Higher Interest Rates May Force Higher Inflation Rates

Summary:
1) Financial analysis of the three way relationship between interest rates, inflation and the U. S. national debt.
2) Higher interest rates causing higher interest payments on the $20 trillion national debt would ordinarily cause soaring deficits over time.
3) Detailed analysis of the “loophole”, which is that if inflation even moderately increases – then interest rates can rise without exploding the real debt.
4) This simultaneous increase in interest rates and inflation would have a major impact on all markets, as well as long term retirement planning.
5) The logical response to rising interest rates may be to sharpen one’s focus on how to better deal with higher rates of inflation over the long term.
Because of the $20 trillion size of the total U. S. national debt, the Federal Reserve acting to increase interest rates would ordinarily create severe financial problems for the government over time, due to sharply rising interest payments on the debt. There is, however, a loophole for the federal government.

This post was published at GoldSeek on September 14th, 2017.

CalPERS Slashes Pension Payments To Retirees In Two More California Towns By Up To 90%

While we’ve yet to experience any large municipal pension failures, which is just a matter of ‘when’ rather than ‘if’, the small pension failures sprinkled across the state of California are starting to pile up. As The Sacremento Bee points out today, public workers in Trinity and Imperial counties are just the latest to have their pensions slashed by up to 90% as their cities admit what most of us have known for some time, namely that they’re running ponzi schemes which simply don’t have the funding required to payout the benefits they’ve promised.
Trinity County Waterworks District No. 1 west of Redding and Niland Sanitary District from Imperial County are in line to become the third and fourth government agencies to break with CalPERS over the past 12 months in a manner that shortchanges their retirees. The CalPERS Board of Administration is scheduled next week to vote on ending contracts with the two small districts because they’re in default.
In Trinity, five current and former employees will see their promised pensions slashed by 70 percent. Niland’s five beneficiaries will see a 92 percent to 100 percent cut in pension benefits, according to CalPERS’ staff reports.

This post was published at Zero Hedge on Sep 14, 2017.

The 30 Metros in the US with the Highest and Lowest Incomes

Breath-taking differences in a vast country.
The Census Bureau released another data trove today for 2016, based on the American Community Survey. Among many other data points, the survey details median household incomes by geographic location, such as by metro area, county, or state. And they show just how enormous the income differences in the US are from city to city.
Of the 382 metropolitan statistical areas (MSA) that the US government recognizes, the median income of $110,000 in Silicon Valley is over three times the median income of $35,600 in Laredo, TX.
These MSAs can be large. For example, the extended San Francisco Bay Area is divided in several metros including the two biggest:
San Jose-Sunnyvale-Santa Clara, which is the southern portion of Silicon Valley and includes Palo Alto. San Francisco-Oakland-Hayward, which includes five counties (San Francisco, Alameda, Marin, Contra Costa, and San Mateo) that make up the northern part of Silicon Valley, San Francisco, parts of the East Bay, and a part of the North Bay. These two are also the metros that had the highest median household incomes in the US in 2016, of $110,040 and $96,677 respectively.
‘Household income’ is income by all household members and from all sources of money, including ‘earnings’ (wages, salaries, and the like) and investment income such as interest, dividends, and rents (#11-#13):

This post was published at Wolf Street by Wolf Richter ‘ Sep 14, 2017.

“Unprecedented” Saudi Crackdown Targets Regime Loyalists As King Prepares To Abdicate

Are we seeing early signs of an “Arab Spring” coming to Saudi Arabia, or will the next king emerge stronger than ever? The kingdom is now in the midst of an unprecedented crackdown of both dissidents and even loyalists perceived as less than enthusiastic about Crown Prince Mohammed bin Salman’s consolidation of power as he prepares to ascend the throne of his aging and increasingly senile father. It was only last June that King Salman shocked the world by suddenly and unexpectedly removing next in line for the crown Muhammad bin Nayef, which made Mohammed bin Salman heir apparent to the throne.
In a rare front page story airing sharp criticism of the kingdom, The Wall Street Journal assessed the scope of the crackdown today:
In the past week, Saudi authorities have detained more than 30 people, roughly half of them clerics, according to activists and people close to those who have been detained. The campaign goes beyond many of the government’s past clampdowns, both in the scope of those targeted and the intense monitoring of social media posts by prominent figures. It is not known if any charges have been filed.

