Seeking Truth in a World of Propaganda. Links do not necessarily indicate agreement with stories or perspectives.
“Those who are able to see beyond the shadows and lies of their culture will never be understood, let alone believed, by the masses.” - Plato
(CD) — Just hours after civil rights groups called on Facebook’s top executives to step down from the company’s board for allowing “viral propaganda” and “bigoted campaigns” to spread on the platform, demands for CEO Mark Zuckerberg to resign intensified after a bombshell New York Times report late Tuesday detailed a “special arrangement” the social media behemoth had with tech corporations that gave […]Authored by Nomi Prions via The Daily Reckoning,
This week I’ve been in Washington, D.C. for high level meetings focused on the economy. While meeting with senior officials and members of the House and Senate, it became clear that a troubling phenomenon is building.
In the wake of recent stock market volatility and uncertainty surrounding monetary policy, it seems that political figures are starting to grow concerned.
There is growing consensus that the makings of a financial crisis of some sort is building — and could drop sooner rather than later. While there is speculation over whether it will be as big as the last one, and whether it will come in waves, the belief is that something is wrong.
With those fears, I turned to the Federal Reserve itself. While meeting at the Fed, I was given the impression that bank regulators have been routinely chastised by Wall Street bankers. What I learned is that some of the biggest playmakers in finance don’t want to disclose the true nature of their positions and money-making schemes. This confirmed my own experiences as an former investment banker.
In addition, it became clearer that Fed Chairman, Jay Powell, and Vice Chairman, Randal Quarles, will be closely studying real economic and bank data when rendering decisions about the path of interest rates. Many have speculated about such dealings, and whether they will be swayed by President Trump’s pressure.
The truth is that the leaders at the Fed have a firmer understanding of what’s really going on in the economy than they allude to publicly. Even though the Fed has been able to avoid another financial crisis the last decade, with quantitative easing (QE) policy — or what I call dark money — their “toolkit” might not render us “safe enough.” They need to grapple with this reality.
Jerome Powell, left, and Randal Quarles. AP Photo/Cliff Owen.
You see, the Fed manufacturers dark money that the markets have come to rely on. Through quantitative easing (QE) the central bank has accumulated a balance sheet that hit a high of $4.5 trillion of assets last year.
By having purchased these assets with electronically created money, the Fed was able to keep rates at the middle and longer end of the yield curve low, while they specifically set low rates for the short end of the yield curve, too.
Just to remind you, the yield curve is the difference between short- and long-term interest rates. Long-term rates are normally higher than short-term rates. When the two converge, it often means markets are anticipating low growth ahead. When the yield curve inverts, when long-term rates fall below short-term rates, it’s almost always a sign of looming recession, historically speaking.
Currently the Fed’s book of assets has been reduced by only a bit — to about $4.1 trillion — but it’s still historically large.
If the Fed continues to sell those assets (which consist of treasury and mortgage bonds) there is a risk that their value will drop too much, too quickly. If bond values drop, then rates will rise in the middle and longer end of the yield curve. This would make it more expensive for most companies to repay, or extend, their corporate debts.
The Fed knows it is currently in a catch-22. That’s why over the last two weeks, it has barely sold any of its assets as volatility in the markets picked up.
Here’s something else you might not know: Two weeks ago, it even quietly increased its book of assets. That’s the opposite of the policy of unwinding, or selling its assets through quantitative tightening (QT), which is what Chairman Powell promised he would be doing.
That’s another sign that the Fed is afraid of a possible new financial crisis. For more proof, consider that former Fed Chair, Janet Yellen, just did a 180 on her prior comments related to the possibility of another crisis. Last June, she said that she didn’t think there would be another financial crisis in her lifetime, attributing this to banking reforms made since the 2008 financial crisis.
Now, everything has changed. Last week, she told the New York Times that, “Corporate indebtedness is now quite high and I think it’s a danger that if there’s something else that causes a downturn, that high levels of corporate leverage could prolong the downturn and lead to lots of bankruptcies in the non-financial corporate sector.”
She noted that CLOs could be a real problem, as I’ve been warning for months. CLOs, or collateralized loan obligations, are a Wall Street product stuffed with corporate loans. If that sounds familiar to you, there’s a reason. Wall Street is doing exactly what they did with mortgage loans before the 2008 financial crisis, but with corporate ones.
