Category Archives: Economy

A Major Shift From West To East Is Occurring As The Dollar Dies. Are You Prepared?

Americans need to shake off their FUD (fear, uncertainty and doubt) and start taking real steps to protect their wealth before the $USD is no longer the world’s dominant reserve currency. This involves converting USD denominated paper assets into physical Gold, Silver and a little Cryptocurrency to preserve your purchasing power … before the multi-polar world of tomorrow arrives.  

A big part of life on the other side of this event will involve dealing with wide spread shortages (including food) that accompany the high cost of imported goods that follow a credit and currency collapse, until America’s domestic manufacturing base can be brought back up. Think decades, not months or years to fully recover. This means you should be accumulating resources necessary to more easily stretch through this period while they are relatively cheap and plentiful in today’s dollars. Otherwise, you might find yourself living like the 99% are in Venezuela today.  

Enjoy the show …

 

The Elites Are Privately Warning About a Crash

Many everyday citizens assume powerful global financial elites operate behind closed doors in secret conclaves, like the scene of a Spectre board meeting in the recent James Bond film.

Actually, the opposite is true. Most of what the power elite does is hidden in plain sight in speeches, seminars, webcasts and technical papers. These are readily available from institutional websites and media channels.

It’s true that private meetings occur on the sidelines of Davos, the IMF annual meeting and G-20 summits of the kind just concluded. But the results of even those secret meetings are typically announced or leaked or can be reasonably inferred based on subsequent policy coordination.

What the elites rely on is not secrecy but lack of proficiency by the media.

The elites communicate in an intentionally boring style with lots of technical jargon and publish in channels non-experts have never heard of and are unlikely to find. In effect, the elites are communicating with each other in their own language and hoping that no one else notices.

Still, there are some exceptions. Mohamed A. El-Erian is a bona fide member of the global power elite (a former deputy director of the IMF and president of the Harvard Management Co.). Yet he writes in a fairly accessible style on the popular Bloomberg website. When El-Erian talks, we should all listen.

In a recent article he raises serious doubts about the sustainability of the bull market in stocks because of reduced liquidity resulting from simultaneous policy tightening by the Fed, European Central Bank (ECB) and the Bank of England.

He says stocks rose on a sea of liquidity and they may crash when that liquidity is removed. This is a warning to other elites, but it’s also a warning to you.

But it’s not just El-Erian who’s sounding the alarm…

You’ve heard the expression “the big money.” This is a reference to the largest and most plugged-in investors on Earth. Some are mega-rich individuals and some are large banks and institutional investors with a dense network of contacts and inside information.

At the top of the food chain when it comes to big money are the sovereign wealth funds. These are funds sponsored by mostly wealthy nations to invest a country’s reserves from trade or natural resources in stocks, bonds, private equity and hedge funds.

As a result, sovereign wealth fund managers have the best information networks of any investors. The chief investment officer of a sovereign wealth fund can pick up the phone and speak to the CEO of any major corporation, private equity fund or hedge fund in the world.

Among sovereign wealth funds, the Government of Singapore Investment Corp. (GIC) is one of the largest, with over $354 billion in assets. So what does the head of GIC say about markets today?

Lim Chow Kiat, CEO of GIC, warns that “valuations are stretched, policy uncertainty is high” and investors are being too complacent.

GIC allocates 40% of its assets to cash or highly liquid bonds and only 27% of its assets to developed economy equities.

Meanwhile, the typical American small retail investor probably has 60% or more of her 401(k) in developed economy equities, mostly U.S.

But it may be time for everyday investors to listen to the big money. They are the ones who see financial crashes coming first.

The bottom line is, a financial crisis is certainly coming. In my latest book “The Road to Ruin,” I use 2018 as a target date primarily because the two prior systemic crises, 1998 and 2008, were 10 years apart. I extended the timeline 10 years into the future from the 2008 crisis to maintain the 10-year tempo, and this is how I arrived at 2018.

Yet I make the point in the book that the exact date is unimportant. What is most important is that the crisis is coming and the time to prepare is now. It could happen in 2018, 2019, or it could happen tomorrow. The conditions for collapse are all in place.

