Weekend Reading: Tax Cut Wish List

Authored by Lance Roberts via RealInvestmentAdvice.com,
On Wednesday, the President announced his plan to cut taxes for Americans, return jobs to America and return the country to economic prosperity.
It’s a tall order to fill, and the proposed tax reform is a ‘Christmas Wish List’ that will have to checked twice to determine which parts are ‘naughty’ and ‘nice.’
As I pointed out yesterday, ‘The belief that tax cuts will eventually become revenue neutral due to expanded economic growth is a fallacy. As the CRFB noted:
‘Given today’s record-high levels of national debt, the country cannot afford a deficit-financed tax cut. Tax reform that adds to the debt is likely to slow, rather than improve, long-term economic growth.’
The problem with the claims that tax cuts reduce the deficit is that there is NO evidence to support the claim. The increases in deficit spending to supplant weaker economic growth has been apparent with larger deficits leading to further weakness in economic growth. In fact, ever since Reagan first lowered taxes in the ’80’s both GDP growth and the deficit have only headed in one direction – lower.’

This post was published at Zero Hedge on Sep 29, 2017.

ECB Wants to Weed Out Smaller Banks to Cut Competition

The biggest financial problem in Europe these days is that it is ‘over-banked,’ according to Daniele Nouy, Chair of the ECB’s Supervisory Board, and thus in charge of the Single Supervisory Mechanism, which regulates the largest 130 European banks.
In a speech bizarrely titled ‘Too Much of a Good Thing: The Need for Consolidation in the European Banking Sector,’ Nouy blamed fierce competition for squeezing profits for many of Europe’s banks while steadfastly ignoring the much larger role in the profit squeeze played by the ECB’s negative-interest-rate policy. ECB President Mario Draghi agrees.
The profits of the largest 10 European banks rose by only 5% in the first half of 2017, compared to 19% for the US banks, which benefited from higher interest rates, stronger capital markets, better capitalization, and larger market shares, according to a new report by Ernst and Young.
In its latest annual health check of European banks, Bain Capital found that 31 institutions, or 28% of the 111 financial institutions they assessed, are in the ‘high-risk’ quadrant. Location seemed to be a far more important factor than size.

This post was published at Wolf Street by Don Quijones ‘ Sep 29, 2017.

29/9/17: Eurocoin: Eurozone growth is still on the upside trend

The latest data from Eurocoin – an early growth indicator published by Banca d’Italia and CEPR – shows robust continued growth dynamics for the common currency GDP through August-September 2017. Rising from 0.67 in August to 0.71 in September, Eurocoin posted the highest reading since March 2017 and matched the 3Q 2017 GDP growth projection of 0,67. The charts below show both the trends in Eurocoin and underlying GDP growth, as well as key policy constraints for the monetary policy forward.

This post was published at True Economics on Friday, September 29, 2017.

Stocks and Precious Metals Charts – End of Third Quarter – Rounding Kap Hoorn Into Uncharted Waters

“Over the last 10 years, there has been so much financial scandal, so many battles between regulators and financiers, and so much complexity (more liquidity and less leverage with your tier one capital, anyone?) that a large swath of the public has become numb to the debate about how to make our financial system safer.
That’s a dangerous problem, because despite all of the wrangling and rule making, there’s a core truth about our financial system that we have yet to comprehend fully: It isn’t serving us, we’re serving it.”
Rana Foroohar, How Big Banks Became Our Masters, NYT
As the paint is drying on the tape for the end of the third fiscal quarter, I am posting out a little early. Visitors from out of town are coming, and I wish to make some preparations to make them welcome.
The Dollar caught a big today on speculation that President Trump will be appointing a ‘hawkish’ replacement for Janet Yellen as the Chairman of the Fed. Whether the bias of one person, even the Fed Chief, will be able to swing interest rates markedly higher is open to debate.
Nevertheless, the President promises us a decision in a couple of weeks, so we will have to put up with giddy speculation out of the financial class. It is good to remember that when it comes to fiscal and economic governance, the focus these days is on the process, the financialization of the economy, rather than the product, which is the economy itself.

This post was published at Jesses Crossroads Cafe on 29 SEPTEMBER 2017.

What’s The Matter With Inflation?

