Meet “Rolling Jubilee” – The Group Buying & Tearing-Up Student Loans

An offshoot of ‘Occupy Wall Street’ is taking the $1.2 trillion student loan bubble, debt servitude dilemma of America’s youth into its own hands… bit by tiny bit. As The BBC reports, activist group ‘Rolling Jubilee’ wants to “liberate debtors” by buying student-debt-bundled ABS on the secondary market (where they trade at significant discounts) and writing off the underlying loans. As Rolling Jubilee notes, “your debts are on sale… just not on sale to you,” until now.
Rolling Jubilee says the problem lies deep within the structure of the education system and the way that selling education as a commodity reinforces inequality.
“It is documented that they end up worse off and have no better chance of getting work than if they simply finished high school,” she says. This week, the Federal Reserve chief Janet Yellen warned the quadrupling of the student loan debt since 2004 represented a barrier to social mobility.

This post was published at Zero Hedge on 10/31/2014.

ECB Announces Stress Test Results: Here Are The 25 Banks That Failed

As was leaked on Friday, when the market surged on news that some 25 banks would fail the ECB’s third stress test (because in the New Normal more bank failures means more bailouts, means the richer get richest, means more wealth inequality), so moments ago the ECB reported that, indeed, some 25 banks failed the European Central Bank’s third attempt at collective confidence building and redrawing of a reality in which there is about 1 trillion in European NPLs, also known as the stress test.
The ECB’s results as summarized by the central bank:
Capital shortfall of 25 billion detected at 25 participant banks Banks’ asset values need to be adjusted by 48 billion, 37 billion of which did not generate capital shortfall Shortfall of 25 billion and asset value adjustment of 37 billion implies overall impact of 62 billion on banks Additional 136 billion found in non-performing exposures Adverse stress scenario would deplete banks’ capital by 263 billion, reducing median CET1 ratio by 4 percentage points from 12.4% to 8.3% Goldman’s quick take:

This post was published at Zero Hedge on 10/26/2014.

The Failure Of The Fed’s ‘Wealth Creation’ Mandate (In 1 Simple Chart)

Having previously shown just who did (and did not) benefit from the resurgence of household net worth, we thought it time to provide the context for why The Fed’s stunningly obvious policy of juicing asset inflation in the hopes of engorging animal spirits among the general population and a renaissance in public spending is a total and utter wealth-inequality-driving farce. As Evergreen Gavekal indicates so obviously, the consumer isn’t fooled by Fed policy; despite a major uptick in household net worth, spending remains anemic.

This post was published at Zero Hedge on 10/25/2014.

Doug Noland: More Wackoism

Central banks win the day and week.
Markets have grown completely dependent on “Do Whatever it Takes” central control. And six years into a historic global experiment in central bank monetary stimulus, the maladjusted global economy has become dependent upon inflated (and dangerously speculative) securities markets. Meanwhile, the consequences of reckless “money” printing spur deepening social and political tensions. As more begin to question contemporary central bank doctrine, the issue of economic inequality is finally becoming an issue.
There are so many signs pointing to the present as an extraordinary juncture in history. For one, the misconceptions, flaws and unfolding failure of contemporary central banking are coming into clearer view. Yet fragilities associated with a flagging global Bubble ensure only more radical monetary measures. In the name of fighting “deflation” risk, everything has become fair game. God only knows how much “money” they might end up printing.