It’s simply a matter of the right catalyst and array of factors in the critical state. Likely triggers could include a major bank failure, a failure to deliver physical gold, a war, a natural disaster, a cyber–financial attack and many other events.

The trigger itself does not really matter. The exact timing does not matter. What matters is that the crisis is inevitable and coming sooner rather than later in my view. That’s why investors need to prepare ahead of time.

The new crisis will be of unprecedented scale. This is because the system itself is of unprecedented scale and interconnectedness. Capital markets and economies are complex systems. Collapse in complex systems is an exponential function of systemic scale.

In complex dynamic systems that reach the critical state, the most catastrophic event that can occur is an exponential function of scale.

This means that if you double the system, you do not double the risk; you increase it by a factor of five or 10.

Since we have vastly increased the scale of the financial system since 2008, with larger banks, greater concentration of banking assets in fewer institutions, larger derivatives positions, and over $70 trillion of new debt, we should expect the next crisis to be much worse than the last.

For these reasons the next crisis will be of unprecedented scale and damage.

The only clean balance sheet and source of liquidity left in the world will be the International Monetary Fund, which can make an emergency issuance of Special Drawing Rights, which you can think of as world money.

Countries around the world are acquiring gold at an accelerated rate in order to diversify their reserve positions. This trend, combined with the huge reserves held by the U.S., Eurozone and the IMF amount to a shadow gold standard.

On the level of the individual investor, losers will fall into two groups when the next crisis strikes…

The first are those who hold wealth in digital form, such as stocks, bonds, money-market funds and bank accounts. This type of wealth is the easiest to freeze in a panic. You will not be able to access this wealth, except perhaps in very small amounts for gas and groceries, in the next panic. The solution is to have hard assets outside the digital system such as gold, silver, fine art, land and private equity where you rely on written contracts and not digital records.

The second group are those who rely on fixed-income returns such as life insurance, annuities, retirement accounts, social security and bank interest. These income streams are likely to lose value, since governments will have to resort to inflation to deal with the overwhelming mountain of debt collapsing upon them.

The solution to this is to allocate 10% of your investable assets to physical gold or silver. That will be your insurance when the time comes.

Meanwhile, demand for secure vaulting space in major financial centers like London and Frankfurt is soaring. There are plenty of bank safe deposit boxes in those cities, but investors are insisting on non-bank vaults because investors understand that the banks cannot be trusted in a panic. As a result, proprietors of non-bank vaults can’t build them fast enough.

This is one indicator that reveals three important facts. The first is that investors feel a panic may be near and the time to act is now. The second is that investors don’t trust banks. And the third is that investors are buying gold to protect themselves since that’s the main tangible that people put in their private vaults. Don’t wait until the panic hits to secure your gold and make arrangements for safe storage.

The time to act is now.

Source: Daily Reckoning

This Might Have Been The Biggest Theft In History

 

… and how the biggest heist ever (central banking) might be facing the beginning of the end.

The following is a highly educational discussion with Bill Holter and Lynette Zang about Janet Yellen, monetary policy, principles of finance, a declining dollar, the future of pensions, precious metal hedges, and TONS of charts and data!

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The Broken States of the Union

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At the end of the day, a broken state is a broken you.

For the first time in US history a handful of US states is teetering on the edge of bankruptcy. Illinois is about to be downgraded to junk bond status, which will turn its financial problems catastrophic overnight. Illinois cannot possibly pay its accumulated debt, its unpaid medicaid expenses and its future retirement obligations, so bankruptcy almost certainly will be its only way out.

Main, Connecticut, Kentucky and California are also caught in chronic budget deadlocks that may lead to bankruptcy as a solution for dodging their entitlement obligations. Bear in mind they’re called “entitlements” because it’s money promised to you that you already put in the work to earn. It’s your retirement. Illinois, for example, has over $200 billion in pension obligations that will never be paid … or that can only be paid at a greatly diminished level worked out in some form of effective bankruptcy.