Her timing was not random. Just because she’s no longer running the Fed doesn’t mean she has no contact with its new leader, who was her number two. The people and connections within central banks and Wall Street are always in play.
The danger in her analysis is that she’s largely mistaken that “current holders of corporate debt do not appear to be levered to excess, mitigating risk of any credit ripple effects.” The data bears this out.
Companies are holding $9.1 trillion of debt now in contrast to the $4.9 trillion in 2007 before the last financial crisis. The financial system, and those who take money from banks, are more highly levered than they were prior to the last financial crisis.
In its inaugural Financial Stability Report, the Fed stressed lurking dangers in corporate debt. Although the Fed also used the opportunity to pat itself on the back for how well capitalized banks were, just as Janet Yellen did, the trouble was still highlighted.
The Fed noted that corporate debt relative to GDP is at record highs, and that credit standards have gotten worse again. The amount of junk bonds and leveraged loans or “risky debt” has risen by 5% in the third quarter of 2018 to over $2 trillion in size.
The central bank pointed to a number of other risks facing the markets. Those include the outcome of Brexit, Italy’s finances and a slowing European economy which could lead to more dollar appreciation. If the dollar were to continue to rise in value, it would make it harder for foreign companies that took out dollar-denominated debt to repay it.
The Fed also used the report to warn that trade wars, geopolitical tensions and slowdowns in China and other emerging market economies could negatively impact the U.S. economy and markets.
All of these factors could not only impact the markets, as we’ve seen over the past several weeks, but also begin to creep in on how companies are able to repay their debts.
Today is the big Fed meeting. I don’t believe the Fed will raise rates this time, which would give markets a boost heading into the new year. If they do, the announcement will be accompanied with much more dovish language and guidance for 2019. Regardless, the problems aren’t going away and neither is volatility.
Authored by Raul Ilargi Meijer via The Automatic Earth blog,
It took me a while to decide which word(s) best define the past year and the next one, but I think this is pretty much it. 2018 was chaotic more than anything else, and that chaos will give rise to mayhem in 2019.
What I think is striking is that this is true across the board, in all walks of life so to speak. In finance, in politics, in energy markets, in ecological matters, and perhaps most of all in the ways all these topics are being covered by what once were trusted media.
I’m going to have to come back to all these topics separately, so it’s promising to be a very busy holiday season, but it’s also good to try and put them together in one place, if only to show how interconnected everything is. And how futile it is to look at the economy without seeing its connection to energy flows and ecosystems. And vice versa.
In finance and economics, we’ve seen an avalanche of falling numbers recently, in stock prices, bond prices, housing, across the globe, and obviously that evokes a lot of comments in the financial press. But that press, and bankers investors on their own, still talk about markets.
However, as I wrote in April 2018, if there is no price discovery, and there isn’t, there ARE NO markets, and it would be good and beneficial if many more people absorb that simple reality. Many more so-called traders and investors would be a start, but by no means enough. Lots more people who have nothing to do with the ‘markets’ should understand why there is no such thing anymore.
As long as you limit it to stock and bond markets, it may appear fine that people don’t understand. But as soon as you acknowledge there are no housing markets either for the exact same reasons, the story changes considerably. Because then it becomes clear that all -former- markets, bar none, have been eviscerated by central bank policies that sought to prop up banks, often highly successfully so, which they knew could only happen at the expense of communities and societies.
We’ve ended up with scores of mom and pop ‘investors’ who own hugely overpriced stocks and homes, while their pensions funds hold zillions ‘worth’ of bonds and also increasingly stocks. The link between pensions and AAA-rate assets was pulverized in the process. That looks set to continue, and worsen, in 2019. But that may be just the look of things. Because there really are no markets, there is no price discovery.
What is still there is a lot of talk about whether the Fed -and other central banks- will raise rates further or not, or will stop or continue their asset buying schemes. Central banks are the only game in town, there are no markets, nobody knows what anything is really worth because the Fed etc. took the discovery process beyond their reach.
