the worst inflation nightmare of all industrialized countries, less than 100 years ago.

If you look back at the official statistics of the horror-inflation during the Weimar-republic, it’s clearly visible that after a first bump of inflation there was actually a period of deflation before the snowball effect started to work. In a working paper, Steven Webb was able to gather all data from the period 1919-1923, and as you can see on the next image, the period of inflation was paused for a few months when there was deflation. Thereafter, the inflation rate picked up again and actually accelerated to a level of 7100% (yes, more than seven thousand percent) in October 1923.

Source

Granted, the velocity of money, which is one of the key drivers to induce inflation, was much higher back then. But this is also the main reason why we think the ECB is pushing too hard to create inflation and will very likely overshoot its target the moment the velocity of money returns to more normal levels.

Allow us to explain this. The inflation rate is mainly determined by two parameters, the amount of money (‘money supply’) and the velocity of the money. There’s absolutely no disagreement that with the recent rounds of Quantitative Easing all over the world, the money supply has increased by a large factor. The only reason why this money-printing tactic hasn’t showed up in our ‘official’ inflation estimates is because the velocity of the money has been decreasing, which has more or less neutralized the danger of the money-printing. Because the velocity is lower, it will take the ‘new’ money longer to get fully in circulation. And this velocity is still decreasing. There are no official numbers from the ECB, but the following chart from the Fed clearly shows a continuously declining velocity of money.

Source

So the ECB is trying to counter this decreasing velocity rate by printing more money. This is theoretically the correct measure to create the inflation, however, this is a short-term measure. If you look at the longer term picture, the average velocity of money supply is much higher than the current velocity. So even if the velocity would return to normal levels, the ECB and its counterparts all over the world will have printed too much money, and even if the money supply would gradually decline again, this won’t be sufficient to counter the effect of a much higher velocity. This is the main reason why we believe the ECB is on its way to overshoot its target as the velocity of the money supply will return to normalized levels sooner rather than later.

One would think the ECB would listen to Jens Weidmann, that it’s dangerous to create inflation as there are more parameters involved in inflation than just the money supply. As it’s very clear that during the Weimar republic there has been a period of deflation before the inflation rate shot up with triple and even quadruple figure inflation rates, we are afraid the ECB is making the same mistake all over again by increasing the money supply even further.

This case study shows that investors in the precious metals sector shouldn’t dump their holdings in a (short) period of deflation, as historically, deflation has been preceding a period of higher-than-normal inflation. As the velocity of money can’t really be influenced by the ECB, its only possibility is to increase the money supply. However, if the velocity returns to the historical average, the ECB and other central banks will have created a ‘perfect storm’ which could lead to the next Weimar-like inflation in Europe. This means that even in a deflationary period, gold and gold-related assets should continue to be a part of any investment portfolio.

Source

As is evidenced on the previous image, the price of gold in Weimar-marken increased faster than the inflation rate, and in just 5 years time, the value of a gold mark expressed in Reichsmarken increased by almost 1,000,000,000%. Yes, that’s 1 billion percent. It’s also clear that the exchange rate decreased during the deflation period in 1920, which might be exactly what we’re experiencing now. Don’t be scared of gold during short periods of deflation. If the ECB really overshoots its inflation target, your gold-related investments will definitely have an increasing value.

** Check out our latest Gold Report!

Sprout Money offers a fresh look at investing. We analyze long lasting cycles, coupled with a collection of strategic investments and concrete tips for different types of assets. The methods and strategies from Sprout Money are transformed into the Gold & Silver Report and the Technology Report.

Follow us on Twitter @SproutMoney








Humpday Humor: Zimbabwe's Unemployment Rate Is 4%, 10.7%, 60% Or 95%

While all the western banks are clearly envious at the facility with which Zimbabwe managed to hyperinflate away its debt mountain after simply printing a few trillion in fiat monetary equivalents, which instead of the stock market hit the broader economy, there is much more the "developed" world can learn and is learning from Robert Mugabe domain of experimental yet practical monetarism. On one hand, we find that it was former Goldmanite Mario Draghi, whose recent idea of a "Bad ECB Bank" was taken from none other than Zimbabwe:

The Reserve Bank of Zimbabwe created a company that will buy non-performing debt from banks. The Zimbabwe Asset Management Corp. will purchase the loans under commercial terms, and assign collateral and all other rights, the central bank said in its monetary policy statement yesterday.