That’s a problem that is only solved by turning it into a worse problem for others. Illinois will end its problems by making certain that for the next quarter century, a good portion of the now retiring baby-boom population is dirt poor and must be carried by the younger population as dead wait (if not exterminated) because the retirement they planned in order to responsibly carry themselves through their final years isn’t there.

Instead of the state not being able to pay its bills, bankruptcy means that hundreds of thousands of retirees won’t be paying theirs, which means the people they owe money to will be going broke, and so the problem trickles down. State bankruptcy merely shifts the burden so that legislators don’t have to deal with it but you do. And it’s inevitable because the alternative is that you pay for it through much higher taxes. The state is you.

The Federal government won’t be solving the state budget problems either because it plans on dumping heavier medicaid expenses back on all states as it repeals Obamacare to help solve its own budget problems amid its own deadlock. Like the states, its own Social Security funds are going broke, so it faces its own massive entitlement problems. And, if it bails out one failing state, it will be expected to bail out all others that face such problems.

With Illinois effectively reaching bankruptcy and a likely catastrophic credit downgrade this summer, the problem finally starts coming to a head where everyone is forced to see how decades of government debt accumulation end, and that end looks something like this in real terms:

Illinois, as the bellwether example, has already stopped paying the contractors who fix roads and other infrastructure. That means the contractors will now stop fixing the roads and won’t be paying their employees, and broken roads don’t get corn and beef to market. Illinois has stopped paying doctors. That means the doctors will stop fixing people. Illinois has refused to pay its lottery winners (even though it took the money from all the suckered ticket buyers). That means there will no more lottery to raise state money because there will be no more ticket buyers. That means the state’s budget problems just got worse, so Illinois soon won’t be paying state employees or pensioners.

It sucks when your entire state goes broke. You see, you can keep kidding yourself — as our entire nation has for the decades that I’ve been complaining about this — that you’re going to take care of everyone on welfare with endless debt spending or that you’re going to maintain huge military power to control the world with debt spending; but eventually you pile up state or federal debts so high that you wind up not paying anyone, including the welfare recipients or the soldiers in your military.

Like the US government, the State of Illinois has been operating without a real budget for more than two years, operating dysfunctionally during that time by court-ordered stop-gap measures because the legislature is deadlocked as politicians refuse to accept reality; so, Illinois has now reached the same financial status as Puerto Rico.

Illinois is grappling with a full-fledged financial crisis and not even the lottery is safe – with Republican Gov. Bruce Rauner warning the state is entering “banana republic” territory…. Reports have suggested the state could be the first to attempt to declare Chapter 9 bankruptcy — but under the law, that’s impossible unless Congress gets involved….. “Illinois is the fiscal model of what not to do,” Rep. Peter Roskam, R-Ill., told Fox News, while not commenting on the bankruptcy question. “This avoidance in behavior toward dealing with our challenges is what leads to the devastating impacts we are seeing today.” (Fox News)

And, for Illinois, the problem is that they cannot kick the can down the road any further because the next credit downgrade will make it impossible for them afford their current debt, which is really already impossible. Creditors will become much fewer and more expensive when Illinois becomes the first state of the union to hit junk-bond status and maybe the first to declare bankruptcy since the Great Depression, when Arkansas found itself “plain flat broke” and became the only state to ever default on its bonds (showing it can happen), effectively declaring its own bankruptcy, even if not sorted out through the federal courts. (Eventually, years later, Arkansas paid their bond holders.) Already, the Illinois ten-year bond yields are at 5.2%; but the world becomes exponentially worse when you hit junk-bond status and entire large institutions become outlawed from financing you.

“We have a very real deadline looming,” Senate Republican Leader Christine Radogno told Fox News. “The alternative to not finding a compromise will be devastating to Illinois.”

With or without bankruptcy, the state is already badly defaulting on its obligations. Bankruptcy is just a more orderly way of deciding who is not going to get paid and by how much. But the not getting paid part? Already here, and nearly a dozen states are falling into this kind of severe condition. The issue with state bankruptcy is that bankruptcy court is federal, putting state budgetary sovereignty under state’s rights under federal determination; but it can be done:

David Skeel, a law professor at the University of Pennsylvania … wrote outright that, “The constitutionality of bankruptcy-for-states is beyond serious dispute.” The key, as he sees it, is that bankruptcy would be entirely voluntary, which should eliminate any concerns about Federal intrusion on state sovereignty. (Zero Hedge)

And it has been done … long ago … and is now here again.