This post was published at Prudent Bear

The High Price of Free Money: Now US Bankers Fear Financial, Social, or Political ‘Instability’

Something is changing about the perception of the Fed’s free-money policies. While we’ve lambasted them for their nefarious effects on the real economy and the inequality they produce, Wall Street, the prime beneficiary, has been bombastically gung-ho about them. And the mainstream media have praised the Fed’s ‘bold action,’ as it’s called, at every twist and turn.
But now even Wall Street is getting cold feet. The official warning shot came from Fed Chair Janet Yellen, who admitted suddenly that ‘the extent of and continuing increase in inequality in the United States greatly concern me.’
Then bankers chimed in. FICO, which produces the infamous credit score, found in its latest survey of North American bank risk managers that 62% of them thought ‘the wealth gap poses a growing risk to the financial system.’
With the economy so dependent on consumer spending, ‘it makes sense that the concentration of wealth would raise flags among bank risk managers,’ explained Andrew Jennings, FICO chief analytics officer. ‘This concern was echoed on a global scale by Credit Suisse in a recent report that found many indicators of wealth inequality are reaching levels that could result in social or political instability.’
This is a twist: Bankers, beneficiaries of the Fed’s policies that created much of the wealth gap, are fretting that that wealth gap poses a ‘risk to the financial system,’ that it might take the banks through a another death spiral. Turns out, in our consumer-based economy, most consumers no longer have the means to adequately support that economy; and the few who have benefited from the wealth redistribution scheme, are too few to adequately support the economy.

This post was published at Wolf Street by Wolf Richter ‘ October 23, 2014.

Central Banker Admits Central Bank Policy Leads To Wealth Inequality

Six years after QE started, and just about the time when we for the first time said that the primary consequence of QE would be unprecedented wealth and class inequality (in addition to fiat collapse, even if that particular bridge has not yet been crossed), even the central banks themselves – the very institutions that unleashed QE – are now admitting that the record wealth disparity in the world – surpassing that of the Great Depression and even pre-French revolution France – is caused by “monetary policy”, i.e., QE.
Case in point, during the Keynote speech by Yves Mersch, ECB executive board member, in Zurich on 17 October 2014 titled “Monetary policy and economic inequality” he said:
More generally, inequality is of interest to central banking discussions because monetary policy itself has distributional consequences which in turn influence the monetary transmission mechanism. For example, the impact of changes in interest rates on the consumer spending of an individual household depend crucially on that household’s overall financial position – whether it is a net debtor or a net creditor; and whether the interest rates on its assets and liabilities are fixed or variable. Such differences have macroeconomic implications, as the economy’s overall response to policy changes will depend on the distribution of assets, debt and income across households – especially in times of crisis, when economic shocks are large and unevenly distributed. For example, by boosting – first – aggregate demand and – second – employment, monetary easing could reduce economic disparities; at the same time, if low interest rates boost the prices of financial assets while punishing savings deposits, they could lead to widening inequality.

This post was published at Zero Hedge on 10/22/2014.

Carl Icahn: “The Fed Turned This Market Around Here”

By now, 6 years after America’s grand experiment in recreating Soviet-style central planning started, it should be clear to all except that subset of Homo Sapiens also known as “economists”, that the Fed’s QE is not helping the economy. In fact, it is merely boosting wealth inequality, leading to asset price (hyper)inflation, middle class devastation, and its inevitable outcome is yet another asset bubble can which will need to be kicked eventually leading to even greater economic misery, greater inequality, and more warfare. In fact the two final outcomes of more QE are becoming increasingly: broad hyperinflation a lathe Bernanke chopper, which implies a failure in the reserve currency, and rising social conflict, which culminates in a French revolution-type social revolt when the poor finally roll out the guillotines.
The above is also largely clear to most, except the members of the Fed of course. So it is for their benefit that we present what two people who actually work in the markets for a living, something that nobody in the Marriner Eccles can say, have to say about QE. We can only hope someone in the US money printing department reads it, but we doubt it.
First, here is David Einhorn, who spoke at the annual, and amusingly misnamed, hedge fund gala known as the Robin Hood Investor Conference, talking about Fed policy:

This post was published at Zero Hedge on 10/21/2014.