 

The company will seek “to clean up and strengthen banks’ balance sheets and provide them with the liquidity to fund valuable projects for the economy to rebound and to mitigate loss of confidence,” the central bank said.

 

Non-performing loans at Zimbabwean banks swelled to 18.5 percent of total loans, or $705 million, in June from 1.6 percent in 2009, the central bank said. The high level of bad debt is the key threat to the country’s banking industry, Harare-based IH Securities said in May.

Why is Zimbabwe doing this? Simple: because as the Central Bank reports, Zimbabwe's NPL ratio at various banks is as high as 91%, or roughly where it is in Europe if all the optical illusions, and Copperfieldian distractions were taken away (in addition to Cypriot deposits of course).

But that is nothing compared to the lessons none other than the US Department of Labor is about to learn from Zimbabwe's own Bureau of Lies and Seasonality of Labor Statistics. Because in Zimbabwe the unemployment rate is either 4% or 95%. Depending on the "data" source.

Africa Check explains:

Zimbabwe’s unemployment rate “of 85%” is a ticking time bomb Morgan Tsvangirai, the leader of the country’s opposition Movement for Democratic Change (MDC), recently said.

But how accurate is the 85% figure? Depending on the source, Zimbabwe’s unemployment rate has been estimated at as low as 4% and as high as 95%.

In its 2013 election manifesto, President Robert Mugabe’s Zanu-PF party claimed unemployment levels stood at 60%. The secretary-general of the Zimbabwe Congress of Trade Union, Japhet Moyo, told a newspaper late in 2012 that the unemployment rate was between 80% and 90%. The country’s National Association of Non-Governmental Organisations (NANGO) suggested that overall unemployment in 2011 stood at 95%.

The MDC say that the figure cited by Tsvangirai was drawn from a study carried out by the party in October 2013 and “updated” in April 2014. Spokesman Douglas Mwonzora told Africa Check that it showed that “formal unemployment has risen to over 85%”. He however failed to produce a copy of the research report despite numerous requests.

Zanu-PF spokesman Rugare Gumbo said the 60% estimate referred to in the party’s election manifesto “might have been accurate then, but things have changed”. “You just have to come and do research yourself,” he added before abruptly ending the call.

Documents provided to Africa Check by the Zimbabwe Congress of Trade Unions as evidence of their 80% to 90% claim contained no data to support it.

Christopher Mweembe from NANGO said the organisation had taken the 95% estimate from the CIA World Factbook, an online database of country information and statistics published by the US Central Intelligence Agency.

The website lists unemployment estimates of 80% (2005) and 95% (2009) for Zimbabwe, but does not provide references for the data. The site also cautions readers that: “[T]rue unemployment is unknown and, under current economic conditions, unknowable”.

In stark contrast, the World Bank website lists Zimbabwe’s unemployment rate at only 4%. It bases the figure on data compiled by the International Labour Organisation (ILO). But closer examination reveals that this “modelled estimate” draws on data that is a decade old.

A labour survey published in June 2011 by Zimbabwe’s agency for national statistics, Zimstat, put unemployment at 10.7%. This figure was based on an “expanded” definition of unemployment that included people who had given up looking for work.

Figures based on a narrower “strict definition” of unemployment, which only counted people who were out of work but actively looking for a job, put unemployment at just 5.4%.

The 2011 survey provides the most recent official data on unemployment and was based on interviews conducted with Zimbabweans from 9,359 households. The Zimstat survey concluded that 6.1-million people aged 15 and older were “economically active”. (Zimbabwe’s population was estimated to be around 12-million at the time.)

As is the norm worldwide, the survey classified anyone who had worked for at least an hour – for cash or in kind – in the week preceding the survey as employed. As a result, around 5.4-million people fell into the “employed” category.

According to the survey, most of the 5.4-million Zimbabweans worked in the informal sector (84%), with only 11% (606,000) in formal employment. But only about a quarter of all those counted as employed received some form of financial compensation for their work.

Like many African countries, Zimbabwe classifies subsistence farming as “employment”, the manager for labour statistics at Statistics South Africa, Peter Buwembo, told Africa Check.

“This is reflected in the Zimbabwe figures where agriculture [both formal and subsistence] contributes 66% of total employment, while in South Africa [which does not class subsistence farming as employment]  it contributes 4.4%,” Buwembo said.