Economic denial is about to square up to economic reality, and reality always wins! Eventually, economic reality forces your hand in a catastrophic solution because of your profligate ways. Eventually, you end up as a truly cashless society. This summer, we get to watch that play out in Illinois to get a sense of what it will look like elsewhere.

At the end of the day, a broken state is a broken you.

The motto of the State of Illinois, Land of Lincoln, who held this great national union together, is “”State Sovereignty, National Union.”

Illinois is all of us.

By David Haggith | The Great Recession

Albertson’s Reveal Supermarket Meltdown as Global Deep-Discounters Promise Price Wars in US Markets

Aldi’s $5 billion bet at a brutal time.

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Aldi Market on Biscayne Boulevard In Miami Florida.

Today, Albertson’s explained in an amended S-4 filing for a debt exchange offering just how tough things have gotten for traditional supermarket chains.

As is so often the case, there is a private equity angle to it. Albertson’s was acquired in a 2005 LBO by a group of PE firms led by Cerberus. In January 2015, it acquired Safeway to eliminate some competition. It then wanted to sell its shares to the public. But in October 2015, as brick-and-mortar retail began to melt down, it scrapped its IPO.

The filing’s most revealing data are same-store sales on a quarterly basis through Q4, 2016, comparing year-over-year sales growth at stores that have been open in the current and prior year. I added the red line to show the trend since Q3 2015:

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The S-4 supplied some reasons for the decline:

Our identical store sales decrease in fiscal 2016 was driven by a decrease of 1.9% in customer traffic partially offset by an increase of 1.5% in average ticket size. During fiscal 2016 our identical store sales were negatively impacted by food price deflation in certain categories, including meat, eggs and dairy, together with pressure to maintain competitive pricing in response.

The two key factors boil down to competition, precisely what the Safeway acquisition was supposed to have eliminated:

  • A “1.9% decline in customer traffic.”
  • “Pressure to maintain competitive pricing in response.”

In other words, starting in Q1 2016, competition pushed previously strong same-store sales growth off the cliff.

Given a series of acquisitions by Albertson’s over the years, total sales rose. The following are sales for the 12-month periods:

  • Through Feb. 2015: $27.2 billion
  • Through Feb. 2016: $58.7 billion (includes Safeway)
  • Through Feb. 2017:  $59.7 billion (includes 29 Haggen Stores and 76 A&P stores)

At the end of 2013, the company had 1,075 stores. It then acquired, divested, opened, and closed numerous stores. By the end of 2015, it had 2,271 stores. And by the end of 2016, it had 2,324 stores.

So in 2016, the net store count increased 2.3% but revenues inched up only 1.7%. Hence the decline in same store sales.

During those three 12-month periods respectively, the company had losses before income taxes of: $1.38 billion, $541 million, and $463.6 billion.

And it had total debt of a breath-taking $12.3 billion as of February 25, 2017, up from $3.7 billion in 2013 before the acquisition of Safeway and the other chains.

It’s not going to get better anytime soon.

On Sunday, Aldi announced it would invest $3.4 billion to expand its base in the US to 2,500 stores by 2022. The privately held discount-grocery chain headquartered in Germany already has over 1,600 stores in the US. It also owns Trader Joe’s, which has an additional 464 grocery stores. In February, Aldi had announced that it would add 400 stores by the end of 2018 and spend $1.6 billion to “remodel and expand” 1,300 of its stores by 2020.

This would bring its newly announced investment in the US to $5 billion. The expansion will make Aldi the third-largest grocery chain operator in the US behind Wal-Mart and Kroger, the company said. And it’s going to compete on price.

“As we continue to expand and grow, our purchasing power continues to increase and allows us to bring products at better prices for consumers,” Scott Patton, Aldi’s head of corporate buying, told Reuters.

