Is This Why The Status Quo Disdains Bitcoin? - The "Wrong People Are Getting Rich"

Authored by Charles Hugh Smith via OfTwoMinds blog,

The wrong people--rebels, outsiders, nerds and techies-- got on the cryptocurrency boat while their insider/rentier "betters" blew it and are now raging bitterly onshore.

The psychology of money, wealth and speculative manias is endlessly fascinating. Most of what"s written on these subjects focus on the process of building wealth as if it were a quasi-science rather than a psychologically driven process. Only speculative manias attract a psychology-based analysis, usually characterized as some variant of the madness of the herd running off the cliff en masse.

But money and wealth are nothing but more sedate reflections of the same dynamics that drive speculative manias. Much has been written about cognitive biases and thinking fast and slow, but these explorations do not exhaust the psychology underpinning money, wealth and speculative manias.

Few things have unleashed the Monster Id of wealth and money quite like bitcoin and the cryptocurrencies. Compare the speculative manias of the dot-com era (1995 - 2000) and the housing bubble (2002 - 2007) with the crypto-mania: in the first two manias, the status quo embraced the mania as rational and justified: the Internet would continue growing for decades, housing never goes down, etc.

But the status quo has not embraced cryptocurrencies with the same ardor--why? Instead of endless justifications for valuations, the status quo is filled with reports that 97% of all economists view bitcoin as a bubble, and endless articles decrying the bitcoin bubble as a fools game that will deservedly burst, and soon.

Why did the status quo embrace irrationally exuberant bubbles in the 1990s and 2000s, but views the exuberance of cryptocurrencies with disdain? I think this is a fruitful topic to explore, largely because nobody seems to be asking this question.

Here are my suppositions:

1. The status quo reviles cryptocurrencies because the wrong people are getting rich.

2. The status quo reviles cryptocurrencies because the usual insiders (Wall Street and its politico leeches) didn"t get on board early, and they"re deeply offended that they missed the boat.

3. Until the advent of bitcoin futures trading, the usual insiders had no means to skim profits from the exuberance.

To me, these dynamics go a long way in explaining the 97% of the status quo"s visible loathing of bitcoin and the cryptocurrencies.

In other words: why embrace some manias but not all manias? Answer: some manias make the usual insiders filthy rich, others don"t. The dot-com mania generated billions of dollars in profits for Wall Street and the rest of the financier-politico leeches (i.e. the rentier class) via IPOs (initial public offerings), insider deals and vast fees generated by trading the mania with other peoples" money.

The housing bubble generated billions of dollars in profits for Wall Street via the issuance of mortgage-backed securities (MBS), CDOs and other exotic financial instruments based on mortgages and related securities, and realtors (and the rest of the housing industry) banked billions in commissions, fees and other skims.

In both cases, Average Joe and Jane reckoned the manias were their ticket to untold wealth. A relative few Average Joes and Janes did strike it rich, usually by being early employees of companies that went public, and a few others managed the impossible, i.e. buying low and selling high and then exiting the casino with their winnings.

But the vast majority of the Average Joes and Janes were fodder for the chipping machines of Wall Street and the FIRE (finance, insurance, real estate) insiders and elites. Far more people lost money in the period between 1997 and 2003 than won big and kept their winnings. Millions of people gambled on the housing bubble expanding forever and lost everything.

Now compare that to the cryptocurrency mania: Wall Street and the rest of the financier-politico leeches (the rentier class) have virtually no insider skims in the cryptocurrencies--is it any wonder they hate bitcoin with a passion that correlates to their inability to rake in billions of low-risk fees from the mania?

The psychology of FOMO (fear of missing out) is well known; the indignation of those who didn"t get on board before the ship sailed is less well noted. The financier/rentier class has a very high opinion of its own moxie and intelligence, and the fact that they missed the boat entirely on bitcoin et al. is like a knife of wounded pride plunged directly into their greedy hearts.

Those who can see past their own wounded pride are busy investing in blockchain applications and cryptocurrency funds, while those who cannot let go of their wounded pride are raging daily against the bitcoin bubble, and praying nightly to their evil gods for its collapse, to prove themselves right after all.

Every day that bitcoin doesn"t crash to zero is a day of pain for those whose pride was wounded by missing the cryptocurrency boat.

Even worse--if that"s possible for those whose greed is insatiable--the wrong people have gotten rich--techies, nerds, outsiders, rebels, etc.