Janet Yellen: Average Net Worth of 62 Million U.S. Households is $11,000

It took 200 years of hard data in a bestselling book by Thomas Piketty, awesome graphs and charts in Robert Reich’s documentary, ‘Inequality for All,’ and years of scolding from Wall Street on Parade, but Fed Chair Janet Yellen has finally, and correctly, arrived at the idea that the nation’s economic ills are deeply rooted in the fact that U. S. ‘income and wealth inequality are near their highest levels in the past hundred years.’ That was the message Yellen delivered on Friday in a speech at the Federal Reserve Bank of Boston, replete with stomach-churning figures from the Fed.
Make no mistake about it, coming at the end of a week that saw dramatic up and down spikes in the stock market – Yellen was sending a pivotal message to the Wall Street wealth hoarders – your billionaire standing could be as ephemeral as a day lily if we don’t fix this income and wealth gap.
Yellen quieted the crowd with this opener: ‘The past several decades have seen the most sustained rise in inequality since the 19th century after more than 40 years of narrowing inequality following the Great Depression.’ Using data from the Fed’s Survey of Consumer Finances, Yellen punctuated her message with these hair-raising figures:
‘The wealthiest 5 percent of American households held 54 percent of all wealth reported in the 1989 survey. Their share rose to 61 percent in 2010 and reached 63 percent in 2013;
‘The lower half of households by wealth, held just 3 percent of wealth in 1989 and only 1 percent in 2013. To put that in perspective…the average net worth of the lower half of the distribution, representing 62 million households, was $11,000 in 2013.’

This post was published at Wall Street On Parade By Pam Martens and Russ Martens/ October 20, 2014.

Irony of the Day: Yellen Moans About Income Inequality; Seven Things That Cause Inequality

Those seeking the irony of the day will find it comes straight from the mouth of the Fed Chair. Please consider Janet Yellen Bemoans Rising US Inequality.
Janet Yellen decried rising inequality on Friday in an unusual speech that may lead to accusations of politicising the US Federal Reserve.
Speaking at a conference in Boston, the Fed chairwoman said she was ‘greatly concerned’ by rising income and wealth inequality, and asked whether it is compatible with American values.
Her remarks will delight the Democrats who championed her as Fed chair, but risk a backlash from Republicans, who may feel she is using the platform of the central bank to promote the causes of their political rivals.

This post was published at Global Economic Analysis on Friday, October 17, 2014.

Define Irony: Janet Yellen Talks Inequality, Has Some Advice – Start A Business, Get Rich Parents

With no mention of the current turmoil in markets – or suggestion of QE99 – Janet Yellen’s speech this morning on “Inequality and Opportunity” in America explains how the poor can get rich. After admitting that widening inequality resumed in the recovery (and “greatly concerns” her), as the stock market rebounded (driven by Fed’s free money) and cost-conscious share buying-back companies defer wage growth as the healing of the labor market has been slow; she turns her attention to how the poor can beat the vicious cycle. Rather stunningly, she notes the 4 sources of income opportunity in America: The first two are widely recognized as important sources of opportunity: resources available for children and affordable higher education (so more student debt and servitude). The second two may come as more of a surprise: business ownership and inheritances. As she concludes, “this is how individuals and their families can improve their economic circumstances.”
Janet Yellen becomes aware of the inequality “problem”…

This post was published at Zero Hedge on 10/17/2014.

What The Fed Does Next

In 2008, various liquidity facilities, designed by the Fed, unclogged broken capital markets. Shortly thereafter in early 2009, QE1 was implemented to improve market liquidity and transform investors’ general revulsion to financial assets. The combination helped avert economic and financial disaster. The Fed responded well at that time; however, the cost-benefit equations for QE2 and QE3 are much less clear.
The Fed’s (subsequent) QE and ZIRP policies have enabled fiscal stalemate, turbo-charged wealth inequality, and arguably led to financial asset bubbles. For these reasons, I believe they have become counter-productive. New tactics, should they be needed, would therefore be welcomed.
It is counterfactual to know, but it could be argued that current market turmoil is partially the result of the Fed purposefully encouraging asset price inflation, and staying in crisis mode long after the economy began to heal, and after the financial markets were operating smoothly on their own. Over the past few years, too many investors, piggy-backing off of Fed policy, have diverged valuations away from economic fundamentals. Recent down -grades to forecasts of global growth and inflation by the IMF and World Bank further expose this fact. In turn, wrong-footed investors are now belatedly trying to recalibrate. The Fed’s feeling as if it is ‘the only game in town’ has been a factor leading to its unusual measures. Polarized politicians should take some blame. They are too frequently reactive (as opposed to proactive), so it could take a financial crisis to get them to act.
Another intention of the QE programs was to sufficiently boost GDP enough to deal with, and reduce, the problem of excessive debt. Since sovereign and non-financial corporate debt-to-GDP levels have risen significantly during the programs, QE, under this metric, has been a failure.