Another German grocery store chain, deep-discounter Lidl with 10,000 stores in 27 European countries has plans to open as many as 600 stores in the US, it revealed in May. Its first store will open on June 15. It expects to have 100 stores along the East Coast a year from now. It said it would undercut competitors by up to 50%.

This threat by arch-competitor Lidl stimulated Aldi’s thinking; CEO Jason Hart Hart said in a statement that Aldi’s prices also would be about 50% below those of traditional grocery stores.

Aldi has always focused on in-house brands to obtain the deepest price cuts. The company’s shares aren’t publicly traded, and quarterly earnings reports don’t cause any kind of ruckus.

Kroger, the largest supermarket chain in the US, booked a sales increase of 5% in 2016, but its net income fell 4.5%, and its shares, after a series of earnings disappointments, are down over 25% from the end of 2015, even as the rest of the stock market was booming.

Then there’s Wal-Mart Stores, the second largest grocery seller in the US. It’s experimenting with lower prices in 11 states and is hounding its vendors to undercut their competitors by 15%. According to analysts cited by Reuters, it’s willing to spend $6 billion on these efforts.

Target too has been plowing more aggressively into the grocery market. Online grocery sales are taking sales away from brick-and-mortar locations. Amazon is now more than just dabbling in it. Everybody wants into this $630-billion-a-year market.

Alas, over the past six years, sales at grocery stores are up a total of 14%, not adjusted for inflation, according to the retail trade report by the Commerce Department. Over the same period, the Consumer Price Index for food rose 14%, according to the Bureau of Labor Statistics. So in inflation-adjusted terms, over the past six years, “real” sales have been flat.

The price war will be a godsend for consumers, at least for a while. But what gives?

Shares of Whole Foods Market have fallen 42% since late 2013 as it grapples with the new environment. And there have been 18 bankruptcies among US grocery store chains since 2014, according to Reuters, including Marsh Supermarkets and Central Grocers in May and Fairway Group Holdings, parent of the “iconic” New York chain Fairway Market, a year ago.

This is the environment that over-indebted Albertson’s and its private-equity backers hadn’t planned on finding themselves in. Beyond PE firm Cerberus, the backers include real-estate investors Klaff Realty and Lubert-Adler, REIT Kimco Realty, and shopping center owner Schottenstein Stores.

To unload the company in an IPO on the unsuspecting public and conniving institutional investors managing the unsuspecting public’s money, the backers must have a buoyant and blind stock market because for equity investors, this must be one of the most toxic combinations: a brick-and-mortar supermarket chain in the age of online sales that was bought by a PE firm, loaded up with debt as it became a supermarket roll-up, in a stagnant market that is attracting the biggest deep-discounters from around the world.

By Wolf Richter | Wolf Street

Do Not Invest In Cryptos: Here’s why

Cryptocurrency has arrived like an armada of cockroaches that the bankers cannot control. The bankers can not touch them; they can not take them away from the rest of us. Why do you think Fedcoin is going to be a possible alternative? Because they can’t remove cryptos so they are going to join in and try to contaminate the good ones like Bitcoin. But that is not going to work. As soon as you get a gold backed cryptocurrency, start the countdown, it’s game over.

Bitcoin in particular is serving something as a proxy for currency in a very constructive manner. Once one of these turn into a gold backed crypto, the entire game changes. If Russia and China backed their currencies with gold, do you think that would have an effect on the USD? Hell yea. So when a gold backed crypto is launched or eight of them, one from every continent, do you think that is going to have an effect on the shabby cryptos? Yea, but it will be worse than that. This would have an effect on all paper and FOREX currencies because we are not in the infancy stage of cryptocurrency anymore. We’re in the adolescent stage and it becomes adult hour when gold backing is introduced. That’s when it will be game over for the criminal banksters.

Times have become very dangerous right now for the US dollar’s primary role among the currencies because all the wars have terminally compromised it’s integrity. The dollar isn’t supported by international oil and gas trade so much anymore as it is supported by aggressive military action with war crimes on a global scale and the people are sick of it. This is a very tenuous  situation for a global reserve currency.