And now all those financial ‘subjects’ are sitting on all this stuff that only appears to have value, and that value hinges exclusively on what Draghi, Kuroda, Yellen and now Jay Powell have decided things are worth. And yes, it does make matters appear okay, but because they can’t do QE forever, all of those values will need to be re-assessed by actual markets once Powell et al. are either thrown out or decide for themselves to leave the arena.
It won’t be pretty, it will be devastating. It’s impossible to say if it will come to a head in 2019, because the Fed can lower rates a bit again after its recent rate hikes and prop up the zombie for longer. Then again Draghi can’t do that anymore since he’s already in negative rate territory, and while the euro could fall to parity with the USD as a consequence, there’s a limit to that too.
Anyway, more on that later.
Energy and ecology seem to become more intertwined as we go along, though that may well be a trompe oeil, trick of the eye. Still, if you see and read what people have to say about things like the big COP24 event in Katowice last week, it’s obvious that the 2nd law of Thermodynamics is a hard one to internalize. Because that law seems to say that the use of energy, period, produces waste, while all these mostly well-meaning folk are merely focusing on shifting between energy sources.
There is surprisingly little attention for not using energy in the first place, which the 2nd Law appears to stipulate is the only way to stop the rot. And it’s entirely feasible to build homes that use 70-80% less power to heat and cool, or to design a transport system in a city that saves that much energy.
But the ‘leaders’, politicians and business people, prefer to address solar panels and wind turbines that allow for the amount of energy used to fall only moderately, which when combined with the economic growth that nobody questions, will lead to the use of ever more energy.
And I get that, you need to shrink your present economies, and the models they’re based on, in order to save the planet. I’m not so much talking about climate change, since the earth is a system so complex we should really be very cautious about deriving any conclusions about it from simplified models, but the species extinction reported in 2018 is another, and more immediately convincing, story.
Still, conferences like COP24, or its predecessor COP21 which I wrote about 3 years ago in CON21, are not just entirely useless, they move everything backward that all the worried boys and girls are so worried about.
The movers and shakers of the world all owe their positions to the economies, and therefore the levels of energy use, that the worried people now want to move away from. And then they turn to the same movers and shakers to make that happen. Sorry, no can do. All you’ll get is lip service from people looking for money and power, who are not interested in being proved wrong if they are.
Today’s climate discussion is a road to nowhere where down the line there’ll be nobody left to talk to and no birds singing. You yourself probably won’t be there either. There is not one politician who will volunteer to give up their power if that could save the world their children will have to live in. They’ll come up with a story where their position is save and so is that world, and they’re more than likely to believe it.
As for the media, the tale gets darker fast. It didn’t start in 2018, but it did become a lot more outspoken. As I’ve said before, there are three targets for the former trusted sources of impartial news, even as those sources rapidly become more partial as we move forward. And that of course has to do with their new business model I wrote about a lot: writing negative stories about Donald Trump became an obvious source of revenue well before he was president.
Once he was elected, the media doubled down. They wrote against Trump at first thinking he would be beaten in the GOP primaries, then some more when he faced Hillary, then because they didn’t like him in the White House, and finally because he turned out to be the business proposition that quite literally kept them alive. What was it, over 100,000 new subscribers for the NYT a MONTH at a certain point?! Would CNN and Rachel Maddow even exist anymore without the Donald?
But that also means that the MSM cannot report anything positive about the man, with the exception of a bombing campaign in a faraway sandbox, and that is pretty crazy. No matter where you stand politically, not even Trump can do everything wrong, but CNN, MSNBC, WaPo,NYT et al can’t say it out loud, because their new readers and viewers want negative stories.
I’m not at all a Trump fan, I find it insane that America can’t find a single person among its 320 million inhabitants who could better represent it, but I also saw well over two years ago that the reporting on Trump was so biased someone had to restore at least some balance. And if that was to be me, so be it.
It’s like the entire US -and UK- press has become the National Enquirer, where the questions of truth or accuracy have become, and/or always was, a complete afterthought, irrelevant to whatever is actually published. And the readers and viewers caught inside the echo chamber will never know any better than that that is what the world really looks like.
It’s the ‘old’ media’s response to the threat of social media, a fight they cannot possibly win in the end, but not one they will relinquish easily; it will be the end of them. So there’s Trump, and then there’s Russia and Julian Assange. And there’s a live shooting practice going on in which all three are fair game.