This post was published at Zero Hedge on Sep 14, 2017.

Stocks and Precious Metals Charts – Stock Options Expiration Tomorrow

“Greater love has no man than this, that he lays down his life for his friends. You are my friends, if you do what I ask of you. No longer do I call you servants, for the servant does not understand what his master is doing. But I have called you friends… This I command you, that you love one another.
If the world despises you, you know that it has despised Me before you. If you were of the world, the worldly would love you as one of their own. But you are not of the world, because I have chosen you out of it. And so the world does not value you.”
John 15:13-19
Tomorrow is a stock options expiration.

This post was published at Jesses Crossroads Cafe on 14 SEPTEMBER 2017.

“Markets Are Wrong”: Hugh Hendry Shuts Down His Hedge Fund; Here Is His Farewell Letter

In the beginning, Hugh Hendry was the consummate contrarian bear, which helped him make a killing a decade ago when everyone else was blowing up. Unfortunately for him, he did not realize just how far the central planners were willing to take their monetary experiment, so after the market troughed in 2009, he kept his bearish perspective, which cost him dearly in terms of missed gains and lost capital under management, until one day in November 2013, he capitulated and turned bullish, infamously saying “I cannot look at myself in the mirror; everything I have believed in I have had to reject. This environment only makes sense through the prism of trends.”
Since then, the reborn Hendry who would never again fight central banks, gingerly made his way, earning his single digit P&L…
…. even as many of his formerly loyal LPs deserted the former bear. It culminate with July and August, when Hendry posted some of his worst monthly returns on record which ultimately sealed his fate, and as he writes in a letter sent to investors today, Hendry decided to shut down his Eclectica hedge funds after 15 years, following a 9.8% YTD loss and massive redemptions, which left the fund which as recently as a few years ago managed billions with just $30.6 million as of August 31. As he best puts it “It wasn’t supposed to be like this.”
The final P&L:

This post was published at Zero Hedge on Sep 14, 2017.

The CPI Comes Home

There seems to be an intense if at times acrimonious debate raging inside the Federal Reserve right now. The differences go down to its very core philosophies. Just over a week ago, Vice Chairman Stanley Fischer abruptly resigned from the Board of Governors even though many believed he was a possible candidate to replace Chairman Yellen at the end of her term next year. His letter of resignation only cited ‘personal reasons.’
It may be that was the real reason, for Fischer was no spring chicken. But even in public there is a noticeable and growing rift on the topic of inflation. For some policymakers, there is every reason to suspect the Fed has it all wrong. Others figure that something may be off, but that it won’t be off forever.
The latter category includes influential members like current FRBNY President Bill Dudley. The former head of the Open Market Desk, the Fed’s monetary frontier, is holding fast to ‘transitory.’
We just don’t know at this point whether the inflation decline that we’ve seen is mostly being driven by transient, idiosyncratic factors, or whether it’s something more secular, longer-term at play. My view is the jury’s out, and I think the data over the next six months is going to be very, very important.

This post was published at Wall Street Examiner on September 14, 2017.

SEPT 14/CHINA TO STOP ALL BITCOIN EXCHANGES (GOOD FOR GOLD/SILVER)/REUTERS CONFIRMS THAT NORTH KOREA SET TO LAUNCH AN ICBM: BOTH NEWS PROPEL GOLD/ GOLD RISES $1.15 BUT SILVER DOWN 2 CENTS/CHINA M…

GOLD: $1325.65 UP $1.15
Silver: $17.77 DOWN 2 CENT(S)
Closing access prices:
Gold $1329.95
silver: $17.80
SHANGHAI GOLD FIX: FIRST FIX 10 15 PM EST (2:15 SHANGHAI LOCAL TIME)
SECOND FIX: 2:15 AM EST (6:15 SHANGHAI LOCAL TIME)
SHANGHAI FIRST GOLD FIX: $1328.81 DOLLARS PER OZ
NY PRICE OF GOLD AT EXACT SAME TIME: $1321.40
PREMIUM FIRST FIX: $7.41
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
SECOND SHANGHAI GOLD FIX: $1323.20
NY GOLD PRICE AT THE EXACT SAME TIME: $1321.30
Premium of Shanghai 2nd fix/NY:$4.82
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
LONDON FIRST GOLD FIX: 5:30 am est $1323.20
NY PRICING AT THE EXACT SAME TIME: $1322.85
LONDON SECOND GOLD FIX 10 AM: $1324.55
NY PRICING AT THE EXACT SAME TIME. 1325.25
For comex gold:
SEPTEMBER/
NOTICES FILINGS TODAY FOR SEPT CONTRACT MONTH: 0 NOTICE(S) FOR nil OZ.
TOTAL NOTICES SO FAR: 54 FOR 5400 OZ (0.1679 TONNES)
For silver:
SEPTEMBER
355 NOTICES FILED TODAY FOR
1,775,000 OZ/
Total number of notices filed so far this month: 5,253 for 26,265,000 oz