When the 2011 Zimstat labour survey was conducted it was still an internationally accepted survey practice that people who “worked for their own consumption” could be classed as employed. But this changed last year, when the international body of labour statisticians decided that work “for own final use” should not be counted as employment.

“If all countries implement this, these unrealistically low unemployment rate figures in African countries will stop,” Buwembo said.

The high informal sector component adds to the “gross underestimate” of unemployment. Tina Koziol, an economist from the South African consultant group Econometrix, explained that methods used to measure informal employment are “problematic” and that the official rate of 10.7% can be regarded “as dubious”.

“Overall, the conclusion remains that there is an absence of reliable data on Zimbabwe’s employment statistics.”

Conclusion: The data is unreliable

Very little primary data exists on unemployment in Zimbabwe. Claims that the unemployment rate is 60%, 85%, 95% or even as low as 4% – as stated by the World Bank – are not supported by reliable, current data.

The most recent labour survey conducted by the country’s agency for national statistics – which pegged unemployment at 10.7% – is three years old and has been criticised as a “gross underestimate” of the problem. The vast majority of the Zimbabweans it classified as “employed” were in fact eking out a living as subsistence farmers.

Neither the Zimstats estimate, nor the much higher unemployment estimates of 60% or 85% or 95%, can be considered reliable. Given the perilous state of Zimbabwe’s economy, unemployment levels are certainly extremely high. But to understand the scope of a problem and implement policies to help solve it you need to be able to quantify it. The first step would be a regular survey of employment and unemployment levels in the country, conducted according to the latest accepted international practices. It is something that is urgently needed.

* * *

And below is an artist's impression of America's own BLS as it was reading this article.








Trannies Trounced, Credit Clobbered, Bonds Bid With Both Hands & Feet

Well that escalated quickly. It appears "bad-news-is-bad-news" once again as ADP was the only saving grace and was just not bad enough to be good (or good enough to comfort escape-velocity-believers). For the 3rd day in a row, stocks saw an opening dump, European close pump, afternoon slump - this time led lower by Trannies (dragged lower by Ebola-scared airlines) down 2.5% (worst in 8 months). The Dow is rapidly approaching unch for the year. Treasury yields collapsed today (2Y -4bps, 30Y -9bps) with 7Y -13bps on the week. 10Y Yield closed at 2.43% with its biggest day move in 13 months. Gold rose modestly as silver and WTI crude plunged once again post-EU close. The USDdollar flatlined amid the carnage in bonds, stocks, and commodities. Lots of potential catalysts for today's weakness but desk chatter about Goldman questioning US growth was notable (as they closed out their growth basket). The Russell 2000 'closed' in 10% correction.

 

 

3rd day in a row of opening dump, European close pump, afternoon slump

 

Once again post EU Close - Silver, Crude and stocks tumbled in sync...

 

This was Trannies biggest single-day drop in 8 months...

 

"Sell In May" is starting to look like a good strategy...

 

 

VIX slamdown into the close kept stocks off the lows (thanksa to HFTs breaking the CFE)

 

Leaving the index to blow lower all on its own...

 

Treasuries, JPY, and Stocks were a one way street today...

 

as was credit... with a VIX driven bouince into the close

 

As Treasury Yields collapsed  to 10-13bps lower on the week... biggest 10Y move in 13 months

 

NOTE: Credit protection rallied modestly into the close and Treasury yields accelerated lower - smells a lot like a corporate-bond spread focused liquidation (lift protection as unwind underlyings - which means sell corp bonds, buy TSYs)

and sure enough Huge volume flushed through the HYG ETF as TSYs and hedges decoupled...

 

Don't tell Financial stocks but Financial credit just hit an 8-month low (wides)...

 

as all the majors get hammered wider...

 

The Dollar went nowhere today - JPY strengthened modestly - amid all the craziness...

 

Gold rose modestly as silver and crude crashed once again...

 

And a gentle reminder to those that were absent today... (FYI - this is a 2014 updated version of the original) - so Buy The F##king Dip... If You Don't You're a F##king Idiot!

 

Charts: Bloomberg

Bonus Chart: The Gold-Silver ratio is back at 71 - the same level when Lehman failed...

 

Bonus Bonus Chart: Japanese stocks crashed today... totally decoupled from USDJPY...








