Big US Budget Deficits and Low Inflation/Wage Growth (What’s Gov Got To Do With It?)

This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission.
There is little doubt that the Federal government loves to spend money, usually more than it takes in as taxes. The difference in the Federal budget deficit. The deficit has gotten so large that some are calling for a Constitutional Convention to proposed a balanced budget amendment to the US Constitution. But has deficit spending done any good and generated wage growth in the US?
The Federal government often runs in a deficit mode, except for the 1998-2001 period as a result of the The Balanced Budget Act of 1997, (Pub. L. 105 – 33, 111 Stat. 251, enacted August 5,1997). It was passed under Speaker Newt Gringrich (R-Ga) leadership. Unfortunately, two recessions (March-November 2001 and December 2007-March 2009) later and the US is in its worst budget deficit position since 1929.

This post was published at Wall Street Examiner on January 30, 2017.

Americans Spend More Than They Earn For 9th Straight Month As Savings Rate Tumbles To 2015 Lows

Personal income growth disappointed in December, rising a less-than-expected 0.3% MoM. Of course, that did not stop Americans from spending as personal consumption rose 0.5% MoM in December. This is the 9th month in a row of higher annual spending growth than income growth…
Sadly for all those hyping and hoping for wage growth – it is stagnant again…

This post was published at Zero Hedge on Jan 30, 2017.

Silver Speculators Gone Wild

This week, the prices of the metals had been up Sunday night but were slowly sliding all week – until Friday at 7:00am Arizona time (14:00 in London). Then the price of silver took off like a silver-speculator-fueled-rocket. It went from $16.68 to $17.25, or 3.4% in two hours.
What does it mean? We don’t know. We would bet an ounce of fine gold against a soggy dollar bill that no one else does either. The old stories of silver shortage or manipulation have no power to explain this move. Why not? Because they are old. The explanation would have to say that earlier in the day there was a reason for silver to trade well under $17 but as of that moment, it was urgent that the metal trader well over $17.
As often occurs, once the move hits certain levels on a price or momentum chart, that’s all it takes. It’s of no use to say that in the long run this will be just another blip of noise. In the heat of the moment, these 60-cent moves are exciting.
Below, we will have an intraday silver chart that shows clearly something that is almost never available to the public. We have a plot of the basis against price. If other theories are right (e.g. manipulation, shortage) this chart should show nothing of interest.

This post was published at GoldSeek on Monday, 30 January 2017.

The FUNDAMENTAL Problem, ECONOMY-WIDE

This is a post that I predict will get few reads and fewer shares.
It’s also mathematically provable and, if we don’t cut it out, it will destroy our nation and economy even if we fix all the other problems.
Simply put, it’s this:
As soon as you find a way to collude such that financialization becomes an essential piece of any part of the economy that part of the economy stops serving the end consumer of said good or service and instead serves the financiers.
Consider good or service “X”. The producer has to compute a price to sell at. His computation is comprised of the expense to produce the good or service plus a profit.
Given no constraints the seller would like an infinite profit.
Two things constrain his profit: 1) The ability for the consumer to refuse to buy at all and 2) competition.
Unfortunately there are products and services that people cannot successfully refuse to purchase. Some of those (like water) you must acquire all the time in order to remain alive; if you cannot do so via either a clean natural source or clean the source you have there is no other option but to purchase it from someone who can. Others, such as medical care, are items you can sometimes refuse to buy but at other times you cannot refuse such as when you’re unconscious due to either a medical emergency or accident. Medical care has a further circumstance that arises in that in many chronic condition circumstances while you can refuse the price of doing is literal death; in those cases you are effectively forced to purchase.

This post was published at Market-Ticker on 2017-01-30.