Via Global Macro Monitor,
What’s The Matter Kansas inflation?
The divergence of official inflation as measured by the government versus inflation realized by the consumer and businesses has never been greater, in our opinion. Go ask anybody on the street in America and Europe if think ‘doing life or business’ is getting more expensive.
We have some thoughts on what is the matter with the inflation data:
1. Defining inflation
What is your definition of inflation? What are we trying to measure? The prices in a consumer basket of goods and services? Wages? Asset prices?
2. Measurement problems
The official measurement procedures seem archaic given the advent of big data in the past few years. Even Bloomberg is out with a recent piece warning the Fed about low-balling inflation due to measurement errors.
Low-Balling Inflation Puts the Fed at Risk Beware of any metric that doesn’t fully reflect housing prices.
The U. S. has an inflation problem. It has nothing to do with inflation being too high or too low. Unlike the raging inflation of the 1970s, it doesn’t need to be solved with a lengthy and painful recession. Instead, it is a problem of measurement because the cost of housing – the single biggest expense for many Americans – isn’t explicitly included in the inflation data.

This post was published at Zero Hedge on Sep 29, 2017.

Market Talk- September 29th, 2017

The Nikkei lost just a smidgeon today but still holds levels way up on the year. The YTD number is just over 6% because much of the rally was in Q4 2016, so on a 1yr basis is up almost 22%. The Yen continues comfortably mid 112’s but with more weakness expected. Elections will be interesting next month especially with the new party, led by Tokyo governor Yuiko Koike, only just formed last Wednesday. Todays Japanese data saw mixed results with Consumer Prices, Retails Sales and Industrial Production all showing opposite trends. Almost every other Asian exchange closed higher with HSI, Shanghai, and Australian ASX all closing around +0.3% with the KOPSI closing a strong near 1% gain for the day. Financials and exporters have been the leaders in this rally but probably to the detriment of the currencies. National holidays in China next week.

This post was published at Armstrong Economics on Sep 29, 2017.

Another Potential Game Changer for Gold Supply: Chinese Oil Imports Convertible to Gold

There are clear supply pressures coming to the gold market, so the last thing it needed was a new source of demand. But that’s exactly what it’s about to get, and as you’ll see, it could potentially push supply into a strained predicament. If this new development catches on it could lead to some fireworks in the gold market.
This source of demand comes from China’s announcement that oil exporters to China will accept yuan as payment. This is normally done in dollars (hence known as the petrodollar system). The yuan is not well established internationally yet, so as an incentive, China will offer its exporters the option to convert their yuan into gold. This will essentially result in a new source of gold demand, one not currently present in the market.
So how much gold are we talking about? Let’s run the numbers…
China’s imports in 2017 have averaged 8.55 million barrels of oil per day. This is already 14% more than last year, and has made them the world’s largest crude oil importer. Every report I’ve read says imports will continue to grow by double digits. A launch date for the program hasn’t been finalized, but let’s assume 9 million barrels per day starting next year.
The one-year forecast for a barrel of crude oil is $60 (it’s $59 as I write). That equates to $540,000,000 per day. At a $1,300 gold price, that means 415,384.6 ounces of gold per day could potentially be converted. That’s a whopping 151,615,384 ounces per year.
Not all of that would be converted, of course. But consider that many of the countries that export oil to China aren’t exactly friends of the US, and some are outright enemies, so the conversion rate would probably be greater than if it were all coming from Canada or Norway, or countries that already have a lot of gold. Further, conversions would almost certainly rise in a crisis, especially if Mike is right about the coming monetary shift.

This post was published at GoldSeek on Friday, 29 September 2017.

SEPT 29/GOLD DOWN $3.75 TO $1282.25 WITH SILVER BEING WHACKED 14 CENTS ON THIS LAST DAY OF LONDON BASED OPTIONS EXPIRY/CHAOS IN CATALONIA SPAIN AS RAJOY PULLS OUT ALL STOPS TRYING TO BLOCK REFERENDUM

GOLD: $1282.25 down $3.75
Silver: $16.68 down 14 CENT(S)
Closing access prices:
Gold $1287.50
silver: $16.87
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: $1293.04 DOLLARS PER OZ
NY PRICE OF GOLD AT EXACT SAME TIME: $1284.30
PREMIUM FIRST FIX: $8.24 (premiums getting larger)

This post was published at Harvey Organ Blog on September 29, 2017.

US Oil Rig Count Rises Most In 3 Months

With US crude production having rebounded back to near cycle highs in its lagged response to the oil rig count, this week’s rebound in the oil rig count (+6 to 750) is notably the largest addition in almost 3 months.

As Bloomberg details, explorers renewed their search for U. S. crude as oil entered a bull market and overseas demand for American supplies flourished.
Working rigs targeting crude increased by six this week, bringing the total to 750, according to Baker Hughes data reported Friday. Drillers resumed adding rigs for the first time in more than a month, a period that included Hurricane Harvey’s sweep across the Eagle Ford Shale region and coastal shipping terminals. Meanwhile, exports of domestic crude jumped 61 percent last week to an all-time high.