VIX Options Halted As CBOE Breaks

As the late-day VIX slamdown began, and stocks levitated off the lows, CBOE's Futures Exchange "broke." At 1542ET, VIX futures/options stopped trading (though the VIX index continued to push lower).

CFE Breaks...

 

As Futures get going...

 

Leaving the index to blow lower all on its own...








Secret Service Head Resigns, Claims It Was "Noble Thing To Do"

Noting that is "in the best interest" of the US, Secret Service Director Julia Pierson has resigned following 'fence-jumper'-gate. While "disappointed" she could implement reforms (of her own policies?) she felt it was the "noble thing to do." In the full statement below, they are careful to point out just how great the Secret Service is "there is no other protection service in the world" like them, they modestly note. Nope, none indeed. Ironically, as she resigns, the White House intruder just plead "not guilty."

  • *JULIA PIERSON COMMENTS IN INTERVIEW WITH BLOOMBERG
  • *PIERSON SAYS IN `BEST INTEREST' FOR U.S. TO STEP DOWN
  • *PIERSON: `DISAPPOINTED' SHE COULDN'T IMPLEMENT CHANGES, VISION
  • *PIERSON SAYS IT WAS CLEAR CONGRESS LOST CONFIDENCE IN HER
  • *PIERSON SAYS `IT'S PAINFUL TO LEAVE'
  • *PIERSON SAYS SHE FELT RESIGNATION WAS `NOBLE THING TO DO'

Full Statement

h/t @ZekeJMiller

 

And via WSJ:

The intruder who allegedly scaled a White House fence, knocked back a Secret Service agent and darted into the executive mansion pleaded not guilty to federal charges on Wednesday.








Something's Broken

With just $10 billion of freshly-printed money left (plus reinvested maturing debt) the Fed is rapidly running out of put-providing, VIX-selling, low-volume-levitating ammunition to keep the wealth-creation dream alive. Nowhere is that more evident in the collapse in equity market breadth. NYSE New Lows have surged to 14-month highs and the spread to New Highs is weakest since August 2013. Of course, back then, equity bulls could rely on a guaranteed 'flow' from the Fed to BTFD, this time that backstop does not exist.

 

 

 

h/t @Not_Jim_Cramer








A "No Social Media List" For Extremists And Potential Terrorists?

Submitted by Michael Snyder of The American Dream blog,

You have heard of the “No Fly List”, right?  Well, now the Tories are pledging that if they win the next election in the UK they will establish a list of “extremists” that will have to have their social media posts “approved in advance by the police” before they post them.  There are also plans to ban “extremists” from broadcasting and speaking at public events.  The stated goal of these proposals is to crack down on terrorism, but in the process the civil liberties of the British people are going to be flushed down the toilet.  And the American people need to pay close attention to what is going on in the UK, because whatever police state measures are implemented over there usually also get implemented over here eventually.  For those that believe that we need to do “whatever it takes” to fight terrorism, there is a very important question that you need to ask yourself.  What if the government decides that you are an “extremist” because of what you believe?  What will you do then?

When I saw a report in the Telegraph today entitled “Extremists to have Facebook and Twitter vetted by anti-terror police“, I could hardly believe it.

Do the British people actually want a “no social media list” that will essentially ban people from using Facebook and Twitter even though they haven’t actually been convicted of doing anything wrong?

The following is a brief excerpt from that article

Extremists will have to get posts on Facebook and Twitter approved in advance by the police under sweeping rules planned by the Conservatives.

 

They will also be barred from speaking at public events if they represent a threat to “the functioning of democracy”, under the new Extremist Disruption Orders.

 

Theresa May, the Home Secretary, will lay out plans to allow judges to ban people from broadcasting or protesting in certain places, as well as associating with specific people.

 

The plans — to be brought in if the Conservatives win the election in May — are part of a wide-ranging set of rules to strengthen the Government’s counter-terrorism strategy.

This sounds like an Orwellian nightmare for the British people.

And who is an “extremist” anyway?

We are being told that those that belong to ISIS are extremists, and nobody would argue that.

But the article in the Telegraph makes it sound like any group “that spreads or promotes hatred” would be considered extremist.  And under these new proposals, even belonging to such a group could get you thrown into prison for up to 10 years

The Home Secretary will also introduce “banning orders” for extremist groups, which would make it a criminal offence to be a member of or raise funds for a group that spreads or promotes hatred. The maximum sentence could be up to 10 years in prison.