This post was published at Harvey Organ Blog on September 14, 2017.

China Will Own More U.S. Debt Thanks to the Weakening Dollar

President Donald Trump likes a weak dollar.
‘I like a dollar that’s not too strong,’ Trump said on Aug. 1. ‘I’ve seen strong dollars. And frankly, other than the fact that it sounds good, lots of bad things happen with a strong dollar.’
A weak dollar helps stimulate manufacturing, limits imports, and maximizes exports, among other economic boons.
But China likes it, too.
That’s because the dollar’s nosedive this year has created the perfect conditions for China to gobble up U. S. debt.
The Red Dragon has increased its holdings of U. S. Treasury securities by over 9% since November, while the U. S. Dollar Index (DXY), which measures the value of the dollar against a basket of six major currencies, has fallen 9% over the same period.
And now that Trump has agreed to extend the U. S. debt limit to Dec. 15, Chinastands poised to increase its holdings even further.

This post was published at Wall Street Examiner on September 14, 2017.

Leaked White House Memo Reveals McMaster’s Plan To Crackdown On White House Leaks

In perhaps the most ironic story of the week (so far), a leaked White House memo to Buzzfeed News reveals that National security advisor H. R. McMaster urged senior government officials to warn agency employees against leaks of both classified and unclassified information.
‘For those with access to classified information, a review of the non-disclosure agreement reminds us of the responsibilities that come with access to, and penalties for unauthorized disclosure of, classified information,’ the memo, which BuzzFeed obtained and posted, reads.

This post was published at Zero Hedge on Sep 14, 2017.

One Bank Calculates The Odds Of A Market Correction In The Next 3 Months

Yesterday was a historic day for the S&P 500: not only did the index close at a new record high, but it was also 269% higher than its “generational lows” of March 2009, surpassing the 266% increase during the 1949 to 1956 bull market, according to Bloomberg calculations.
And while there is no reason to doubt that central bankers – who no longer have anything to lose from blowing the biggest, hopefully last bubble in history – can push this artificial “market” to unprecedented levels, even taking out the top spot of the 1990-2000 market run which saw the S&P rise by over 400%, others are less sanguine, and in recent weeks calls for an imminent correction have become a chorus. After all, it has now been years since there was even a modest drop in the S&P500, resulting in an generation of traders who are unfamiliar with using the sell button (for those asking, one definition of correction vs a crash is that the former follow rich valuations, but only crashes are associated with recessions).

This post was published at Zero Hedge on Sep 14, 2017.

Gold, Yen Spike (Again) After Another North Korea Missile Launch Prep Headline

Gold and Yen spiked this morning (right before CPI) on the back of Nikkei headlines about preparation being observed for another North Korean missile launch (following overnight news that US officials had confirmed). Now Reuters reports that defense officials have confirmed to Fox News that North Korea is prepping for a new missile launch and gold and yen are bid once again.

This post was published at Zero Hedge on Sep 14, 2017.

Three Reasons Why Retail Sales Are About To Disappoint Bigly

On Friday the Department of Commerce will report August retail sales, a material report which all else equal, may influence whether the Fed proceeds with its plans to unveil balance sheet tapering in its upcoming FOMC meeting. However, as we discussed last week, the report, together with virtually all other high frequency economic reports, will be materially distorted by the destructive aftermath of hurricane Harvey (Irma’s impact will be felt in the September retail report).
While Goldman recently showed the historical impact of hurricanes and other natural disasters on virtually every economic data series…
… of particular interest in the coming days will be the biggest driver behind the US economy, namely retail spending, and specifically whether the recent natural disasters led to a sharp – and potentially sustained – slump. According to internal Bank of America credit and debit card spending data released as usual just days ahead of the official government report, there does appears to be a substantial adverse impact. The question is how much of this is secular, and how much is a continuation of recent weakness in retail spending. Further complicating matters is a seasonal quirk, with the August spending report coming at the peak “back to school” spending period, coupled with the recent Amazon Prime Day which led to further distortions in retail spending patterns.