Harry Dent: Stocks Will Fall 70-90% Within 3 Years

Economist and cycle trend forecaster Harry Dent sees crushing deflation ahead for nearly every financial asset class. We are at the nexus of a concurrent series of downtrends in the four most important predictive trends he tracks.
Laying out the thesis of his new book The Sale Of A Lifetime, Dent sees punishing losses ahead for investors who do not position themselves for safety beforehand. On the positive side, he predicts those that do will have a once-in-a-generation opportunity to buy assets at incredible bargain prices once the carnage ends (and yes, for those of you wondering, he also addresses his outlook for gold):
All four of the cycles I track point down now. One after the next has peaked in the last several years. All four point down into early 2020 or so. That’s only happened in the early to mid-’70s when we had the worst stock crashes back then, the OPEC embargo, etc — the worst set of crises since the 1930s.

This post was published at PeakProsperity on Monday, January 30, 2017.

Gartman: “Our Propensity Is To Find Modest Long Exposure Today”

With speculation that the global economy, and equity markets, may be poised for the next leg lower (simply because it is difficult seeing global economic surprise indexes going any higher from current multi-year highs…
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… we were waiting for Gartman to chime in, hopefully giving the “all clear.” Luckily, he did that overnight, to wit:
Here at TGL, in our retirement account… the only money we actually ‘run’… we are up 1.4% for the year-to-date and we are modestly net long of equities for we are long of a business development corporation that we buy, amongst other high dividend paying corporations, to try to capture the dividend stream and which gives us a modest market exposure; were long of cotton; we are short of the EUR via an ETF and we are long, of course, of gold in EUR and Yen denominated terms.
Our ‘net’ equity market exposure then is relatively minor but given the longer term trend and given the minor correction to the downside over the course of the past three or four sessions, accompanied by rather obviously declining volume on the exchanges, our propensity is to find modest long exposure today. We may do so via simple long only equity ETF until we have conviction once again on viable, specific market sectors.

This post was published at Zero Hedge on Jan 30, 2017.

How to Protect Your IRA From Consfiscation, Nationalization and Hyperinflation

The following video was published by The Dollar Vigilante on Jan 30, 2017
Jeff interviews returning guest Gus Demos of Perpetual Assets, topics include: offshoring self directed IRAs, capital controls and the war on cash is ramping up and spreading to other countries, the coming war on gold and Bitcoin, negative interest rates only possible with demonetization, a possible US debt default under Trump or else possible nationalization of IRAs, the desirability of holding tangible assets, making it difficult for governments to rob you, perilous times ahead for IRAs, a precious metals backed Visa/ATM card, a glowing testimonial for the TDV Summit and Anarchapulco 2017

More Executive Orders Coming: A Preview Of Key Events In Washington Today

Having concluded a blistering, tumultuous first week, in which Trump signed no less than 17 executive orders, the President is set to begin his second week the way he finished on Friday: by signing another executive order, this one reportedly aimed at foreign worker visas.
As Bloomberg reported overnight, the Trump administration has “drafted an executive order aimed at overhauling the work-visa programs technology companies depend on to hire tens of thousands of employees each year. ”

This post was published at Zero Hedge on Jan 30, 2017.

Global Stocks, Futures Slide On US Protectionism Worries Following Trump Travel Chaos

European, Asian stocks and S&P futures all drop after traders were left with a sour taste from the potential fallout of Donald Trump’s order halting some immigration and ahead of central bank decisions from the U. S. and Japan. Markets in Hong Kong, China, Malaysia, Korea, Singapore, Taiwan and Vietnam are all shut due to the Lunar New Year public holiday, leading to a quiet Asian session. Oil rebounded after sliding as much as 0.7%. Gold was unable to hold its overnight gains and has dipped into the red to $1,190 after rising just shy of $1,200 in early trading.
“Concerns on protectionism appear to be rising after President Trump’s executive order to restrict immigration,” said Adam Cole, head of G10 foreign exchange strategy with RBC in London.
As Bloomberg notes, Trump’s executive order halting immigration from seven predominantly Muslim nations drew criticism from world governments and some of the largest companies, bringing the geopolitical and international trade risks surrounding the new U. S. president into sharper focus. As DB’s Jim Reid adds, the domestic affairs of the US hit the headlines all weekend with widespread global criticism and anger over President Trump’s immigration executive order.