This post was published at Zero Hedge on Via Scotiabank’s Guy Haselmann.

The Stock Market Has Lost Confidence in Central Banks as Gods

Yes, there is a wall of worry that the stock market is no longer climbing but is now descending. The greatest worry, that makes all others pale in comparison, is that the U. S. central bank, the Federal Reserve, has nothing left in its monetary arsenal but one bullet – Fed-Speak, otherwise known as spin.
After three bond buying programs known as Quantitative Easing (QE) flooded Wall Street with bountiful amounts of play money while failing to significantly lift wages or economic growth, the U. S. central bank now has a balance sheet that has quadrupled since the 2008 crisis to $4.4 trillion. That it would be allowed to engage in QE4 in the next crisis is highly doubtful since QEs have proven to be financial bubble makers, income inequality makers and of little help to the average citizen.
Equally problematic, the Fed is already at the zero-bound range in interest rates with no bullets left to fire in that arena as the specter of deflation begins to emerge around the globe.

This post was published at Wall Street On Parade on October 14, 2014.

Global Bellwether: Japan’s Social Depression

Beneath the surface wealth of bullet trains, cute robots and exuberant fashions, this is the Japan few outsiders understand: the one gripped by a deepening social depression.
This week I’ve highlighted the structural flaws of using GDP as a measure of “growth” and prosperity: GDP = Waste and What Metric Are We Optimizing For? The conventional metrics of “growth” and prosperity have another fatal flaw: they do not recognize, much less measure, social depression, the social costs of economic stagnation and wealth inequality driven by financialization. The term social recession has two distinct meanings: around 2000, the term was used to describe the erosion of social cohesion via the decline of institutions such as marriage and the rise of social problems such as teen pregnancy. Many commentators pinned this erosion of social constraints and bonds on rampant individualism and overstimulated consumerism, while others pointed to urbanization, the commodification of child care, and women entering the workforce en masse to prop up household incomes. Poverty was explicitly rejected as a causal factor, hence the term “social recession.”

This post was published at Charles Hugh Smith on WEDNESDAY, SEPTEMBER 24, 2014.

Gold Daily and Silver Weekly Charts – The Prisoner’s Dilemma, Bureaucrats Agonistes

‘The dove descending breaks the air With flame of incandescent terror Of which the tongues declare The one discharge from sin and error. The only hope, or else despair Lies in the choice of pyre or pyre- To be redeemed from fire by fire.
Who then devised the torment? Love. Love is the unfamiliar Name Behind the hands that wove The intolerable shirt of flame Which human power cannot remove. We only live, only suspire Consumed by either fire, or fire.’
T. S. Eliot, Four Quartets
“And he led him up to the highest place, and showed him all the kingdoms of the world and their splendours.”
Matt 4:8
If you are not familiar with the classic game theory example of The Prisoner’s Dilemma you may read about it here. I see quite a few instances in the world today that seem like the types of standoffs as described in that example of two people who can broadly benefit if they come to an agreement, or both suffer if one or the other seeks a short term advantage. The Ukraine, Syria, Israel, the Congress, the great inequality in the US economy. The examples are almost everywhere. It seems as though working for some broader benefit, and engaging in productive compromise, is utterly out of temper in this utterly selfish, hard-hearted world of ours. For me the most interesting aspect of The Prisoner’s Dilemma is watching the Western Central Banks trying to come to terms with their unsustainable positions in the monetary metals markets, vis a vis the BRICS.