According to two reports published just yesterday in the NY Times and the BBC, African Americans and French Yellow Vests were targeted by Russian bots, trolls, give them a name. What these once trusted media no longer understand, or don’t care about, is that they are effectively saying that African Americans and Yellow Vests are all so stupid and so unconvinced and unconvincing in their political convictions that a bunch of poorly defined Russians made them throw their votes away from Hillary Clinton and towards Trump.
Like African Americans have no opinions and therefore in the end no functioning brains. Like their f*king robots, some inferior lifeform. Is there anything you can say that is more racist than that? I come up empty. And I understand Kanye.
And that the ‘Russians’ caused tens of thousands of Frenchmen and -women to put on a yellow vest and protest Macron’s dismantling of -very- long-standing labor rights and taxation ‘reforms’ that benefit the rich French elite. You cannot insult two such vast yet diverse groups of people, who seem to have little if anything in common, African Americans and Yellow Vests, you cannot insult them more or worse than such reports do.
And they simply don’t see it. In their view, and which they -rightly by now- trust their public will eat up like hot cakes, their 24/7 anti-Trump and anti-Russia campaigns have been so convincing that they can basically say anything at all by now. If Trump or the Russians deny, that’s just what they would do if they were guilty. Assange can’t deny anything at all, they’ve totally silenced him. They being the US deep state in liaison with the MSM.
That’s how we’re about to enter 2019, how we’re about to move from chaos to mayhem. It is scary not just because of what we see happening today, but even more because we’ve never seen anything remotely like it. Sure, US media, any country’s media, have always supported government strategic lies in times of warfare or other tensions.
But an overall campaign against a sitting president, comprised of dozens of articles a day consisting of mere allegations and rumors, let alone the same against a state nuclear power arguably mightier than the US itself, and a journalist who’s the only one in his profession who’s actually done what journalists should do, not the well-paid follow the party line thing going on at the MSM, all this is unprecedented.
And given what we’ve seen in 2018 in the realm of banned social media accounts, in a wider sense of the word, we can only wonder how much worse the censorship can get in the mayhem year of 2019.
Can the Automatic Earth, and for instance our friends at Zero Hedge, only continue to exist next year if we agree to increasingly become the poodles of the ruling political classes, intelligence services, and their press masters and lackeys?
It’s starting to look that way. So in closing, I want to call on you to support us by donating a Christmas gift, and preferably a recurring one all through the 2019 mayhem year, so we know we can continue to present you with an alternative to the ‘appropriate’ information you’re ‘supposed’ to be receiving.
It’s later than you think.
Authored by Thomas Malinen via GNSEconomics.com,
The world economy has never faced a more perilous situation. While many have just started to debate whether a recession will start in 2019 or 2020, very few perceive the ’black hole’ the global economy is about to get sucked into...
The hole has two main “gravitational forces”: the wide-spread mispricing of risk and stagnating productivity growth. Central bank meddling with their bond buying programs (QE) have seriously distorted prices in the capital markets, which means that risk has also been mispriced in vast magnitude. The implications and repercussions of the six-year period of stagnating global productivity growth has also not been understood. These intertwined developments will lead the world economy into a serious economic downfall, a Global Depression.
We devoted most of the March issue of our Q-review to explain how the asset purchase (QE) programs of the central banks have created an environment which encourages risk-taking, leverage and yield-hunting. At the heart of it is the suppression of yields on assets considered safe, most crucially government bonds, which have been the primary target of their QE-programs. QE created a stupendous, multi-year pulse of artificial central bank liquidity forced into the financial system. As the major central banks kept on pumping it eventually ended up increasing the price of almost every single asset class in the world with the possible exception of precious metals.
While leverage can be usually measured with some suitable metric (like debt-to-income or -equity), evaluating financial risk requires a reference point that is considered riskless. This creates a perplexing problem, because the QE -programs of the central banks have created a situation where we do not have any un-manipulated reference points telling us what the “riskless” rate of return actually is. So, there’s currently no way of telling the difference between assets that can be deemed safe and those which cannot, and thus no way to measure the risk of a financial asset with any reasonable certainty. True risk will be revealed only after the artificial central bank-induced liquidity recedes and the asset bubble bursts. When this happens, we are likely to see the balance sheets of numerous banks, corporations, governments and households deteriorating into insolvency. Alas, central banks have effectively created Black Swans, unknown and unanticipated large-scale events, that threaten to upend financial markets.
