ZeroHedge RSS Feed

Peak Idiocy: CNN Urges Students Not To Pay Down Student Loans, Buy Stocks Instead

You know the Central-Bank-driven wealth-creation narrative has gone too far when... CNN Money - the bastion of personal financial advice introduces us to Mohammad Majd, graduate who opines "I changed my entire philosophy on debt. I started making minimum payments on my student loans, picked up a "Stock Investing for Dummies" book, and put whatever extra money I made into the stock market." It's great any muppet can win... "It was a really good feeling knowing that I could wipe away my entire student loan debt with just a few mouse clicks." This is how broken the market (and the mindset) has become...


Via CNN Money,

When Mohammad Madji graduated from Drexel University in 2009 with a degree in engineering, he was 23 and had $200 in his bank account.
In other words, he was like most American college students: Poor and in debt.

The loan burden: My mother was overly ambitious in helping me and put a lot of my tuition payments on her credit card; as a result, she ended up claiming bankruptcy my senior year.


My roommates each had over $100,000 to repay. One of them currently waits tables on weekends on top of having a full-time engineering job. He's been doing it since we graduated in an admirable effort to pay down his student loan debt.


When I started my career, my monthly student loan payments came to $460. My entry-level engineering job paid $48,000 a year. I was better off than most. My payments were inconvenient but still manageable.

And so he began his long road to deb serfdom...

Paying down debt: Aside from moving out of that studio and into a small two-bedroom apartment, I maintained the same modest lifestyle I had while I was a student. A lot of my friends were still struggling to find jobs, so there wasn't much social pressure on me to get a new car, a nice apartment or eat out at fancy restaurants.


I began attacking my student loans by making double and triple payments. Like a lot of other recent graduates, I was conditioned to fear debt, and I made a point to get rid of it as soon as possible.


Coming out of school just after the financial crisis had a big impact on me. I wanted to know what had just happened and why my friends weren't getting the jobs they deserved, so I started reading a lot about the crisis and about economics in general.

Then his life changed... One important concept that I came across was Opportunity Cost -- the notion of quantifying what you give up when you chose one option over another. I asked myself: Why am I rushing to pay off loans with 3% to 6% interest rates when the S&P has historically returned 11%?

Game changer: I changed my entire philosophy on debt. I started making minimum payments on my student loans, picked up a "Stock Investing for Dummies" book, and put whatever extra money I made into the stock market.


I was a novice investor, but I bought at a time when a lot of other people were discouraged from investing in 2009 and 2010. Consequently, I was able to buy stocks at bargain prices.


When I turned 26, I noticed something astonishing My student loan debt and the money in my investment account had converged to the same amount -- $35,000. It was a really good feeling knowing that I could wipe away my entire student loan debt with just a few mouse clicks, but I opted to continue making minimum payments.


By paying the minimum, it would take me eight years to pay off all my loans.




After eight years, I would have $75,000 (assuming an annual return of 10%).


Sure, that is simplifying it a bit. Obviously, the stock market doesn't return 10% every year on the dot. These numbers also don't take taxes into account. Student loan interest is tax-deductible up to $2,500, and capital gains is 0% for anyone who taxed at the 10% to 15% rate.


The options will be slightly different for everyone. Depending on the interest rate and life of the loan, reducing debt might be the best option.



Today I am well on my way to paying down my student debt, but I also have tens of thousands in stock market gains.


I'm glad I did the math.

*  *  *
Wow!!! One quick question, Mohammad:

What would have happened if you graduated in say 2007 or 2008 and started your speculate-your-way-out-of-student-debt plan?

Never mind...

*  *  *

His final lesson...

But for many of us who have grown up in modest households, we are taught to pay off debt quickly. It's not a bad lesson. But if you want to get rich, you might be better off making the minimum payment on your student loan and investing the rest.

nailed it...

*  *  *

Remember kids - debt is good, moar debt is moar good, and rampant speculation in the 'market' can only lead to riches beyond your dreams (with no downside whatsoever)... in fact, why go to college at all? Take your minimum wage burger-flippingh money and Buy double-short VIX ETFs...

Debunking Keynesian "History": The Gold Standard Had Nothing To Do With Panics And Busts

Authored by Brian Domitrovic, originally posted at Forbes, via Contra Corner blog,

One of the main reasons that detractors of the gold standard contend it is a “barbarous relic” (in John Maynard Keynes’s phrase) is that it was implicated in so many financial panics and economic busts back in its heyday in the 19th century. As the New York Times’ pet Internet troll once put it, sarcastically, “under the gold standard, America had no major financial panics other than in 1873, 1884, 1890, 1893, 1907, 1930, 1931, 1932, and 1933. Oh, wait….returning to the gold standard is an almost comically (and cosmically) bad idea.”

Looking at the 19th century, before the gold standard became a ghost, a dead-letter in the early era of the Federal Reserve from 1913-33, there is no evidence that the good old thing was implicated in any panic or bust. Certainly not in 1873, when the United States was still contemplating returning to the gold standard that it had abrogated in the civil war the decade prior.

Certainly not in the other famous panics of the 19th century, every one of which had at its root some form of extensive government meddling in the economy.

Not the panic of 1819—caused by the misallocation ofcapital owing to the U.S.’s printing, during the War of 1812, of fiat paper currency (some of which was so transparently desperate it paid interest). Not the panic of 1837, caused by undue speculation in land sparked by Congressional goading following “Indian removal.” Not the panic of 1857—caused by a collapse in railroad shares on the basis of over-investment encouraged again by federal policy.

Which brings us to the panic of 1884. Here are yearly the economic growth statistics of the five-year run from 1882 to 1886, the mid-point being that putative panic year, 1884. (GDP is a blunderbuss statistic, but at least these reconstructions don’t have to pretend that government spending is output, in that government spending was a twelfth of what it is today.) 1882-86, yearly growth came in 5.3%, 2.8%, -1.6%, 0.3%, 8.1%. Growth over the five-year period, with 1884 at the mid-point: 9.6%. By the end of the decade, the 1880s, further 28% growth (6.2% per annum) had been tacked on.

For there to be a “major financial panic,” economic growth must take a substantial and sustained hit—as in the years after 1929 and our own cherished post-2007 era. Here we have a modest trough bounded by good growth before, and epic growth after. Take 1884 off the list.

Which brings us to 1890 and 1893. Of all the panics in American history, these are perhaps the least understood and most misrepresented—with the possible exception of the tremendous recession of 1919-21, which the Times troll most very curiously did not mention (which is OK, since none other than James Grant is on the matter).

Saying that there was a panic in 1890 is weird, in that growth was some 9% that year. In 1891, growth tumbled down, but stayed positive, at 1%. Growth surged again in 1892, to at least 10%. Then the sustained drought came: growth fell by fully 10% through 1894 and took till 1897 to recover the old trend of sustained increase.

This was the desperate panic/bust of 1893, which gave us the Haymarket riot, the Pullman strike, mass bankruptcies, and the word and very much the fact of “unemployment.” Right smack in the middle of the gold-standard era.

Or was it? It is perfectly clear what caused both the huge run-up in output numbers from 1890-92, as well as the tremendous stress on the banking and credit system that led to the drying up of investment and the shuttering of factories in 1893 and beyond. The United States, in 1890, decided to traduce the gold standard.

1890 was the year in which Congress made two of its most intrusive forays into monetary and fiscal policy in the years before the creation of the Fed and the income tax in 1913. It authorized the creation of fiat money to the tune of nearly five million dollars a month, and it passed a 50% increase in tax rates in the principal form of federal taxation, the tariff.

The monetary measure came care of the Sherman Silver Purchase Act, whereby the United States was mandated to buy, with new paper currency, an additional 4.5 million ounces in silver per month. The catch: the currency that bought the silver had to be redeemable to the Treasury in gold too.