Is Bitcoin Standing In For Gold?

https://s15-us2.ixquick.com/cgi-bin/serveimage?url=http%3A%2F%2Ft1.gstatic.com%2Fimages%3Fq%3Dtbn%3AANd9GcRMCd_GXEMKjkXEHr4gy73dZHkGe6R_iRHCqa2N-eAOmfl4129Gfg&sp=44a211d30ef62402d875b5e9aafa3f9e&anticache=277451Via Paul Craig Roberts and Dave Kranzler,

In a series of articles, we have proven to our satisfaction that the prices of gold and silver are manipulated by the bullion banks acting as agents for the Federal Reserve.

The bullion prices are manipulated down in order to protect the value of the US dollar from the extraordinary increase in supply resulting from the Federal Reserve’s quantitative easing (QE) and low interest rate policies.

The Federal Reserve is able to protect the dollar’s exchange value vis-a-via the other reserve currencies—yen, euro, and UK pound—by having those central banks also create money in profusion with QE policies of their own.

The impact of fiat money creation on bullion, however, must be controlled by price suppression. It is possible to suppress the prices of gold and silver, because bullion prices are established not in physical markets but in futures markets in which short-selling does not have to be covered and in which contracts are settled in cash, not in bullion.

Since gold and silver shorts can be naked, future contracts in gold and silver can be printed in profusion, just as the Federal Reserve prints fiat currency in profusion, and dumped into the futures market. In other words, as the bullion futures market is a paper market, it is possible to create enormous quantities of paper gold that can suddenly be dumped in order to drive down prices. Everytime gold starts to move up, enormous quantities of future contracts are suddenly dumped, and the gold price is driven down. The same for silver.

Rigging the bullion price prevents gold and silver from transmitting to the currency market the devaluation of the dollar that the Federal Reserve’s money creation is causing. It is the ability to rig the bullion price that protects the dollar’s value from being destroyed by the Federal Reserve’s printing press.

Recently, the price of a Bitcoin has skyrocketed, rising in a few weeks from $1,000 to $2,200. Two explanations suggest themselves.

One is that the Federal Reserve has decided to rid itself of a competing currency and is driving up the price with purchases while accumulating a large position, which then will be suddenly dumped in order to crash the market and scare away potential users from Bitcoins. Remember, the Fed can create all the money it wishes and, thereby, doesn’t have to worry about losses.

Another explanation is that people concerned about the fiat currencies but frustrated in their attempts to take refuge in bullion have recognized that the supply of Bitcoin is fixed and Bitcoin futures must be covered. It is strictly impossible for any central bank to increase the supply of Bitcoins. Thus Bitcoin is standing in for the suppressed function of gold and silver.

The problem with cryptocurrencies is that whereas Bitcoin cannot increase in supply, other cryptocurrencies can be created. In order to be trusted, each cryptocurrency would have to have a limited supply. However, an endless number of cryptocurrencies could be created that would greatly increase the supply of cryptocurrencies. If entrepreneurs don’t bring about this result, the Federal Reserve itself could organize it.

Therefore, cryptocurrency might be only a temporary refuge from fiat money creation. This would leave gold and silver, whose supply can only gradually be increased via mining, as the only refuge from wealth-destroying fiat money creation.

For as long as the Federal Reserve can protect the dollar by bullion price suppression and money creation by other reserve currency central banks, and as long as the Federal Reserve can keep the influx of new dollars out of the general economy, the Federal Reserve’s policy adds to the wealth of those who are already rich. This is because instead of driving up consumer prices, thus threatening the US dollar’s exchange value with a rising rate of inflation, the Fed’s largess has flowed into the prices of financial assets, such as stocks and bonds. Bond prices are high, because the Fed forced up the price by purchasing bonds. Stock prices are high, because the abundance of money bid prices higher than profits justify. As the US government measures inflation in ways designed to understate it, the consumer price index and producer price index do not send alarm systems into the markets.

Thus, we have a situation in which the Fed’s policy has done nothing for the American population, but has driven up the values of the financial portofilios of the rich. This is the explanation why the rich are becoming more rich while the rest of America becomes poorer.

The Fed has rigged the system for the rich, and the whores in the financial media and among the neoliberal economists have covered it up.