It"s as if the crypto-rabble rebels just blew up the Financial Empire"s Death Star and got away with it.

Interestingly, few balk when privileged insiders mint fortunes for doing essentially nothing but exploiting their privileges. The corporate media heaps fatuous praise on insiders who reap billions of dollars from others" labor and ideas via IPOs, leveraged buyouts, etc. because of course these rentiers are our bosses and overlords.

It"s dangerous for a mere peasant in the Corporate-State Feudal System (i.e. the status quo) to speak truth to power against the Financial Aristocracy that issues the paychecks.

You can bet that if a Wall Street insider had bought bitcoin in size for $100 each, said insider would be justifying today"s valuations and arguing for higher valuations ahead, just as he/she did in the dot-com and housing manias.

So it all boils down to this: the wrong people--rebels, outsiders, nerds and techies-- got on the cryptocurrency boat while their insider/rentier "betters" blew it and are now raging bitterly onshore, not just resentful but indignant that this mania didn"t enrich insiders like it should have.

So sorry about your Death Star. I guess this doesn"t bode well for your bonus and promotion in the Imperial hierarchy.

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I"m offering my new book Money and Work Unchained at a 10% discount ($8.95 for the Kindle ebook and $18 for the print edition) through December, after which the price goes up to retail ($9.95 and $20). Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

"Wealth Effect" = Widening Wealth Inequality

Authored by Charles Hugh Smith via OfTwoMinds blog,

Note that widening wealth and income inequality is a non-partisan trend.

One of the core goals of the Federal Reserve"s monetary policies of the past 9 years is to generate the "wealth effect": by pushing the valuations of stocks and bonds higher, American households will feel wealthier, and hence be more willing to borrow and spend, even if they didn"t actually reap any gains by selling stocks and bonds that gained value.

In other words, the mere perception of rising wealth is supposed to trigger a wave of renewed borrowing and spending.

This perception management only worked on the few households which owned enough of these assets to feel wealthier--the top 5%, the top 6 million out of 120 million households. This chart shows what happened as the Fed ceaselessly goosed financial assets higher over the past 9 years: the gains, real and perceived, only flowed to the top 5% of households earning in excess of $200,000 annually.

Spending by the bottom 95% has at best returned to the levels reached a decade ago in 2007.

By focusing on boosting financial assets to the moon as a means of goosing spending, the Federal Reserve has widened wealth and income inequality to the breaking point. Perception management doesn"t actually boost the inflation-adjusted wages of the bottom 95%, which have stagnated for decades. Nor does boosting assets do much good for the vast majority of households which have modest holdings of stocks and bonds, usually in IRA or 401K retirement accounts they can"t touch without paying steep penalties.

As the charts below illustrate, the Grand Canyon between the top 5% and everyone else is widening. Let"s say a househould has $12,000 in retirement funds and $5,000 in a savings account. (Many households have less than $1,000 in savings, so this example-household is doing pretty well to have $17,000 in cash and financial assets.)

Thanks to the Federal Reserve"s Zero Interest Rate Policy (ZIRP), savers have lost ground after adjustments for inflation. The stock market has more than doubled, and most bond funds have appreciated, but precious metals and other commodities have not performed as well. So let"s say the household"s retirement portfolio rose by a hefty 75%, or $9,000, to a total of $21,000.

Does this modest gain actually change the financial foundation of the household to the point that the household can now afford to buy a new vehicle, college tuition, etc.? The short answer is no; the gains are simply too modest as a percentage of income to make any difference.

Compare this to a top 5% household with hundreds of thousands of dollars of financial assets: gains registered in the hundreds of thousands do indeed move the needle on household wealth and perception management. The top 5% haven"t just reaped outsized gains in Fed-goosed assets; they"ve also reaped the vast majority of any wage gains generated in the past 9 years of "recovery."

As this chart shows, the bottom 90% lost ground, and the really substantial gains have accrued only to the top 1%.

Note that widening wealth and income inequality is a non-partisan trend. The political and financial elites have feathered their own nests while the bottom 95% have lost ground.

The Federal Reserve"s perverse policy of perception management has exacerbated wealth and income inequality: "wealth effect" = widening wealth inequality.

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I"m offering my new book Money and Work Unchained at a 10% discount ($8.95 for the Kindle ebook and $18 for the print edition) through December, after which the price goes up to retail ($9.95 and $20). Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Bubble Watch: The Fed KNOWS We"re in a 1999-Type Mania...