This post was published at Zero Hedge on Jan 30, 2017.

The standard wage for an American is $29,000: Social Security data reveals raw figures for the wealthiest country in the world.

All Americans pay Social Security taxes. So looking at Social Security for income data is fairly reliable. The new Social Security figures show that Americans continue to make a lot less than what the public tends to believe. For example, you may have seen mainstream shows with talking heads saying that someone making $200,000 a year is somehow middle class. First, if your family is making that much you are in the top five percent of all U. S. households. Not exactly the middle. The median figure is the best measure here. This is the point where half of workers make less or more (the true middle). The latest Social Security data shows that the median worker income earned by an American is much less than what most expect.
What does the typical American worker make?
Most Americans are living by the seat of their financial pants. Half of the country is living paycheck to paycheck hoping their money clears into their account fast enough to pay the mortgage or rent and electricity. You also see so many people going into incredible levels of debt just to maintain the illusion that they are somehow middle class.

This post was published at MyBudget360 on January 29, 2017.

Europe’s Latest Steps to Eliminate Cash Post-Davos

Within days of Davos, here is the European Commission statement on moving forward to eliminate cash. This is an ‘Inception Impact Statement’ to provide notice to those involved and to ask for comments back. Everything is couched in terms of terrorism, but in fact it is to hunt taxes and eliminate our freedom to privacy regarding our own wealth.
The Roman Emperor Maximinus I (235-238AD) declared that all wealth belonged to the state. He paid informants to rat out anyone who looked like they were hiding wealth. The bottom-line, this pushed the Roman Empire over the edge. Investment began to vanish and the velocity of money collapsed as people then hoarded their cash for fear of confiscation. This is why we find hoards of even debased money. This hoard was found in Somerset, Britain with coins covering the crisis period of the 3rd century AD with coins from 21 emperors and three emperors’ wives. This included Roman coins and when the Roman Empire split with the usurper Carausius who ruled Britain and parts of northern Gaul independent of the empire from 286-293 AD. Coins of Carausius are rarely found in hoards.

This post was published at Armstrong Economics on Jan 30, 2017.

Key Events In The Coming “Big Week” For The US

Markets will again zero in on the U. S. this week, and not just because of Donald Trump in Bloomberg’s opinion. The Federal Reserve meeting and nonfarm payrolls may set a clear direction for dollar and yields for the next few months. U. S. GDP data on Friday showed the largest negative contribution from net exports since 2010. This will give the president ammunition for his Twitter feed because it confirms his view on the evils of globalization. So prepare. Beyond Trump’s rhetoric, it’s going to be a big week for orthodox economic developments in the United States.
No one expects a policy shift at the Fed meeting Wednesday. The FOMC has remained silent on whether they are considering hiking rates in March; the market prices around a one-third chance. This low probability reflects last year’s experience of perpetual rate hike delays. But if the Fed hints that a rate hike is a serious possibility for March, pricing should rise to between 50% and 75%. The dollar would obviously benefit. On the other hand, silence would likely lead yields and the dollar to fall. The dot plot in December showed a median expectation of three rate hikes this year. Nothing has happened since then to suggest this is too optimistic. Therefore, it seems likely the FOMC will acknowledge a March hike is a possibility…so there is also an upside risk for the dollar and yields. However, watch out for Friday’s payroll data as a possible sting in the tail. The Fed won’t have access to the data when they announce policy, and it wouldn’t be the first time the data threw a spanner into the Fed’s intentions.
Other US data in addition to the FOMC and payrolls, include ISM, ADP, housing data, personal income & spending, vehicle sales and core PCE.
That said, in the US, the focus on politics will likely remain paramount, with every Trump tweet closely scrutinized.
In addition to the busy US week, we also have policy decisions from the Bank of Japan and Bank of England, and a slew of important data releases from the Euro area including inflation data which is expected to pop higher, and in the UK parliamentary debate on Article 50 among other data and events.