This post was published at Zero Hedge on Sep 29, 2017.

The US Economy Is Failing – Paul Craig Roberts

Do the Wall Street Journal’s editorial page editors read their own newspaper?
The frontpage headline story for the Labor Day weekend was ‘Low Wage Growth Challenges Fed.’ Despite an alleged 4.4% unemployment rate, which is full employment, there is no real growth in wages. The front page story pointed out correctly that an economy alleged to be expanding at full employment, but absent any wage growth or inflation, is ‘a puzzle that complicates Federal Reserve policy decisions.’
On the editorial page itself, under ‘letters to the editor,’ Professor Tony Lima of California State University points out what I have stressed for years: ‘The labor-force participation rate remains at historic lows. Much of the decrease is in the 18-34 age group, while participation rates have increased for those 55 and older.’ Professor Lima points out that more evidence that the American worker is not in good shape comes from the rising number of Americans who can only find part-time work, which leaves them with truncated incomes and no fringe benefits, such as health care.
Positioned right next to this factual letter is the lead editorial written by someone who read neither the front page story or the professor’s letter. The lead editorial declares: ‘The biggest labor story this Labor Day is the trouble that employers are having finding workers across the country.’ The Journal’s editorial page editors believe the solution to the alleged labor shortage is

This post was published at Paul Craig Roberts on September 29, 2017.

Incomes Are What Matters, So Bad Month, Bad Year, Bad Decade

This is a syndicated repost courtesy of Alhambra Investments. To view original, click here. Reposted with permission.
Sometimes economics can be complicated, such as why the labor market has slowed in such lingering fashion since early 2015. Sometimes economics can be easy, such as why there is so much less to the economy this year than thought. The easy part relates to the hard part. The labor market slowed and so did national income. Though so much of official focus is on debt supplementation, it’s always, always about income.
Incomes are, like everything else, still growing but also like everything else it is not growth. In the 22 months starting with November 2015, Real Personal Income excluding Transfer Receipts is up 1.7% total, not per year. That’s an annual rate of less than 1%, qualifying for only the negative descriptions even though there’s that plus sign. In the 22 months prior ending in October 2015, Real Personal Income excluding Transfer Receipts was up nearly 9%, or an almost 5% at annual rate.

This post was published at Wall Street Examiner by Jeffrey P. Snider ‘ September 29, 2017.

Spain Says “Referendum Won’t Happen”, To Shut Barcelona Airspace After Catalan Separatists Unveil Ballot Boxes

The Spanish government reiterated its angry rhetoric this morning that the “Catalan referendum won’t happen” with igo Mndez de Vigo saying “organizers will be held responsible,” after they unveiled the ballot boxes and discussed the 2,315 polling stations to be used.
Madrid, which claims the authority of a constitution that declares the country to be indivisible, remained implacably opposed to the vote. As Reuters reports,
‘I insist that there will be no referendum on Oct. 1,’ central government spokesman Mendez de Vigo told a news conference following the weekly cabinet meeting, reiterating that the vote was illegal. It appears the Catalans are ignoring him… In a sign that large crowds are again expected on the streets on Sunday, department store chain El Corte Ingles said it would shut three stores in central Barcelona. The central government said airspace above the city would be partly restricted. Lines of tractors draped in the red-and-yellow striped Catalan flag left provincial towns on Friday, planning to converge on Barcelona in a sign of support for the referendum.

This post was published at Zero Hedge on Sep 29, 2017.

I THOUGHT I WAS MIDDLE CLASS

‘The best way to teach your kids about taxes is by eating 30% of their ice cream.’ – Bill Murray
When I saw that slimy tentacle of the Goldman Sachs vampire squid, Gary Cohn, bloviating about Trump’s tax plan and how it was going to do wonders for the middle class, I knew I was probably going to get screwed again. And after perusing the outline of their plan, it is certain I will be getting it up the ass once again from my beloved government.
I know everyone’s tax situation is different, but I’m just a hard working middle aged white man with two kids in college and some hefty family medical expenses. I’m already clobbered with Federal, State, City, and real estate taxes, along with huge toll taxes, sales taxes, gasoline taxes, utility taxes, phone taxes and probably a hundred more hidden taxes and fees.
I fucking hate taxes and want nothing more than to see them cut dramatically. I voted for Trump for the following reasons:
He wasn’t that evil hateful shrew named Hillary Clinton He promised to repeal and replace Obamacare

This post was published at The Burning Platform on Sept 29, 2017.