The Fed raised rates another 0.25% the week before last.

This marks the 5th rate hike since the Fed embarked on its policy tightening in December 2015 and the fourth rate hike in the last 12 months. The Fed’s latest statement also indicates it plans on raising rates three more times in 2018.

It is easy to gloss over the significance of this, but the Fed’s actions are indeed unusual; other major Central Banks (the Swiss National Bank, Bank of Japan, European Central Bank and Bank of England) are all currently running QE programs (the BoJ, ECB and BoE) or openly printing new money to buy stocks outright (the SNB).

What precisely is the Fed doing? Why the urge to tighten when other banks are all printing new money by the billions?

The following quotes from Fed offer us clues.

Fed Monetary Policy Report, June 2017:

“Forward price-to-earnings ratios for equities have increased to a level well above their median of the past three decades,

Fed minutes, July 2017:

"Since the April assessment, vulnerabilities associated with asset valuation pressures had edged up from notable to elevated, as asset prices remained high or climbed further, risk spreads narrowed, and expected and actual volatility remained muted in a range of financial markets."

Janet Yellen response to question from IMF Panel, October 2017:

Market valuations “are at high level in historical terms” when assessed on metrics akin to price-earnings ratios,

Fed Minutes, October 2017:

"In light of elevated asset valuations and low financial market volatility, several participants expressed concerns about a potential buildup of financial imbalances,"

Janet Yellen during Fed presser December 13th, 2017:

Stock valuations are at high end of historical levels.

I want to be clear on the significance of these statements.

The Fed’s primary role is to maintain financial stability. This means that the Fed will always downplay risks in its public statements. Indeed, former Fed Chair Ben Bernanke once stated that Fed policy is “98% talk, 2% action.”

With that in mind, the above quotes are astonishing in their clarity: the Fed is explicitly stating (in Fed terms) that the markets are in a bubble. And the Fed didn’t just do this once, the Fed has been warning about asset valuations/froth in the system for six months straight.

So just how “frothy” are things that the Fed is being so explicit?

Try “1999-levels” frothy.

Perhaps the best means of measuring frothiness in stocks is the Price to Sales (P/S) multiple. Most investors prefer to use Price to Earnings (P/E), but I am wary of that method because earnings can easily be fudged via gimmicks (different methods of depreciation, write-offs, reducing loan loss reserves, tax loopholes, etc.).

Sales, on the other hand, are very hard to fudge. Either money came in the door, or it didn’t. And if a company gets caught fudging its revenues, someone goes to jail.

With that in mind, consider that the S&P 500’s current P/S multiple has surpassed its former all time peak from 1999: a period that is now widely considered to be the single largest stock bubble in history.

Put simply, stocks are extraordinarily overvalued by a reliable measure.

H/T Bill King

However, there is one main difference between 1999 and today...

Namely, that the Fed has been INTENTIONALLY creating bubbles for nearly 20 years today... and it"s out of more senior asset classes to use!

Let me explain...

The late ‘90s was the Tech Bubble.

When that burst in the mid-‘00s, the Fed created a bubble in housing.

When that burst in ’08 the Fed created a bubble in US sovereign bonds or Treasuries.

And because these bonds are the bedrock of the US financial system, the “risk-free rate” of return against which ALL risk assets are valued, when the Fed did this it created a bubble in EVERYTHING (hence our coining of the term “The Everything Bubble” and our bestselling book by the same name).

On that note, we are putting together an Executive Summary outlining all of these issues as well as what’s to come when The Everything Bubble bursts.

It will be available exclusively to our clients. If you’d like to have a copy delivered to your inbox when it’s completed, you can join the wait-list here:

https://phoenixcapitalmarketing.com/TEB.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Jesus Was Born In A Police State

Authored by John Whitehead via The Rutherford Institute,

The Christmas narrative of a baby born in a manger is a familiar one.

The Roman Empire, a police state in its own right, had ordered that a census be conducted. Joseph and his pregnant wife Mary traveled to the little town of Bethlehem so that they could be counted. There being no room for the couple at any of the inns, they stayed in a stable, where Mary gave birth to a baby boy, Jesus.

Unfortunately, Jesus was born into a police state not unlike the growing menace of the American police state. And when he grew up, Jesus did not shy away from speaking truth to power. Indeed, his teachings undermined the political and religious establishment of his day. He was eventually crucified as a warning to others not to challenge the powers-that-be.