This post was published at Jesses Crossroads Cafe on 23 SEPTEMBER 2014.

In a Hyper-inflation Scenario, What Would the Value of Gold Be?

Letter from the women of Cologne, Germany addressed to the ‘Women of the British Empire’ November 12, 1914 ‘During the times of passive resistance we existed, not by industry, but through the paper money doles sent from unoccupied country. Now these have ceased and we face starvation. Industry cannot recover, and there are millions, literally out of work…tens of thousands of our leading citizens have been banished or imprisoned…our newspapers have been suppressed…armed hordes of adventurers have now been let loose on our disarmed and helpless population in the name of separatism and Republicanism… Winter is before us, and we have no coal.’
What will it take for hyper-inflation to occur? Why hasn’t it already occurred? and What would the real value of gold be in this scenario?
Americans today have never experienced the severe inflation that German citizens experienced after World War 1, but as we are bombarded with images of hip-hop artists throwing up limitless amounts of paper bills ‘in da club’ and the Federal Reserve printing trillions of dollars in financial stimulus money, known academically as Quantitative Easy, one gets the sense that there may soon come a time where we too are sweeping paper bills into the fireplace to heat our homes. Currently, there are 47 million Americans on food-stamps and 91 million people not in the labor force. These numbers are similar to the economic stagnation experience in the late 70’s when inflation was running consistently over 10%, but today we have difficulty reaching the Fed target of 2%. So what is going on?
Well, truth is, if we were to calculate inflation the way we did in 1980, then the inflation rate would actually be 10%. So inflation is running much higher than what is officially being reported.
The Fed is under-reporting inflation because they do not want to be politically responsible for causing the economic disparity and income inequality between the 1% and the 99%. This is being commented on and reported widely, but for the most part the fingers are not being pointed at the Fed so their plan is working.
So with inflation at 10% why isn’t the price of gold skyrocketing?
Turns out inflation numbers aren’t the only thing the Fed is manipulating. Even the price of gold is being manipulated.

This post was published at The Burning Platform on 22nd September 2014.

Labor Day 2014: Economic solutions already here for full employment, zero public deficits and debts

Labor Day is an Orwellian holiday: US ‘leaders’ psychopathically pretend to care about American labor while lying about a real unemployment rate of close to 25% (the so-called ‘official’ rate excludes under-employed and discouraged workers).
Along with unemployment, Americans receive policy enabling oligarchs to ‘legally’ hide $20 to $30 trillion in offshore tax havens in a rigged-casino economy designed for ‘peak inequality.’ For comparison, $1 to $3 trillion ends global poverty forever, saving a million children’s lives every month from slow and gruesome death (here, here). And, as always, US ‘leaders’ lie-begat Americans intounlawful Wars of Aggression (in comparison, 11 days of US war cost would pay for all tuition of US college students).
Americans could have full-employment and zero public deficits and debt with monetary and credit reform.
These solutions are obvious upon a few moments of your attention. See for yourself:
What is monetary and credit reform?
Since the 1913 legislation of the Federal Reserve, the US has had a national ‘debt system;’ the Orwellian opposite of a monetary system. What we use for money is created as a debt, with the consequence of unpayable and increasing aggregate debt. This is a description of the simple mechanics of adding negative numbers. Although it’s taught in every macroeconomics course in structure, the consequences of increasing and unpayable debt are omitted (unpayable because it destroys what is used for money, and eventually the debt becomes tragic-comic in amount).

This post was published at Washingtons Blog on August 30, 2014.

Is There Capitalism After Cronyism?