So what does all of that exactly mean?

Would anti-abortion groups be considered “extremist”?

Would groups promoting traditional values be considered “extremist”?

Would groups protesting against the abuses of the British government be considered “extremist”?

Would Christian churches ultimately be considered “extremist” because they don’t agree with the radical liberal agenda of the central government?

Essentially what the Tories propose to do is to tightly regulate all speech.  And there is no way to do that without turning the entire United Kingdom into a totalitarian hellhole.

Meanwhile, the United States continues to march down a similar road.

For example, we now live in an environment where a 16-year-old kid can be suspended from school and arrested by the police for writing a story “about using a gun to shoot a dinosaur”

In another case of school officials adhering to ridiculous zero tolerance policies, a student from South Carolina was suspended and arrested by police recently after writing an imaginative story about using a gun to shoot a dinosaur.

 

The offender, 16-year-old Alex Stone of Summerville High School in a suburb of Charleston was in the course of completing an assignment where students were asked to write something brief about themselves, much like Facebook status updates.

 

Stone told reporters that he found himself in hot water with teachers for being over imaginative and mentioning the word ‘gun’.

This is utter insanity, and it is getting worse with each passing day.

And it is not just kids that have to deal with this kind of thing.  A Big Brother police state control grid is being slowly constructed all around us.  And authorities are preparing for the day when they will have to use lethal force to keep the population in line.  Just check out the following excerpt from a recent Infowars report

A document released by the U.S. Army details preparations for “full scale riots” within the United States during which troops may be forced to engage in a “lethal response” to deal with unruly crowds of demonstrators.

 

The appearance of the document amidst growing unrest in Ferguson, Missouri, with the National Guard now being called in to deal with the disorder, is an ominous coincidence.

 

The 132-page document, titled U.S. Army Techniques Publication 3-39.33: Civil Disturbances (PDF), was written in April 2014 and recently obtained by Public Intelligence.

 

The document makes it clear that the techniques detailed therein are to be applied both outside and inside the “continental United States (CONUS)” in the event of “unruly and violent crowds” where it is “necessary to quell riots and restore public order.”

 

The training manual outlines scenarios under which, “Civil unrest may range from simple, nonviolent protests that address specific issues, to events that turn into full-scale riots.”

So precisely who is the government so concerned about anyway?

If ISIS and other Islamic terror groups are the problem, why train to fight against Americans?

Sadly, the truth is that much of the focus in the “war on terror” has been turned inward during the Obama administration.  Many officials in the federal government now insist that “homegrown terror” is the greatest threat that we face.

And you may be quite surprised to learn who the government considers “potential terrorists” to be.  The following is an extended excerpt from my previous article entitled “72 Types Of Americans That Are Considered “Potential Terrorists” In Official Government Documents“…

*****

Below is a list of 72 types of Americans that are considered to be “extremists” and “potential terrorists” in official U.S. government documents.  To see the original source document for each point, just click on the link.  As you can see, this list covers most of the country…

1. Those that talk about “individual liberties”

2. Those that advocate for states’ rights

3. Those that want “to make the world a better place”

4. “The colonists who sought to free themselves from British rule”

5. Those that are interested in “defeating the Communists”

6. Those that believe “that the interests of one’s own nation are separate from the interests of other nations or the common interest of all nations”

7. Anyone that holds a “political ideology that considers the state to be unnecessary, harmful,or undesirable”

8. Anyone that possesses an “intolerance toward other religions”

9. Those that “take action to fight against the exploitation of the environment and/or animals”

10. “Anti-Gay”

11. “Anti-Immigrant”

12. “Anti-Muslim”

13. “The Patriot Movement”

14. “Opposition to equal rights for gays and lesbians”

15. Members of the Family Research Council

16. Members of the American Family Association

17. Those that believe that Mexico, Canada and the United States “are secretly planning to merge into a European Union-like entity that will be known as the ‘North American Union’”