Silver-mining interests in Nevada and elsewhere had conned (and surely bribed) Congress into this endeavor. Knowing that their extensive silver was worth little, what better way to cash in on it than get a piece of paper that says the silver can be exchanged for gold, government-guaranteed?

The cascade of new money caused an asset bubble, the tariff made sure the bubble was especially deformed, and the most extended recession of the pre-1913 period hit. The United States, needless to say, ran out of gold to back all the extra currency. J.P. Morgan had to float a gold loan to bail out his pathetic government. With the private banking system devoting its resources to backing the currency, the market got starved of cash, and the terrible recession came.

To believe that this ridiculous episode impugns the gold standard is to miss the point, and badly. Any currency that is on the gold standard can have its manager ruin the monetary system if so disposed. If you print gobs more currency than you could conceivably redeem in gold, because some con man from out West got to you, the grim creeper will come for you and your economy. So avoid that fate.

In our own era, the Fed prints excess dollars without concern that they be redeemable in gold. Which means that our capital misallocation is extensive and long-term, our recessions are long and deep, our growth trend is shallow, and our complacency about how right we are in contrast to the benighted past is callow and pitiable.

5 Things To Ponder: Crude Oppositeness

Submitted by Lance Roberts of STA Wealth Management,

This past week I have been inundated with questions regarding the dive in crude oil prices and the energy sector in general. Is this a fantastic buying opportunity, or is the bigger of something bigger? The answer depends on your time frame.

For a speculative trader looking for a short-term opportunity, as shown in the chart below, oil is now 4-standard deviations oversold and a fairly strong bounce is likely.

However, longer-term investors may want to use whatever bounce comes to rebalance energy weightings in portfolios as it is quite likely that the dynamics of the oil/energy market have now markedly changed going forward.  As I discussed recently in "No, It's Not Time To Buy Oil Stocks Yet," the longer-term investment opportunity in energy has occurred after the initial bounce.  To Wit:

"As you will notice, each time there is a sharp correction in the NYEI, the subsequent bounce has been an opportunity to sell positiions that are underperforming, experiencing credit related issues or were just poor investments to begin with. Strongly rising markets mask many investment errors made by investors that are quickly, and brutally, revealed during market declines. These bounces give investors opportunities to clear those mistakes.


The subsequent decline provided an ideal opportunity to reallocate portfolios to better quality and performing issues within the portfolio. The current sell-off is likely the first leg of a similar pattern that investors should use to clean up portfolios in energy related investments."

This weekend's reading list is a collection of articles discussing the good, the bad and the ugly of the dive in crude oil prices. It will likely be some time before we know how this particular story ends, but it is a story that is particularly important to Houstonians that have enjoyed oil-driven economic boom for the last five-years.

1) 10 Reasons Why A Severe Drop In Oil Prices Is A Problem by Gail Tverberg via Our Finite World

  • Low prices lead to oil being left in the ground
  • Low prices negatively impact shale extraction and offshore drilling
  • Shale operations have a huge impact on US Employment
  • Low oil prices lead to debt defaults
  • Low oil prices can lead to collapses of exporters
  • Benefits to consumers likely smaller than expected
  • Hope for exported oil and LNG likely to disappear
  • Hoped for renewables lose luster with low oil prices
  • Deflationary pressures
  • Drop in oil prices likely reflective of world reaching debt expansion limit

Read Also: Oil & Banks - As Prices Fall Risks Rise by John Schoen via CNBC


2) Energy Bond Risk Soars To Record Highs via ZeroHedge

"The spread (or risk) of high-yield energy credits surged again today, breaking above 850bps for the first time... The overall high-yield credit market is being dragged wider by this contagion as hedgers try to contain the collapse that is possible. For now, the S&P 500 remains entirely ignorant of the fact that over a third of its CapEx was expected to come from this crushed sector."


Read Also: Why The Stock Market Is Detached From The Economy via Streettalklive

Read Also: Guess What Happened The Last Time Oil Crashed Like This by Michael Snyder via Conscious Life News


3) Why The Oil Price Decline Is Not A Bad Thing by David Rosenberg via The National Post

"Mr. Rosenberg said the stiff drop in oil prices this year has resulted in U.S. gas prices falling US26¢ to US$2.88 per gallon from US$3.14 a month ago. That, he said, is equivalent to a US$40-billion tax cut that will benefit various sectors including transportation, energy-dependent manufacturers and segments of the consumer discretionary space such as restaurants, electronics, and music and book stores."

Read Also: Why Bottom Falling Out Of Oil Isn't All That Bad by David Rosenberg via The National Post


4) Recession Is The New Stimulus by Jeffrey Snider via Alhambra Partners

"At this point the idea of 'decoupling' enters as if it were valid today in a way it was totally absent in 2008 (the last time “decoupling” was so prevalent). In other words, the global economy may be sinking but the US is supposed to be the bright shining light of contrary good fortune. Thus, less demand around the world is expunged from the domestic trend of rising production and scenarios of import price competition. Of course, I think that is nothing more than the same wishful thinking that drove the 2008 version, but also that it is plainly obvious that emerging market demand for energy is a full part of the lack of forward demand up the supply chain. China may be slowing, but it’s not because China is slowing on its own, rather the US is buying a lot less from China (and everywhere else).


GDP is a spreadsheet or regression with variables to be moved around and nothing more to 'economists.' How else can you arrive at the idea that rapidly gaining bearishness in markets with trillions and trillions on the line is now the go-to 'stimulus?' Maybe the global economy, including the US, will get so bad it will be positively booming."

Read Also: Oil Price Drops - Don't Panic, Really by Cyrus Sanati via Fortune


5) Steep Slide In Oil Prices Is Blessing For Most by James Stewart via The New York Times

"The plunge in oil prices — to about $66 a barrel from over $107 in late June — has many pundits wringing their hands. They have cited the risks of falling prices and social and political unrest overseas, not to mention the economic threat to the booming mid-American oil basin, running from Texas to North Dakota and Alberta.


But if history is any guide, it’s hard to see falling oil prices as anything but good news for everyone whose fortunes aren’t tied to oil, which is to say, most of the world’s population."

Read Also: Plunging Oil Prices Will Starve The World Of Economic Fuel by Chris Martenson via MarketWatch

Read This: Dollar Surge Endangers Global Debt Edifice Warns BIS by Ambrose Evans-Pritchard via The Telegraph

"The BIS has particular authority since its job is to track global lending. It was the only major body to warn of serious trouble before the Great Recession - and did so clearly, without the usual ifs and buts.

It now warns that the world is in many ways even more stretched today than it was in 2008, since emerging markets have been drawn into the global debt morass as well, and some have hit the limits of easy catch-up growth."

"Let me tell you something that we Israelis have against Moses. He took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil!" - Golda Meir

Have A Great Weekend

Fitch Downgrades France To AA: Full Text

And the final punch in the gut on this bloodbathy Friday some from French Fitch which just downgraded France from AA+ to AA.

From Fitch

Fitch Downgrades France to 'AA'; Outlook Stable  

Fitch Ratings has downgraded France's Long-term foreign and local currency Issuer Default Ratings (IDR) to 'AA' from 'AA+'. This resolves the Rating Watch Negative (RWN) placed on France's ratings on 14 October 2014. The Outlooks on France's Long-term ratings are now Stable. The issue ratings on France's unsecured foreign and local currency bonds have also been downgraded to 'AA' from 'AA+' and removed from RWN. At the same time, Fitch has affirmed the Short-term foreign currency IDR at 'F1+' and the Country Ceiling at 'AAA'.