This post was published at Zero Hedge on Jan 30, 2017.

ECB Under Pressure As German Inflation Spikes To Highest Since 2013

German consumer prices accelerated at the fastest pace in three and a half years in January, leaving the ECB running out of excuses to maintain (or even extend) its stimulus measures.
As Bloomberg notes, consumer prices rose 1.9 percent from a year ago, data from the Federal Statistics Office showed on Monday. That’s up from 1.7 percent the previous month and the highest rate since July 2013, though below the median estimate of 2 percent in a Bloomberg survey. Prices slid 0.8 percent from December.
The surge in German inflation since the end of last year is a potential political flashpoint in the country, which faces elections in September, as savers remain burdened with near-zero deposit rates. Calls are mounting for the ECB to start talks over winding down its bond-buying program, which is scheduled to run until at least the end of this year, though policy makers have generally urged caution until it’s clear price increases are being sustained in the euro area as a whole.

This post was published at Zero Hedge on Jan 30, 2017.

Should Cash be Abolished?

At the World Economic Forum in Davos Switzerland, Joseph Stiglitz the Nobel Prize-winning economist argued in favor of phasing out currency and moving toward a digital economy.
The view expressed by Stiglitz is similar to that of former IMF chief economist Kenneth Rogoff who has been arguing for many years that there is an urgent need to remove cash from the economy. It is held that cash provides support to the shadow economy and permits tax evasion. Some estimates suggest this could be up to $700 billion in the US.
The Governor of the Bank of England – Mark Carney – has expressed similar views in support of the removal of cash.
Yet another justification for its removal is that in times of economic shocks, which push the economy into recession, the run for cash exacerbates the downturn – i.e., it becomes a factor contributing to economic instability by facilitating a cash-induced savings surge rather than an increase in demand.
Other arguments go further, including the position that in the modern world most transactions can be settled by means of electronic funds transfer. Money in the modern world is an abstraction, or so it is held.
But is it true that money is an abstraction?

This post was published at Ludwig von Mises Institute on January 30, 2017.

Why 2017 Could See the Collapse of the Euro

2017 could be the year that the euro collapses according to Joseph Stiglitz writing in Fortune magazine and these concerns were echoed over the weekend by former Bundesbank vice-president and senior European Central Bank official, Jrgen Stark, when he said that the ‘destruction’ of the Eurozone may be necessary if countries are to thrive again.
Stark and Stiglitz are too of many respected commentators, from both the so called right and the so called left, who are warning that the common currency and the Eurozone itself will not survive the financial and political turmoil already besetting the European monetary union and set to deepen in the coming months and years.

This post was published at Gold Core on January 30, 2017.

Why Our System Is Broken: Cheap Credit Is King

You want to fix the economic system, reduce political bribery and reduce rising income inequality? Shut off the cheap unlimited credit spigot to banks, financiers and corporations. Cheap credit–newly issued money that can be borrowed at low rates of interest–is presented as the savior of our economic system, but in reality, it’s why our system is broken. The conventional economic pitch goes like this: cheap credit enables consumers to buy more goods and services (and since the system needs growth or it implodes, that’s good). Cheap credit also enables companies to invest in new productive assets (capital). Last but not least, low rates of interest enables the government at all levels to borrow money at relatively low cost. That all sounds good in theory, but let’s see how cheap credit works in the real world. The first thing we observe is those closest to the central bank credit spigot get the lowest rates and nearly unlimited lines of credit. J. Q. Citizen may be thrilled to get a 4% annual-rate mortgage, but the mega-millionaire closer to the credit spigot can borrow 10 times as much as J. Q. can, and at half the rate of interest.

This post was published at Charles Hugh Smith on SUNDAY, JANUARY 29, 2017.