This post was published at Zero Hedge on Sep 14, 2017.

Euros, Dollars and Central Bank Manipulations

Peter Schiff has been talking a lot about the weakening dollar. In a recent Schiff Report video, Peter said he sees the ‘mother of all dollar bear markets’ on the horizon. The dollar has already dropped about 12% on the year, and it’s on track for its worst year since 1985. That was the beginning of a decade long bear market for the dollar. Peter says he thinks this one will be worse.
I think this one is going to be the mother of all dollar bear markets, and I think the dollar is going to fall much further than it did in any prior bear market.’
The following article by economist Dr. Daniel Lacalle, published at the Mises Institute FedWatch, provides some further insights into monetary policy by looking at the strength of the euro in relation to the dollar. His analysis sheds light on the relationship between strong and weak currencies, and the cost and benefits of each.
The primary purposes of the incorrectly named ‘unconventional monetary policies’ are to debase the currency, stoke inflation, and make exports more competitive. Printing money aims to solve structural imbalances by making currencies weaker.

This post was published at Schiffgold on SEPTEMBER 14, 2017.

“Dr.Copper”‘s Contango Crushes Economic Hype

We warned two weeks ago that China’s “Bronze Swan” was looming as the crackdown on leverage in the system by Chinese authorities may be forcing unwinds of the CCFDs – thus putting upward pressure on Copper futures (unwinding short positions) and selling physical copper (which would mean procuring the physical metal before passing it on). Those effects were exactly what we had been seeing in the market until the end of August.
And now, it appears, as StockBoardAsset.com notes, exhaustion has started to set in across industry metals…
Barclays has also called the copper rally overhyped, while Bank of America Merrill Lynch said it’s the metal most at risk of a reversal, with the optimism of investors in financial futures disconnected from slow conditions in the physical market.
‘When you look at the state of the refined copper market, you certainly question why prices have risen so significantly,’ Snowdon said by phone from London.

This post was published at Zero Hedge on Sep 14, 2017.

So Exactly Which Households Got the Spoils?

Not very many. Or why consumer spending has been dragging for years.
One more thing about the new Census Bureau’s Income and Poverty report for 2016, which found to the great excitement in the media that median household income, adjusted for inflation (via CPI), rose 3.2% in 2016 to $59,039 – finally a tad above where it had been 17 years ago.
We already found buried in it that inflation-adjusted earnings from wages, salaries, etc. for full-time employed men have fallen 4.4% since 1973.
So now, we’ll look at another data set buried in the Census Bureau’s report, which is based on respondents at 98,000 addresses across the US. We want to know which households were the lucky ones – and turns out, there weren’t very many.
‘Earnings’ in this report are the fruits of labor – so wages, salaries, and the like. ‘Household income’ includes not only ‘earnings’ but also money from other sources during the year. These are the sources of ‘household income’ in the report:

This post was published at Wolf Street on Sep 14, 2017.

Former JPMorgan Quant On Evading Chinese Capital Controls Via Bitcoin

Mainland Chinese buyers have become a dominant force in real estate markets across the world. The Chinese government crackdown on outflows earlier this year severely throttled that money.
While this money has been throttled, it’s still appearing in certain markets, most notably the United States.
We wanted to know how exactly this is still happens, so we connected with Dr. Joseph Wang – a Bitcoin and Chinese capital outflow expert.
Hong Kong-based Dr. Joseph Wang is an OG of monitoring China’s capital flows and Bitcoin. He currently serves as Chief Science Officer at BitQuant, a fintech that specializes in technologies for the upcoming China yuan renminbi equities option market, as well as options and futures for digital currencies. He previously served as Vice President of Quantitative Research for JP Morgan, the sixth largest bank in the world – whose CEO is now an outspoken critic of the cryptocurrency. He’s got a ton of street cred, but even more important – he monitors China’s capital outflows to seek business opportunities.

This post was published at Zero Hedge on Sep 14, 2017.