The massive market-meddling has left the global economy as both less dynamic (innovative) and more fragile. Bailouts of ailing banks and firms combined with extraordinarily loose monetary policy created an extended period of stagnated total factor productivity (TFP) growth, a “Great Stagnation”.
Figure. Regional and global growth rates of total factor productivity (TFP) in percentage points. Source: GnS Economics, Conference Board
The stagnation in productivity growth demonstrates that companies have not been able to increase the effectiveness of their production (productivity), the great and primary driver of durable improvements in standards of living. Thus it shows, effectively, the ‘zombification’ of the global economy.
When interest rates rise and the availability of credit diminishes, the “zombies”, that is, companies with over-levered balance sheets unable to cover interest costs, will begin failing. The bankruptcy of the global conglomerate of Steinhoff last year and the ailing finances of US corporate giant General Electric are the first signs of this. The fate of GE and Steinhoff will be shared by many when the crisis gets into gear. It is, for example, estimated that over 14% of companies in the S&P 1500 are zombies.
This diminution in the rate of productivity growth also shows that the world economy has not been able to grow organically, but has depended on continuous stimulus (which has made the problem worse). When this stimulus is withdrawn, the economy will collapse.
Currently, the global economy faces threats from three fronts.
The China slowdown threatens to remove critical support for the global export and import sectors, which will especially affect the Eurozone. Eventually, the slowdown in China will turn into a ‘hard landing’ (see Q-review 2/2017).
Retreating artificial global central bank liquidity threatens to bring down the global asset and credit markets (see Q-review 1/2018).
Rising interest rates and tightening monetary conditions threaten to bring down the global zombified corporate sector (see, e.g., Q-review 3/2017).
These will hit all sides of the global economy reversing growth of global trade, financial flows and income. There’s absolutely no other end to this than a global depression.
Washington Only Investigates Fake Crimes Created By Fake News
Christopher Steele of the “Steele Dossier,” the backbone of the presstitutes’ multi-year fake news “Russiagate” story, says in court that he was hired by a Democratic law firm working for Hillary Clinton.
It is impossible that Mueller did not know from the beginning that the entire story was a political fabrication.
The real question is: were Mueller, Comey, Brennan, Clapper, and Rosenstein themselves inherent parts of the attempted frameup of President Donald Trump? How could it be otherwise as these are the instigators of the Mueller “investigation”?
How long is Trump going to let these corrupt officials who possibly have committed a variety of felonies, and the corrupt presstitutes—especially CNN and the New York Times—who served them, go uninvestigated?
It is completely obvious how utterly corrupt Washington is when fake crimes are investigated but real ones are not.
http://www.informationclearinghouse.info/50788.htm
The post Washington Only Investigates Fake Crimes Created By Fake News appeared first on PaulCraigRoberts.org.
FAKE SCIENCE: How a Dubious Forensic Science Spread Like a Virus. “From his basement in upstate New York, Herbert MacDonell launched modern bloodstain-pattern analysis, persuading judge after judge of its reliability. Then he trained hundreds of others.”
Its path — the steady case-by-case, decision-by-decision acceptance of a new forensic science by the justice system — is one that’s rarely, if ever, been retraced. But it reveals the startling vulnerability of judges, and juries, to forensics techniques, both before, and after, they’ve been debunked.
Although the reliability of blood-spatter analysis was never proven or quantified, its steady admission by courts rarely wavered, even as the technique, along with other forensic sciences, began facing increasing scrutiny.
In 2009, a watershed report commissioned by the National Academy of Sciences cast doubt on the whole discipline, finding that “the uncertainties associated with bloodstain pattern analysis are enormous,” and that experts’ opinions were generally “more subjective than scientific.”
Still, judges continued allowing spatter experts to testify.
Subsequent research, funded by the Department of Justice, raised questions about experts’ methods and conclusions. But little changed.
All along, attorneys like Bankston continued challenging the admission of bloodstain-pattern analysts. But they came to learn that a forensic discipline, once unleashed in the system, cannot easily be recalled.
What a mess.