The downgrade reflects the following factors and their relative weights:


When it placed the ratings on RWN in October, Fitch commented that it would likely downgrade the ratings by one notch in the absence of a material improvement in the trajectory of public debt dynamics following the European Commission's (EC) opinion on France's 2015 budget. Since that review, the government has announced additional budget saving measures of EUR3.6bn (0.17% of GDP) for 2015, which will push down next year's official headline fiscal deficit target to 4.1% of GDP from the previous forecast of 4.3%. On its own, this will not be sufficient to significantly change Fitch's projections of France's government debt dynamics.

The 2015 budget involves a significant slippage against prior budget deficit targets. The government now projects the general government budget deficit at 4.4% in 2014 (up from 3.8% in the April Stability Programme with the slippage led by weaker than expected growth and inflation) and 4.1% in 2015 (previously 3.0%), representing no improvement from the 4.1% of GDP achieved in 2013. It has postponed its commitment to meet the headline EU fiscal deficit threshold of at most 3% of GDP from 2015 until 2017.

In the draft 2015 budget, the authorities projected the gross general government debt (GGGD) to GDP ratio to peak higher at 98% and later in 2016 (previously in the Stability programme at 95.6% in 2014 and 2015) and fall more slowly to 97.3% in 2017 (previously 91.9%) and 92.9% in 2019. The projections compare with the 'AA' category median for GGGD of 37%. The only 'AA' range country with a higher debt ratio is Belgium (AA/Negative). Even under the official forecast, the capacity of the public finances to absorb shocks has been significantly reduced. Fitch expects the debt to GDP ratio to peak higher at close to 100% of GDP, with a slower decline to 94.9% of GDP by the end of the decade.

Risks to Fitch's fiscal projections remain on the downside owing to the uncertain outlook for GDP growth and inflation in the near term and the increased uncertainty over the government's ability to deliver on a fiscal consolidation path. Reflecting these concerns, Fitch's medium-term growth forecasts are somewhat weaker and budget deficits wider than official projections.


The weak outlook for the French economy impairs the prospects for fiscal consolidation and stabilising the public debt ratio. The French economy underperformed Fitch's and the government's expectations in 1H14 as it struggled to find any growth momentum, in common with a number of other eurozone countries. Underlying trends remained weak despite the economy growing more strongly than expected in 3Q, when inventories and public spending provided an uplift. Euro depreciation and lower oil prices will provide some boost to growth in 2015. Fitch's near-term GDP growth projections are unchanged from the October review of 0.4% in 2014 and 0.8% in 2015, down from 0.7% and 1.2% previously. Continued high unemployment at 10.5% is also weighing on economic and fiscal prospects.

The on-going period of weak economic performance, which started from 2012, increases the uncertainty over medium-term growth prospects. The French economy is expected to grow less than the eurozone average this year for the first time in four years. The French government is implementing a programme of structural reforms. However, the quantitative impact of recent structural reforms is uncertain, and in Fitch's view does not appear sufficient to reverse the adverse trends in long-term growth and competitiveness.

The OECD estimates that the impact of economic reforms could take longer to materialise than expected by the authorities. Its October 2014 report on French structural reforms suggests that measures already undertaken could raise GDP by a cumulative 1.2ppt in five years and 3.0pp in ten years. This is equivalent to an annualised impact on growth of 0.2ppt and 0.3pp, respectively. Adding announced measures yet to be implemented, the impact on GDP rises to 1.6ppt over five years and 0.3ppt annually. However, these estimates are highly sensitive to assumptions and there are risks to policy design and implementation of some of the measures. We continue to believe estimates of long-term growth potential around 1.5% are plausible, down from over 2% in the 1980s. This would be consistent with applying the OECD's estimates for the impact of structural reforms on growth to the EC's current estimate of trend growth at 1.2%.

In Fitch's view, the latest deviations from budget targets and EU excessive deficit procedure commitments weaken fiscal credibility. This is the second time the French government has postponed meeting the EU 3% headline deficit threshold since end-2012. This is despite the introduction of a High Council of Public Finances and new fiscal framework in France and the reinforced EU policy framework.

Despite the additional measures, the EC November opinion on 2015 was that France is at risk of non-compliance with the provisions of the Stability and Growth Pact. Furthermore, it states that "the information available so far indicates that France has not taken effective action for 2014". If that is its final view and agreed by the EU Council, and France then fails to take effective action it could potentially incur a fine in the form of a deposit of 0.2% of GDP. The EC will reassess France's position in March 2015 after official data on 2014 budget performance is made available by Eurostat and consider the next steps.

The French High Council of Public Finance's (HCPF) opinion on the government's latest economic forecast was that the lower GDP growth rates projected for 2016-2017 were more realistic than previous forecasts but still reflect an optimistic view of the external environment and domestic investment potential. The HCPF's opinion on the government's fiscal projections in the draft 2015 budget was that there is a risk of deviation from the medium-term objective of lowering the structural deficit from 2.5% of potential GDP in 2013 to 0.4% by 2019.

France's 'AA' IDRs and Stable Outlooks also reflect the following main factors:

Fitch judges financing risk to be low, reflecting an average debt maturity of seven years, low borrowing costs and strong financing flexibility. Government debt is entirely euro-denominated rather than in foreign currency.

The government has stated its intention to continue with structural reforms in 2015, including territorial reform and a law on growth. As stated above, these have the potential to raise trend growth.

France has a wealthy and diversified economy. It has a track record of relative macro-financial stability including low and stable inflation. It also benefits from moderate levels of household debt and a high household savings rate. Political stability and governance is entrenched by strong and effective civil and social institutions.

While the current account balance has generally been on a deteriorating trend for the past 10 years due to France's loss of export market share, at 1.3% of GDP in 2013 the deficit is not excessive. Fitch projects the deficit to stabilise around current levels. However, France's net external debt is significantly higher than most rating peers.

There is low risk from contingent liabilities. In recent years, the financial sector has been cleaning up its balance sheets, strengthening funding, liquidity, capital and leverage. The risks from the eurozone crisis management mechanism including the EFSF and ESM have also eased owing to the actions of the ECB and the on-going gradual economic recovery of the single currency area.


The main factors that could lead to negative rating action, individually or collectively, are:
- Weaker public finances reducing confidence that public debt will peak in 2017 and be placed on a downward trajectory.
- Deterioration in competitiveness and weaker medium-term growth prospects.

Future developments that could individually or collectively, result in positive rating action include:
- Sustained lower budget deficits, leading to a track record of a decline in the public debt to GDP ratio from its peak.
- A stronger economic recovery of the French economy and greater confidence in medium-term growth prospects particularly if supported by the implementation of effective structural reforms.


In its debt sensitivity analysis, Fitch assumes a primary surplus averaging 0.5% of GDP over the next 10 years, trend real GDP growth averaging 1.5%, an average effective interest rate of 2.7% and GDP deflator of 1.5%. On the basis of these assumptions, the debt-to-GDP ratio would peak at 99.4% in 2017, before declining to 87.6% by 2023.

Fitch assumes the eurozone will avoid long-lasting deflation, such as that experienced by Japan from the 1990s. Fitch also assumes the gradual progress in deepening fiscal and financial integration at the eurozone level will continue; key macroeconomic imbalances within the currency union will be slowly unwound; and eurozone governments will tighten fiscal policy over the medium term.

Crude Carnage Contagion: Biggest Stock Bloodbath In 3 Years, Credit Crashes

We leave it to Jack to explain what happened this week...

Quite a week!!