The more the Status Quo pursues the same old Keynesian Cargo Cult script of central planning and free money for financiers, the more self-liquidating the system becomes.
Judging by the mainstream media, the most pressing problems facing capitalism are:
2) the failure of laissez-faire markets to regulate their excesses, a common critique encapsulated by Paul Craig Roberts’ recent book The Failure of Laissez Faire Capitalism.
These critiques (and many similar diagnoses) reach a widely shared conclusion: capitalism must be reformed to save it from itself.
The proposed reforms align with each analyst’s basic ideological bent. Piketty’s solution to rising wealth inequality is the ultimate in statist centralization: a global wealth tax.
Roberts and others recommend reforming capitalism to embody social purpose and recognize environmental limits. Exactly how this economic reformation should be implemented is a question that sparks debates across the ideological spectrum, but the idea that capitalism can be reformed is generally accepted by left, right and libertarian alike.
Socio-economist Immanuel Wallerstein asks a larger question: can the current iteration of global capitalism be reformed, or is it poised to be replaced by some other arrangement?

This post was published at Charles Hugh Smith on SATURDAY, AUGUST 30, 2014.

CFR Recommends Policy Shift that is Very Bullish for Gold

The ‘Foreign Affaird’ publication of the influential and policy-setting Council of Foreign Relations made an announcement that could have huge ramifications for monetary policy going forward. In an article titled ‘Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People,’ the authors argue that the current quantitative easing and debt monetization is not generating broad-based stimulus to the economy.
To some extent, low inflation reflects intense competition in an increasingly globalized economy. But it also occurs when people and businesses are too hesitant to spend their money, which keeps unemployment high and wage growth low. In the eurozone, inflation has recently dropped perilously close to zero. And some countries, such as Portugal and Spain, may already be experiencing deflation. At best, the current policies are not working; at worst, they will lead to further instability and prolonged stagnation.
Governments must do better. Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly. In practice, this policy could take the form of giving central banks the ability to hand their countries’ tax-paying households a certain amount of money. The government could distribute cash equally to all households or, even better, aim for the bottom 80 percent of households in terms of income. Targeting those who earn the least would have two primary benefits. For one thing, lower-income households are more prone to consume, so they would provide a greater boost to spending. For another, the policy would offset rising income inequality.
This is a huge announcement because it would lead to a major increase in the velocity of money. While a tremendous amount of money was created following the financing crisis, it has yet to result in significant inflation as a good amount of it remains parked in excess reserves and in corporate accounts. This has brought the velocity of money to the lowest levels in decades.

This post was published at GoldStockBull on August 27th, 2014.

Keynesian Fairy Tale Alert: Establishment Citadel – Council On Foreign Relations – -Peddles Helicopter Money Plan

Folks, take economic cover. There is already a rabid financial mania loose in the land as reflected in the irrational exuberance of the stock market, but, in fact, the fairy tale economics fueling the current financial bubble is fixing to leap into a whole new realm of lunacy. Namely, an out-and-out drop of ‘helicopter money’ to the main street masses.
That’s right. The Keynesian brain freeze has so deeply infected the Wall Street/ Washington corridor that the grey old lady of the establishment, the Council On Foreign Relations, has lent the pages of its prestigious journal, Foreign Affairs, to the following blithering gibberish:
It’s well past time, then, for U. S. policymakers – as well as their counterparts in other developed countries – to consider a version of Friedman’s helicopter drops….. Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly. In practice, this policy could take the form of giving central banks the ability to hand their countries’ tax-paying households a certain amount of money. The government could distribute cash equally to all households or, even better, aim for the bottom 80 percent of households in terms of income. Targeting those who earn the least would have two primary benefits. For one thing, lower-income households are more prone to consume, so they would provide a greater boost to spending. For another, the policy would offset rising income inequality.
I have actually checked, and, no, the publishing arm of the Council on Foreign Relations has not been hacked by writers from the Onion. This monetary insanity is for real!

This post was published at David Stockmans Contra Corner on August 29, 2014.