Condo Speculation Collapses in Miami-Dade’s Condo Glut

Preconstruction condo flippers left twisting in the wind. The lure: Buy a preconstruction condo from a developer in the early stages of development. The initial deposit is small, and in a booming market, the payoff big. Additional payments need to be made as the building progresses, but lenders are eager to lend as condo prices soar. Everyone is in nirvana. This bet has been hot in the condo construction boom around the country. But in Miami, the bet is now collapsing. And preconstruction condo flippers, the lucky ones that could sell their units at all, are bathing in a sea of red ink.
First things first: The overall condo market in Miami-Dade has gotten tough, with the inventory of condos for sale ballooning and with sales plunging.
In December, 1,084 condos and townhouses were sold, down 7% from December 2015, down 22% from December 2014, and down 24% from December 2013, according to the Miami Association of Realtors. While the median sales price still edged up 1.3%, the average sale price dropped 12.6%, and the dollar volume of those sales plunged 19.4%

This post was published at Wolf Street on Jan 29, 2017.

Why The Cold War Between Tech CEOs and Trump Is About To Go Nuclear

Over the weekend, openly defiant CEOs, particularly among the tech sector, expressed their displeasure with Trump’s Friday executive order temporarily banning refugees and limiting travel from seven Muslim countries, with both words and deeds, among which the following (summary courtesy of Axios):
VCs funding the ACLU: Several venture capitalists, as well as a few entrepreneurs, took turns soliciting donations to the American Civil Liberties Union through social media and personally matching those donations. Airbnb volunteers to help provide housing for impacted immigrants: The home-sharing company said that it will work with travelers and organizations to provide housing for those impacted by the executive order, whether through volunteer hosts or by funding housing. Lyft and Uber commit millions of dollars to legal aid: On Sunday, Lyft said it will donate $1 million to the ACLU over the next four years. Later in the day, Uber said it will create a $3 million legal defense fund for impacted drivers, as well as provide legal assistance and compensate their lost wages. Google is setting up a $2 million crisis fund: The search giant has set up a fund that will donate to the American Civil Liberties Union, Immigrant Legal Resource Center, International Rescue Committee, and UNHCR. On Monday morning, former US Treasury Secretary Larry Summers, speaking in an interview with Bloomberg Television, said that he is ‘gratified’ by what he heard from the tech community. ‘As global businesses, they have a huge stake in the United States being a nation of the Statue of Liberty rather than being a nation of refugee camps.’ He added that ‘they have a huge stake in the United States supporting an open and tolerant global system, they have that stake for their employees, their customers, they have it for the reputation of the United States and they have spoken out.’

This post was published at Zero Hedge on Jan 30, 2017.

Adventures in Currency Debasement

Rekindling the Dollar Debasement Strategy The U. S. dollar, as measured by the dollar index, has generally gone up since mid-2014. The dollar index goes up when the U. S. dollar gains strength (value) against a basket of currencies, including the euro, yen, pound, and several others. Conversely, the dollar index goes down when the U. S. dollar loses value.
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Between July 30, 2014 and December 28, 2016, the dollar’s value, as measured by the dollar index, increased from 79.78 to 103.30 – or 29 percent. Since then, the dollar index has dropped to about 100. In addition, President Trump has said that the dollar is ‘too strong’ and Treasury Secretary Steven Mnuchin has called the dollar ‘excessively strong.’
President Trump wants a weaker dollar to help with his program of bringing manufacturing jobs back to the U. S. The rationale is simple enough. A weaker dollar should make U. S. exports more attractive on international markets. Similarly, a weaker dollar should make foreign imports more expensive for U. S. consumers so they’ll buy products Made in USA.

This post was published at Acting-Man on January 30, 2017.

European House of Cards – When Does it Come Crashing Down?

The EU leadership is attempting to minimize the importance and the explosive result of BREXIT. While the leaders merely yell ‘You will still regret it’, the disintegration of the EU has already begun and they are clueless as to what is really at stake. While many just focus of trade, the entanglement is far more complex than just trade. The banking system, clearing, and the implementation of bank-bail-in provisions place at risk the entire European banking system.

This post was published at Armstrong Economics on Jan 30, 2017.