  • WTI's 2nd worst week in over 3 years (down 10 of last 11 weeks)
  • Dow's worst worst week in 3 years
  • Financials worst week in 2 months
  • Materials worst week since Sept 2011
  • VIX's Biggest week since Sept 2011
  • Gold's best week in 6 months
  • Silver's last 2 weeks are best in 6 months
  • HY Credit's worst 2 weeks since May 2012
  • IG Credit's worst week in 2 months
  • 10Y Yield's best week since June 2012
  • US Oil Rig Count worst week in 2 years
  • The USDollar's worst week since July 2013
  • USDJPY's worst week since June 2013
  • Portugal Bonds worst week since July 2011
  • Greek stocks worst week since 1987

Some serious intraday volatility this week as hope kept shining through but in the end, reality won. Despite spiking euphoria among US Consumers, concerns over Greek elections, Japanese elections, the GDP-plunge-driven collapse in oil prices (with neither OPEC nor non-OPEC willing to blink yet on cutting production), and contagion to high-yield finallly caught up with stocks after they blindly followed the mainstream media narrative that low oil prices are unequivocally good for every muppet.

First things first... 2014 so far... "why would you buy a Treasury bond when you can buy stocks with dividends?"


Here's why crude matters...

ES trading vs. Crude for the week

— Not Jim Cramer (@Not_Jim_Cramer) December 12, 2014


No Hindenburg Omen today but it appears the Dow & S&P are pressing down to test their 50DMAs...


On the week, The Dow was the laggard... NOT OFF THE LOWS


And Energy sector the worst...


The Russell 2000 closed the week negative year-to-date...


VIX surged this week (ignore the excitement over percentage moves)...


Treasury yields collapsed...


Leaving the decoupling at epic levels... between bonds and stocks..


and between credit and stocks...


The Dollar slipped a little today to end the week down over 1%


Gold and Silver had great weeks - very stable as the rest of the markets turmoiled - while oil prices


Crude is now down 25% from the initial OPEC leaks...back below $58!!


Makes you wonder eh? The decoupling began when QE3 was hinted at...


and energy credit is near 1000bps now... and is starting to spread to rest of the HY markets...


notably worse than stocks (for now)...

*  *  *

But it's all about the fundamentals!! Great Jobs Data, Great Retail Sales Data, and Great Consumer Confidence Data - unless that's all totally manipulated bullshit?

Charts: Bloomberg

Bonus Chart: How much longer can this go on?

Martin Armstrong Warns Civil Unrest Is Rising Everywhere (And Government Is Digging In Its Heels)

Submitted by Martin Armstrong via Armstrong Economics blog,


I have warned that governments always turn against the people.

  • Illinois just made it a felony to film police abuse in the USA.
  • The Spanish government has followed the same course.

Despite protests from political, judicial and population, the politicians who are becoming ruthless elite dictators rather than democratic representatives of the people, passed a law which provides extensive fines for protesters who dare to film the abuse of police. They have the audacity to claim filming police  is an “offense against public safety” with fines of up to 600,000 euros. It is the police who protect government – not the people.

So let’s get this straight. “public safety” has become a code word for “government safety” that no longer gives two shits about the people.

Switzerland enacted laws requiring registration of all guns in the country for the first time when. Why? There have not been any incidents of “public safety”.

They too realize that the people are starting to wake up against the abuse of government everywhere. The people have caused this.

As a whole, people watch sports, buy clothes, and go to dinner. Generally at best half even bother to vote. That has sent the signal to government elites the people do not care so corruption has run wild. But now with taxes rising, unemployment rising, pensions vanishing into thin air, and living standards declining, people want real change no words.

Even in the USA, the Republicans wrongly believe their ideas are what the people want. They too raise taxes. This funding bill allowing the banks to repeal Dodd Frank is an example of the corruption behind the scenes. They votes for Republicans because who is ever in power is being tossed out. Come 2016, it will be the Republican’s turn as we see a rise in third-party activity. This repeal of Dodd Frank is a John Andrew Boehner special that goes against the conservative T-Party Republicans.

Politicians will be politicians. What is left to say?

The Devastation Of America's Working Class

After years of exposing, month after month, the truth about the US labor market - its conversion into a part-time (in 2010!), low-paying job market where Millennials refuse to work (as the job market reality is gruesome so instead they opt to load up on record amount of student loans) and where older Americans, instead of enjoying retirement are forced right back into the labor force leading to record numbers of workers over the age of 55 (thanks to ZIRP crushing the value of their savings and a refusing to participate in an HFT- and central-bank rigged stock market), the mainstream media, having grown tired of spinning the bullshit optimistic propaganda, has finally moved to the "tinfoil" side, and has done something it normally wouldn't touch with a ten foot pole. Tell the truth.

Enter the NYT with a shocking dose of truthfulness, one which goes to show just one thing: how over the past decade, notwithstanding the tripling of the S&P from its post-Lehman lows on the back of $11 trillion in central bank liquidity, America's working class has been not only skewed beyond recognition, but is now absolutely devastated. And all thanks to the Federal Reserve skewing the value of money so much that those who should be working aren't, and those who should be retiring, are serving you Starbucks.

Here are the facts, long overdue but facts nonetheless, from the NYT:

  • At every age, the chances of not working have changed in the last 15 years.
    • Teenagers are far more likely not to work.
    • Older people are retiring later and working more.
  • In the late 1960s, almost all men between the ages of 25 and 54 went to work. Only about 5 out of every 100 did not have a job in any given week. By 2000, this figure had more than doubled, to 11 out of every 100 men. This year, it’s 16. 
  • About 13 percent of the increase in prime-age nonworkers, including a substantial fraction of the younger ones, comes among people who say they are in school.
  • Much of the school-related rise in nonwork, at least since 2007, appears to be less about staying in school than it is about not being able to find part-time jobs (don't tell that to the trillion+ in student loans though).
  • Some men in school say they would like to be working part time but they’ve given up looking for a job. Others may stop going to school entirely if they could find a job, or if the college wage premium were smaller.
  • About 20 percent of the new nonworkers say they are disabled, a category whose numbers have risen particularly for workers above age 50.

And the really important part, the one that goes to the entire debate about the collapsing labor force. Bottom line: it's not because baby boomers are retiring (as we have shown time after time). In fact, quite the opposite:

  • Among prime-age workers, early retirement has increased slightly since 2000. Far more drastic changes have occured among workers 55 and older, who have been doing the opposite and putting off retirement.

Of course, this being the liberal NYT, spin was once again unavoidable:

  • The decline of traditional pension plans and rising education levels, which are associated with less physically demanding jobs, may both help explain why the elderly are working longer.

A token pretty chart that shows everything said above:

That's the NYT's version. Here is our far simpler chart that says all that and more.

And here, with a 2 year delay, is the NYT admitting what we said back in 2012 in "55 And Under? NoJob For You"

Some countries have developed policies that encourage older people to leave the labor force, so they do not “crowd out” younger workers. But studies across countries and time suggest that crowding-out may not actually be a problem. Economies do not appear to have a fixed number of jobs. When more older people are working, they are earning money that they will then spend in ways that may create more jobs for young people, for example. Even if this is the case, though, the rise of elderly employment in recent years has not provided enough of a lift to put more young people back to work.

And so on.

We won't waste your time on the rest (you can read it here The Vanishing Male Worker: How America Fell Behind) for the simple reason that once again, we said all of the above and much more years in advance. That said we commend the mainstream media, especially those who are ideologically alligned with the current administration, for finally daring to tell the truth.

And Now, Expert Financial Advice From Jessica Alba

In a world in which neither the Fed, nor the sellside (Goldman was forecasting $100 oil for years to come as recently as October 29), and certainly not tenured economists have any idea what lies beyond the next corner, perhaps the best place to look for financial answers are Hollywood celebrities such as Jessica Alba. So, in our pursuit of truth, financial answers and the Hollywood way, we give you... Jessica Alba.