18. Members of the American Border Patrol/American Patrol

19. Members of the Federation for American Immigration Reform

20. Members of the Tennessee Freedom Coalition

21. Members of the Christian Action Network

22. Anyone that is “opposed to the New World Order”

23. Anyone that is engaged in “conspiracy theorizing”

24. Anyone that is opposed to Agenda 21

25. Anyone that is concerned about FEMA camps

26. Anyone that “fears impending gun control or weapons confiscations”

27. The militia movement

28. The sovereign citizen movement

29. Those that “don’t think they should have to pay taxes”

30. Anyone that “complains about bias”

31. Anyone that “believes in government conspiracies to the point of paranoia”

32. Anyone that “is frustrated with mainstream ideologies”

33. Anyone that “visits extremist websites/blogs”

34. Anyone that “establishes website/blog to display extremist views”

35. Anyone that “attends rallies for extremist causes”

36. Anyone that “exhibits extreme religious intolerance”

37. Anyone that “is personally connected with a grievance”

38. Anyone that “suddenly acquires weapons”

39. Anyone that “organizes protests inspired by extremist ideology”

40. “Militia or unorganized militia”

41. “General right-wing extremist”

42. Citizens that have “bumper stickers” that are patriotic or anti-U.N.

43. Those that refer to an “Army of God”

44. Those that are “fiercely nationalistic (as opposed to universal and international in orientation)”

45. Those that are “anti-global”

46. Those that are “suspicious of centralized federal authority”

47. Those that are “reverent of individual liberty”

48. Those that “believe in conspiracy theories”

49. Those that have “a belief that one’s personal and/or national ‘way of life’ is under attack”

50. Those that possess “a belief in the need to be prepared for an attack either by participating in paramilitary preparations and training or survivalism”

51. Those that would “impose strict religious tenets or laws on society (fundamentalists)”

52. Those that would “insert religion into the political sphere”

53. Anyone that would “seek to politicize religion”

54. Those that have “supported political movements for autonomy”

55. Anyone that is “anti-abortion”

56. Anyone that is “anti-Catholic”

57. Anyone that is “anti-nuclear”

58. “Rightwing extremists”

59. “Returning veterans”

60. Those concerned about “illegal immigration”

61. Those that “believe in the right to bear arms”

62. Anyone that is engaged in “ammunition stockpiling”

63. Anyone that exhibits “fear of Communist regimes”

64. “Anti-abortion activists”

65. Those that are against illegal immigration

66. Those that talk about “the New World Order” in a “derogatory” manner

67. Those that have a negative view of the United Nations

68. Those that are opposed “to the collection of federal income taxes”

69. Those that supported former presidential candidates Ron Paul, Chuck Baldwin and Bob Barr

70. Those that display the Gadsden Flag (“Don’t Tread On Me”)

71. Those that believe in “end times” prophecies

72. Evangelical Christians

*****

Are you starting to understand?

When government officials speak of the need to crack down on “extremists” and “potential terrorists”, that is a very dangerous thing.

The truth is that they could be talking about you.








Goldman Global Leading Indicator Drastically Revised, Collapses Into "Confirmed Slowdown"

Just 2 short weeks ago, Goldman nervously admitted that possibly perhaps maybe their Global Leading Indicator was indicating a "slowdown" was coming, but remained hopeful that the rest of the month would see data pick up and prove them wrong. Now that the final data has been released for the various components of the index, the 'exuberant' recovery of the last few months has been massively revised lower. As Goldman itself notes, the September Final GLI came in at 2.6% YoY, providing a clear signal of "Slowdown", with the data now in hand further suggesting that the GLI first may have entered the ‘Slowdown’ phase back in July.

 

Via Goldman Sachs,

The September Final GLI came in at 2.6%yoy, a decline relative to the August reading. Momentum decreased to 0.15%mom relative to last month’s reading of 0.29%. Although the degree of deceleration remains quite modest, the September GLI print provides a clear signal of ‘Slowdown’, with the data now in hand further suggesting that the GLI first may have entered the ‘Slowdown’ phase back in July.

This comes after an initial August reading that still placed the GLI in ‘Expansion’, but very close to Slowdown, and after both the September and August Advanced GLI readings placed the cycle in the ‘Slowdown’ phase.

 

Red arrows show the revisions from last month...

 

Components mixed

Six of the ten underlying components of the GLI worsened in September. Three of last month’s four improving components came in softer.

The September Final GLI places the global industrial cycle in the ‘Slowdown’ phase, which is defined by positive but decreasing momentum. This may be driven by some data coming in lower after fairly high prints in previous months, such as the Global PMI and NOIN. Along with the Advanced GLI readings in August and September, which located the GLI in ‘Slowdown’, this Final GLI reading comes in a broader context of stable and compressed growth, where small changes may lead to shifts in cycle phases.








Pages