Yes, the shapely artist alternatively known as Cash Money, was at yesterday's DealBook conference sharing deep insight. Why? Because among all the other ridiculous capital misallocation opportunities presented to West Coast venture capitalists in recent years thanks to the Fed, her diaper delivery startup, Honest, launched in 2012 and which is unbelievably valued at $1 billion, is preparing for its IPO as reported previously.

Here, courtesy of DealBook, is what she had to say:

1. “I appreciate being an actress now more than ever, because being in business is so stressful.”

   Credit Thos Robinson/Getty Images For New York Times


2. “Board meetings are so long.”

  Brian Lee and Jessica Alba are co-founders of Honest Company.Credit Andrew Renneisen for The New York Times


3. Raising money is “like pitching a movie all the time.

  Credit Andrew Renneisen for The New York Times


4. “My 30-plus-page deck got condensed into a 10-page deck, with a lot less words, a lot more pictures.”

  Credit Andrew Renneisen for The New York Times


5. “I had this idea of this brand where people could really outsource their trust.”

Credit Andrew Renneisen for The New York Times


6. With a movie, “it’s not like your whole life is hanging on this thing. With a business, your whole life is hanging on this thing.”

Credit Andrew Renneisen for The New York Times


7. “We don’t test our products on animals. We test our products on our kids. And on ourselves.”

* * *

Finally, for all those who would rather watch rather than listen, here is the 21 minutes clip of Jessica Alba explaining why all one needs to be valued in the hundreds of millions, however briefly, is stunning good looks, B-ish grade Hollywood celeb status, VCs with ridiculous amounts of cash to burn, and the biggest equity bubble in history. Oh yes, and an idea involving excrement.

Short-Term Inflation Expectations Have Crashed To 5 Year Lows (In The US)

With all attention firmly focused on Draghi and Europe's deflationary pressures, it appears the mainstream media forgot to look domestically. With today's weaker than expected PPI, the 2Y Breakeven inflation rate continues to crash- from over 1.00% just a month ago to just 15.5bps this morning. 5Y5Y forwards continue to slide to near record lows across all the majors.


2Y Breakevens are crashing...


and 5Y5Y forwards - often discussed as the Central Bankers preferred perspective - are near record lows across all the majors...


US 5Y5Y Forward inflation pluinged 15bps today to 2.37% and does that look like Abe has stalled the deflationary 'mindset' in Japan?


Charts: Bloomberg

Here Is One Place Where The Stock Market Hasn't Disconnected From Oil

Dubai... is down 23% in the last 10 days. After soaring 64% in the first half of the year, Dubai's Financial Market General Index has collapsed 33.5%...


but if it is due to correct to where oil trades, it has a long way to go still...

Maybe it disconnected a while back, when The Fed flooded the world with money, and now it's pay back time?


And in case you were wondering, from when we called the top in Dubai after a "shell" company with no current operations IPO'd and was 36x oversubscribed... that company's stock has crashed 43%...


Charts: bloomberg

Paying Down The Debt Is Now Almost Mathematically Impossible

Submitted by Simon Black via Sovereign Man blog,

Exactly 199 years ago, in 1815, a “temporary” committee was established in the US Senate called the Committee on Finance and Uniform National Currency.

It was set up to address economic issues and the debt accrued by the US government after the War of 1812.

Of course, because there’s nothing more permanent than a temporary government measure, the committee became a permanent one after just one year.

It soon expanded its role from raising tariffs to having influence over taxation, banking, currency, and appropriations.

In subsequent wars, notably the American Civil War, the Committee was quick to use its powers and introduced the union’s first income tax. They also detached the dollar from gold to help fund the war.

This was all an indication of things to come.

Over the subsequent decades there was a sustained push to finally establish the country’s central bank that will control money and credit, as well as institute a permanent income tax to feed the expanding aspirations of government.

They succeeded in 1913 when the Federal Reserve Act was passed and the 16th Amendment ratified, binding the country in the shackles of central banking and taxation of income.

Over the century that followed, the US has gone from being the biggest creditor in the world to its biggest debtor.

Decades of expanding government programs, waste, endless and costly wars, etc. have racked up such an enormous pile of debt that it has become almost impossible to pay it down.

A lot of folks don’t realize that, since the end of World War II, the US government’s total tax revenue has been almost constant at roughly 17% of GDP.

In other words, even though the actual tax rates themselves rise and fall, the government’s ‘slice’ of the economic pie is almost always the same - 17%.

I’ve worked out a mathematical model which shows that, even with absurd assumptions (7%+ GDP growth for years at a time, low interest rates, etc.), it is simply not feasible for the US government to ‘grow’ its way out.

Default has become the only option. And that could mean a number of things.

They could default on their creditors (other governments like China who loaned money to the US government). But this would spark a global financial and banking crisis.


They could default on the Federal Reserve, which owns trillions of dollars of US debt. But this would create an epic currency crisis for the US dollar.


They could also default on their obligations to their citizens—primarily to future beneficiaries of Social Security (who collectively own trillions of dollars of US debt).


Or they could choose to default on their obligations to every human being alive who holds US dollars… and engineer rampant inflation.

None of these is a good option. And simply put, the US government has reached a point of no return.

I aim to demonstrate this to you in today’s video podcast episode. It’s a very sobering realization.

Join me to see it for yourself:

The Media Is Focusing On the WRONG Senate Torture Report

The Big Story Torture Everyone Is Missing

While the torture report released by the Senate Intelligence Committee is very important, it doesn’t address the big scoop regarding torture.

Instead, it is the Senate Armed Services Committee’s report that dropped the big bombshell regarding the U.S.  torture program.

Senator Levin, commenting on a Armed Services Committee’s report on torture in 2009, explained:

The techniques are based on tactics used by Chinese Communists against American soldiers during the Korean War for the purpose of eliciting FALSE confessions for propaganda purposes. Techniques used in SERE training include stripping trainees of their clothing, placing them in stress positions, putting hoods over their heads, subjecting them to face and body slaps, depriving them of sleep, throwing them up against a wall, confining them in a small box, treating them like animals, subjecting them to loud music and flashing lights, and exposing them to extreme temperatures [and] waterboarding.

McClatchy filled in important details:

Former senior U.S. intelligence official familiar with the interrogation issue said that Cheney and former Defense Secretary Donald H. Rumsfeld demanded that the interrogators find evidence of al Qaida-Iraq collaboration


For most of 2002 and into 2003, Cheney and Rumsfeld, especially, were also demanding proof of the links between al Qaida and Iraq that (former Iraqi exile leader Ahmed) Chalabi and others had told them were there.”


It was during this period that CIA interrogators waterboarded two alleged top al Qaida detainees repeatedly — Abu Zubaydah at least 83 times in August 2002 and Khalid Sheik Muhammed 183 times in March 2003 — according to a newly released Justice Department document…


When people kept coming up empty, they were told by Cheney’s and Rumsfeld’s people to push harder,” he continued.”  Cheney’s and Rumsfeld’s people were told repeatedly, by CIA . . . and by others, that there wasn’t any reliable intelligence that pointed to operational ties between bin Laden and Saddam . . .


A former U.S. Army psychiatrist, Maj. Charles Burney, told Army investigators in 2006 that interrogators at the Guantanamo Bay, Cuba, detention facility were under “pressure” to produce evidence of ties between al Qaida and Iraq.


“While we were there a large part of the time we were focused on trying to establish a link between al Qaida and Iraq and we were not successful in establishing a link between al Qaida and Iraq,” Burney told staff of the Army Inspector General. “The more frustrated people got in not being able to establish that link . . . there was more and more pressure to resort to measures that might produce more immediate results.”


“I think it’s obvious that the administration was scrambling then to try to find a connection, a link (between al Qaida and Iraq),” [Senator] Levin said in a conference call with reporters. “They made out links where they didn’t exist.”


Levin recalled Cheney’s assertions that a senior Iraqi intelligence officer had met Mohammad Atta, the leader of the 9/11 hijackers, in the Czech Republic capital of Prague just months before the attacks on the World Trade Center and the Pentagon.


The FBI and CIA found that no such meeting occurred.

The Washington Post reported the same year:

Despite what you’ve seen on TV, torture is really only good at one thing: eliciting false confessions. Indeed, Bush-era torture techniques, we now know, were cold-bloodedly modeled after methods used by Chinese Communists to extract confessions from captured U.S. servicemen that they could then use for propaganda during the Korean War.


So as shocking as the latest revelation in a new Senate Armed Services Committee report may be, it actually makes sense — in a nauseating way. The White House started pushing the use of torture not when faced with a “ticking time bomb” scenario from terrorists, but when officials in 2002 were desperately casting about for ways to tie Iraq to the 9/11 attacks — in order to strengthen their public case for invading a country that had nothing to do with 9/11 at all.




Gordon Trowbridge writes for the Detroit News: “Senior Bush administration officials pushed for the use of abusive interrogations of terrorism detainees in part to seek evidence to justify the invasion of Iraq, according to newly declassified information discovered in a congressional probe.

Colin Powell's former chief of staff (Colonel Larry Wilkerson) wrote in 2009 that the Bush administration's "principal priority for intelligence was not aimed at pre-empting another terrorist attack on the U.S. but discovering a smoking gun linking Iraq and al-Qaeda."

Indeed, one of the two senior instructors from the Air Force team which taught U.S. servicemen how to resist torture by foreign governments when used to extract false confessions has blown the whistle on the true purpose behind the U.S. torture program.

As Truthout reported:

[Torture architect] Jessen’s notes were provided to Truthout by retired Air Force Capt. Michael Kearns, a “master” SERE instructor and decorated veteran who has previously held high-ranking positions within the Air Force Headquarters Staff and Department of Defense (DoD).




The Jessen notes clearly state the totality of what was being reverse-engineered – not just ‘enhanced interrogation techniques,’ but an entire program of exploitation of prisoners using torture as a central pillar,” he said. “What I think is important to note, as an ex-SERE Resistance to Interrogation instructor, is the focus of Jessen’s instruction. It is EXPLOITATION, not specifically interrogation. And this is not a picayune issue, because if one were to ‘reverse-engineer’ a course on resistance to exploitation then what one would get is a plan to exploit prisoners, not interrogate them. The CIA/DoD torture program appears to have the same goals as the terrorist organizations or enemy governments for which SV-91 and other SERE courses were created to defend against: the full exploitation of the prisoner in his intelligence, propaganda, or other needs held by the detaining power, such as the recruitment of informers and double agents. Those aspects of the US detainee program have not generally been discussed as part of the torture story in the American press.”

In a subsequent report, Truthout notes:

Air Force Col. Steven Kleinman, a career military intelligence officer recognized as one of the DOD’s most effective interrogators as well a former SERE instructor and director of intelligence for JPRA’s teaching academy, said ….  “This is the guidebook to getting false confessions, a system drawn specifically from the communist interrogation model that was used to generate propaganda rather than intelligence”  …. “If your goal is to obtain useful and reliable information this is not the source book you should be using.”

Interrogators also forced detainees to take drugs … which further impaired their ability to tell the truth.

And one of the two main architects of the torture program admitted this week on camera:

You can get people to say anything to stop harsh interrogations if you apply them in a way that does that.

And false confessions were, in fact, extracted.

For example:

And the 9/11 Commission Report was largely based on a third-hand account of what tortured detainees said, with two of the three parties in the communication being government employees. And the government went to great lengths to obstruct justice and hide unflattering facts from the Commission.

According to NBC News:

  • Much of the 9/11 Commission Report was based upon the testimony of people who were tortured
  • At least four of the people whose interrogation figured in the 9/11 Commission Report have claimed that they told interrogators information as a way to stop being “tortured.”
  • The 9/11 Commission itself doubted the accuracy of the torture confessions, and yet kept their doubts to themselves

Details here.

Today, Raymond McGovern – a 27-year CIA veteran, who chaired National Intelligence Estimates and personally delivered intelligence briefings to Presidents Ronald Reagan and George H.W. Bush, their Vice Presidents, Secretaries of State, the Joint Chiefs of Staff, and many other senior government officials –  provides details about one torture victim (Al-Libi) at former Newsweek and AP reporter Robert Parry's website:

But if it’s bad intelligence you’re after, torture works like a charm. If, for example, you wish to “prove,” post 9/11, that “evil dictator” Saddam Hussein was in league with al-Qaeda and might arm the terrorists with WMD, bring on the torturers.


It is a highly cynical and extremely sad story, but many Bush administration policymakers wanted to invade Iraq before 9/11 and thus were determined to connect Saddam Hussein to those attacks. The PR push began in September 2002 – or as Bush’s chief of staff Andrew Card put it, “From a marketing point of view, you don’t introduce new products in August.”


By March 2003 – after months of relentless “marketing” – almost 70 percent of Americans had been persuaded that Saddam Hussein was involved in some way with the attacks of 9/11.


The case of Ibn al-Sheikh al-Libi, a low-level al-Qaeda operative, is illustrative of how this process worked. Born in Libya in 1963, al-Libi ran an al-Qaeda training camp in Afghanistan from 1995 to 2000. He was detained in Pakistan on Nov. 11, 2001, and then sent to a U.S. detention facility in Kandahar, Afghanistan. He was deemed a prize catch, since it was thought he would know of any Iraqi training of al-Qaeda.


The CIA successfully fought off the FBI for first rights to interrogate al-Libi. FBI’s Dan Coleman, who “lost” al-Libi to the CIA (at whose orders, I wonder?), said, “Administration officials were always pushing us to come up with links” between Iraq and al-Qaeda.


CIA interrogators elicited some “cooperation” from al-Libi through a combination of rough treatment and threats that he would be turned over to Egyptian intelligence with even greater experience in the torture business.


By June 2002, al-Libi had told the CIA that Iraq had “provided” unspecified chemical and biological weapons training for two al-Qaeda operatives, an allegation that soon found its way into other U.S. intelligence reports. Al-Libi’s treatment improved as he expanded on his tales about collaboration between al-Qaeda and Iraq, adding that three al-Qaeda operatives had gone to Iraq “to learn about nuclear weapons.”


Al-Libi’s claim was well received at the White House even though the Defense Intelligence Agency was suspicious.


“He lacks specific details” about the supposed training, the DIA observed. “It is possible he does not know any further details; it is more likely this individual is intentionally misleading the debriefers. Ibn al-Shaykh has been undergoing debriefs for several weeks and may be describing scenarios to the debriefers that he knows will retain their interest.”


Meanwhile, at the Guantanamo Bay prison in Cuba, Maj. Paul Burney, a psychiatrist sent there in summer 2002, told the Senate, “A large part of the time we were focused on trying to establish a link between al-Qaeda and Iraq and we were not successful. The more frustrated people got in not being able to establish that link … there was more and more pressure to resort to measures that might produce more immediate results.”




President Bush relied on al-Libi’s false Iraq allegation for a major speech in Cincinnati on Oct. 7, 2002, just a few days before Congress voted on the Iraq War resolution. Bush declared, “We’ve learned that Iraq has trained al-Qaeda members in bomb making and poisons and deadly gases.”


And Colin Powell relied on it for his famous speech to the United Nations on Feb. 5, 2003, declaring: “I can trace the story of a senior terrorist operative telling how Iraq provided training in these [chemical and biological] weapons to al-Qaeda. Fortunately, this operative is now detained, and he has told his story.”


Al-Libi’s “evidence” helped Powell as he sought support for what he ended up calling a “sinister nexus” between Iraq and al-Qaeda, in the general effort to justify invading Iraq.


For a while, al-Libi was practically the poster boy for the success of the Cheney/Bush torture regime; that is, until he publicly recanted and explained that he only told his interrogators what he thought would stop the torture.


You see, despite his cooperation, al-Libi was still shipped to Egypt where he underwent more abuse, according to a declassified CIA cable from early 2004 when al-Libi recanted his earlier statements. The cable reported that al-Libi said Egyptian interrogators wanted information about al-Qaeda’s connections with Iraq, a subject “about which [al-Libi] said he knew nothing and had difficulty even coming up with a story.”


According to the CIA cable, al-Libi said his interrogators did not like his responses and “placed him in a small box” for about 17 hours. After he was let out of the box, al-Libi was given a last chance to “tell the truth.” When his answers still did not satisfy, al-Libi says he “was knocked over with an arm thrust across his chest and fell on his back” and then was “punched for 15 minutes.”


After Al-Libi recanted, the CIA recalled all intelligence reports based on his statements, a fact recorded in a footnote to the report issued by the 9/11 Commission. By then, however, the Bush administration had gotten its way regarding the invasion of Iraq and the disastrous U.S. occupation was well underway.




Intensive investigations into these allegations – after the U.S. military had conquered Iraq – failed to turn up any credible evidence to corroborate these allegations. What we do know is that Saddam Hussein and Osama bin Laden were bitter enemies, with al-Qaeda considering the secular Hussein an apostate to Islam.


Al-Libi, who ended up in prison in Libya, reportedly committed suicide shortly after he was discovered there by a human rights organization. Thus, the world never got to hear his own account of the torture that he experienced and the story that he presented and then recanted.


Hafed al-Ghwell, a Libyan-American and a prominent critic of Muammar Gaddafi’s regime at the time of al-Libi’s death, explained to Newsweek, “This idea of committing suicide in your prison cell is an old story in Libya.”

Paul Krugman [whatever you think of his economics, he got this one right] eloquently summarized the truth about the torture used:

Let’s say this slowly: the Bush administration wanted to use 9/11 as a pretext to invade Iraq, even though Iraq had nothing to do with 9/11. So it tortured people to make them confess to the nonexistent link.

There’s a word for this: it’s evil.

Torture Program Was Part of a Con Job

As discussed above, in order to “justify” the Iraq war, top Bush administration officials pushed and insisted that interrogators use special torture methods aimed at extracting false confessions to attempt to create a false linkage between between Al Qaida and Iraq. And see this and this.

But this effort started earlier …

5 hours after the 9/11 attacks, Donald Rumsfeld said “my interest is to hit Saddam”.

He also said “Go massive . . . Sweep it all up. Things related and not.”

And at 2:40 p.m. on September 11th, in a memorandum of discussions between top administration officials, several lines below the statement “judge whether good enough [to] hit S.H. [that is, Saddam Hussein] at same time”, is the statement “Hard to get a good case.” In other words, top officials knew that there wasn’t a good case that Hussein was behind 9/11, but they wanted to use the 9/11 attacks as an excuse to justify war with Iraq anyway.

Moreover, “Ten days after the September 11, 2001, terrorist attacks on the World Trade Center and the Pentagon, President Bush was told in a highly classified briefing that the U.S. intelligence community had no evidence linking the Iraqi regime of Saddam Hussein to the [9/11] attacks and that there was scant credible evidence that Iraq had any significant collaborative ties with Al Qaeda”.

And a Defense Intelligence Terrorism Summary issued in February 2002 by the United States Defense Intelligence Agency cast significant doubt on the possibility of a Saddam Hussein-al-Qaeda conspiracy.

And yet Bush, Cheney and other top administration officials claimed repeatedly for years that Saddam was behind 9/11. See this analysis. Indeed, Bush administration officials apparently swore in a lawsuit that Saddam was behind 9/11.

Moreover, President Bush’s March 18, 2003 letter to Congress authorizing the use of force against Iraq, includes the following paragraph:

(2) acting pursuant to the Constitution and Public Law 107-243 is consistent with the United States and other countries continuing to take the necessary actions against international terrorists and terrorist organizations, including those nations, organizations, or persons who planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001.

Therefore, the Bush administration expressly justified the Iraq war to Congress by representing that Iraq planned, authorized, committed, or aided the 9/11 attacks.

Indeed, Pulitzer prize-winning journalist Ron Suskind reports that the White House ordered the CIA to forge and backdate a document falsely linking Iraq with Muslim terrorists and 9/11 … and that the CIA complied with those instructions and in fact created the forgery, which was then used to justify war against Iraq. And see this.

Suskind also revealed that “Bush administration had information from a top Iraqi intelligence official ‘that there were no weapons of mass destruction in Iraq – intelligence they received in plenty of time to stop an invasion.’ ”

Cheney made the false linkage between Iraq and 9/11 on many occasions.

For example, according to Raw Story, Cheney was still alleging a connection between Iraq and the alleged lead 9/11 hijacker in September 2003 – a year after it had been widely debunked. When NBC’s Tim Russert asked him about a poll showing that 69% of Americans believed Saddam Hussein had been involved in 9/11, Cheney replied:

It’s not surprising that people make that connection.

And even after the 9/11 Commission debunked any connection, Cheney said that the evidence is “overwhelming” that al Qaeda had a relationship with Saddam Hussein’s regime , that Cheney “probably” had information unavailable to the Commission, and that the media was not ‘doing their homework’ in reporting such ties.

Again, the Bush administration expressly justified the Iraq war by representing that Iraq planned, authorized, committed, or aided the 9/11 attacks. See this, this, this.

Even then-CIA director George Tenet said that the White House wanted to invade Iraq long before 9/11, and inserted “crap” in its justifications for invading Iraq.

Former Treasury Secretary Paul O’Neill – who sat on the National Security Council – also says that Bush planned the Iraq war before 9/11.

Top British officials say that the U.S. discussed Iraq regime change even before Bush took office.

And in 2000, Cheney said a Bush administration might “have to take military action to forcibly remove Saddam from power.” And see this.

The administration’s false claims about Saddam and 9/11 helped convince a large portion of the American public to support the invasion of Iraq. While the focus now may be on false WMD claims, it is important to remember that, at the time, the alleged link between Iraq and 9/11 was at least as important in many people’s mind as a reason to invade Iraq.

So the torture program was really all about “justifying” the ultimate war crime:  launching an unnecessary war of aggression based upon false pretenses.

Postscript:   It is beyond any real dispute that torture does not work to produce any useful, truthful intelligence.  Today, the following question made it to the front page of Reddit:

Why would the CIA torture if torture “doesn’t work”? Wouldn’t they want the most effective tool to gather intelligence?

The Senate Armed Services Committee report gave the answer.

US Oil Rig Count Tumbles Most In 2 Years

We warned just a week ago that the lag between initial price declines in oil and the closure of rigs was between 4 and 6 months and just as we warned of the deja-vu all over again, Banker Hughes reports that the Rig Count this week dropped the most since March 2013 (oil rigs dropped 29 to 1546 - biggest weekly drop in 2 years). The biggest drop was seen in the Permian Basin (down 20 to 548). Of course, it's being ignored for now, just as it was in 2008...


Worst weekly drop in rig count since March 2013...


With Oil Rigs down 3rd most in 5 years...


And as a reminder, what happened last time...


Unequivocally good...


Charts: Bloomberg

Austria Considers Repatriating Its Gold

And just like that, the list of countries who want to repatriate their gold just increased by one more, because after Venezuela, Germany, the Netherlands, sorry Switzerland, and rumors of Belgium, we now can add Austria to those nations for whom the "6000 year old barbarous relic bubble" is more than just "tradition."

From Bloomberg:

Austrian Central Bank Mulls Relocating London Gold: Standard


The Austrian state audit court says central bank should address concentration risk of storing 80% of its gold reserves with the Bank of England, Standard reports, citing draft audit report. Court advises central bank to diversify storage locations, contract partners.


Austrian central bank reviewing gold storage concept, doesn’t rule out relocating some of its gold from London to Austria: Standard cites unidentified central  ank officials. Austria has 280 tons gold reserves, according to 2013 annual report. Austrian Audit Court Will Review Nation’s Gold Reserves in U.K.

And from (google translated):

The gold reserves of the Oesterreichische Nationalbank (OeNB) and their deposits in the UK and in Switzerland are a recurring theme in political discussions. Especially like the Freedom require relocation to Austria, the example of the Deutsche Bundesbank in mind, who want to move their gold by 2020 half of them to Germany.


In Austria, the Court has adopted in its recent OeNB examination of the issue of gold. In its draft report he gives the OeNB diverse recommendations on the way. One of the key points: Given the "high concentration risk in the Bank of England" advise the examiner to "rapid evaluation of all possibilities of a better dispersion of the storage locations". Not only the parties to be diversified, but it should also come to the "actual spread of the storage locations".


Gold relocation possible


In the central bank can not hold, such a transfer excluded. The existing gold bearing concept would be reviewed, at best you'll bring parts of the stored gold in the UK to Austria, OeNB experts explain the standard. Any changes will be decided according to security and economic criteria, according to the OeNB.


A brief orientation in gold Milieu: Austria has 280 tons of gold, only a small part of them (17 percent) are kept in Vienna. 80 percent of the reserves are located in London, the main trading for gold, three percent in Switzerland. For comparison, the German Bundesbank has 3400 tons of gold; about half of them superimposed (as of 2013) in the United States. With the decision by the end of 2012, to resettle half of the gold to Germany, gave the Bundesbank political pressure.


Examiners want Strategy


Because you do not think in the OeNB; the central bank decide "autonomously", as emphasized. But there was indeed a discussion of the gold storage, you will receive and evaluate the recommendations of the Court. But whose final report is not yet available, the OeNB has transmitted to the auditors on 28 November their comments on the draft report.


The examiners also recommend an analysis of the costs of the bearings and a "comprehensive strategy for the management of gold reserves" to. The OeNB said: "opportunities to develop a long-term approach bearings will be evaluated." The criticism of the auditor, the OeNB have the gold that is not stored in the National Bank itself, not regular "physically checked" 2009-2013 or not, has the OeNB in ??its opinion violently back.


In October 2011, had central bankers, as mentioned in the report body, held in three deposits in Switzerland and one in London "Einschau". 2012 were examined in the coin Austria gold holdings. Keyword Einschau: This should not be so easy. Anyway criticize the auditor that access opportunities are not agreed with all bearings contract.


Violent criticizes the Court of Auditors on the audit of the gold holdings abroad: Since lacked a concept of what constitutes a gap in the internal control system. The OeNB denies it, which was founded in 2013 department of "values ??Revision" fulfills that function already.

What, no rigged referendum? Or maybe this is the next logical step from the only country in Europe to push for the now-cancelled Russian "South Stream" pipeline.

So, who's next? Because if you act now, you may still be able to recover some of the physical gold "located" in the gold vault located at the bottom of Libert 33 (which just happens to share a tunnel with the JPM gold vault located just across the street).

As for what this ever more aggressive scramble by official monetary authorities to repatirate their gold means, we hardly need to comment what that means for the future of "non-6000 year old, non-traditional" fiat currencies.

What Would Happen "If It Was A Free Market" - Deutsche Bank Explains

As usual, some shockers of truth and Koolaidlessness from Deutsche Bank's Jim Reid whose Credit Outlook 2015: Plate Spinning is a must read.

Views (about 2015) On A Page

  • If it was a free market and central banks were not allowed to intervene anymore then we would be very bearish as the global financial system is still extremely fragile and not sustainable. Clearly this won't happen but illustrates our default position ex-intervention.
  • Central banks do exist and at a global level will buy more assets in 2015 than they did in 2014. 2015 will be the 9th year of highly unconventional central bank policy and although we're no nearer to finding a sustainable solution, the same policy prescription will be used as better alternatives are currently unrealistic or unpalatable.
  • The ECB will likely start broad based asset purchases in Q1 (probably March) including corporate and government bonds. This will help European credit withstand some risks in the early months, not least from possible pivotal Greece elections. There will also likely be an early year drag from US credit due to the effects of the falling oil price on the US energy sector and fears of a hawkish Fed.
  • By H2 we expect the Fed to be more dovish as still soft global growth and low inflation makes it harder for them to pull the trigger on rate rises. So credit (especially US) may have a better H2 than H1.
  • In a world of strong bond technicals and stretched Government valuations, we don't think credit spreads are too tight. Across EUR, USD and GBP no rating band is within its lowest spread quartile relative to history. We're a long way off the all time tights across the board and this cycle may end nearer these tights if Central banks remain highly accommodative.
  • Within Europe we think 2014's sell-off in HY, especially single-Bs, makes it attractive against IG as technicals from the likely ECB buying spread to more 'yieldy' assets. Our excess return forecast for European HY is around 5% in 2015 while for EUR and GBP IG, excess return expectations range from 1.4%-4.9% across non-fins and fins with GBP outperforming EUR.
  • Our US credit strategists expect the US HY default rate to rise to 3.5% in 2015 from September's cycle lows of 1.7%. This is led by the energy sector. For Europe all of our forward indicators currently point to a 1.5-2% default rate over the course of the year - still incredibly low. The risk is if US energy defaults start to lead to a wider mini credit crunch in global HY.
  • We think EUR credit will outperform in the first part of the year, however as the macro develops valuations may move to a point where we will prefer USD over EUR credit later in the year.
  • Overall Q1 could be a battle between the ECB and the usual positive seasonals on one hand and the Fed, US energy and Greece on the other. We think the former will win out but there could be points where spreads are wider first. The days of blanket US QE and low volatility are over. Expect some challenging conditions en route to tighter spreads by the end of H1 and indeed YE 2015.

We Have Just Escaped The Earth's Gravity And Are Now In Space Orbit

Houston, we have a serious problem... With only 20% of US Shale regions remaining economic at these oil price levels, it should not be surprising that the credit risk of the US
Energy sector is exploding to near 1000bps
... and contagiously infecting
the broad HY market...

Credit risk in the energy sector is starting to infect the broad HY market - HYG at 2-year yield highs and HYCDX near 15-month wides...


Which signals considerable pain to come for US Energy stocks..

*  *  *

The denial is so loud it's deafening


Charts: Bloomberg

WTI Crashes To $57 Handle; 80% Of Shale Production Non-Economic

WTI Crude just burst below $58 and is now over 46% below the peak in June. Since the initial leaks of no production cuts at OPEC, WTI is down 25% (gold and silver are up 2-4%). At these levels only 4 of the US 18 Shale Oil regions remain economic...




Down 25% from the initial OPEC leaks...


Which leaves only 20% of US Shale regions economic...


*  *  *

Unequivocally good!!


Charts: Bloomberg

Don't Show The S&P This Chart

Look away...



Bonds must be wrong, right?

Bonds are manipulated by the Fed and are not real...

It's stocks that are the ultimate arbiters of truthiness, right!!

Money on the sidelines...