Yet what if, instead of being born into the Roman police state, Jesus had been born and raised in the American police state?

Rather than traveling to Bethlehem for a census, Jesus’ parents would have been mailed a 28-page American Community Survey, a mandatory government questionnaire documenting their habits, household inhabitants, work schedule, etc.

Instead of being born in a manger, Jesus might have been born at home. Rather than wise men and shepherds bringing gifts, however, the baby’s parents might have been forced to ward off visits from state social workers intent on prosecuting them for the home birth. One couple in Washington had all three of their children removed after social services objected to the two youngest being birthed in an unassisted home delivery.

Had Jesus’ parents been undocumented immigrants, they and the newborn baby might have been shuffled to a profit-driven, private prison for illegals where they would have been turned into cheap, forced laborers for corporations such as Starbucks, Microsoft, Walmart, and Victoria’s Secret.

From the time he was old enough to attend school, Jesus would have been drilled in lessons of compliance and obedience to government authorities, while learning little about his own rights. Had he dared to step out of line while in school, he might have found himself tasered or beaten by a school resource officer, or at the very least suspended under a school zero tolerance policy that punishes minor infractions as harshly as more serious offenses.

Had Jesus disappeared for a few hours let alone days as a 12-year-old, his parents would have been handcuffed, arrested and jailed for parental negligence.

From the moment Jesus made contact with an “extremist” such as John the Baptist, he would have been flagged for surveillance because of his association with a prominent activist, peaceful or otherwise. Since 9/11, the FBI has actively carried out surveillance and intelligence-gathering operations on a broad range of activist groups.

Jesus’ anti-government views would certainly have resulted in him being labeled a domestic extremist. Law enforcement agencies are being trained to recognize signs of anti-government extremism during interactions with potential extremists who share a “belief in the approaching collapse of government and the economy.”

While traveling from community to community, Jesus might have been reported to government officials as “suspicious” under the Department of Homeland Security’s “See Something, Say Something” programs.

Rather than being permitted to live as an itinerant preacher, Jesus might have found himself threatened with arrest for daring to live off the grid or sleeping outside. In fact, the number of cities that have resorted to criminalizing homelessness by enacting bans on camping, sleeping in vehicles, loitering and begging in public has doubled.

Viewed by the government as a dissident and potential threat to its power, Jesus might have had government spies planted among his followers to monitor his activities, report on his movements, and entrap him into breaking the law. Such Judases today—called informants—often receive hefty paychecks from the government for their treachery.

Had Jesus used the internet to spread his radical message of peace and love, he might have found his blog posts infiltrated by government spies attempting to undermine his integrity, discredit him or plant incriminating information online about him. At the very least, he would have had his website hacked and his email monitored.

Had Jesus attempted to feed large crowds of people, he would have been threatened with arrest for violating various ordinances prohibiting the distribution of food without a permit. Florida officials arrested a 90-year-old man for feeding the homeless on a public beach.

Had Jesus spoken publicly about his 40 days in the desert and his conversations with the devil, he might have been labeled mentally ill and detained in a psych ward with no access to family or friends.

Without a doubt, had Jesus attempted to overturn tables in a Jewish temple and rage against the materialism of religious institutions, he would have been charged with a hate crime. Currently, 45 states and the federal government have hate crime laws on the books.

Rather than having armed guards capture Jesus in a public place, government officials would have ordered that a SWAT team carry out a raid on Jesus and his followers, complete with flash-bang grenades and military equipment. There are upwards of 80,000 such SWAT team raids carried out every year.

Had anyone reported Jesus to the police as being potentially dangerous, he might have found himself confronted—and killed—by police officers for whom any perceived act of non-compliance (a twitch, a question, a frown) can result in them shooting first and asking questions later.

Charged with treason and labeled a domestic terrorist, Jesus might have been sentenced to a life-term in a private prison where he would have been forced to provide slave labor for corporations or put to death by way of the electric chair or a lethal mixture of drugs.

Either way, as I show in my book Battlefield America: The War on the American People, whether Jesus had been born in our modern age or his own, he still would have died at the hands of a police state.

Remember, what happened on that starry night in Bethlehem is only part of the story. That baby in the manger grew up to be a man who did not turn away from evil but instead spoke out against it, and we must do no less.

NSA Whistleblower Snowden Launches Mobile App For Paranoid People

Famed NSA Whistleblower Edward Snowden has just launched Haven, an app for people to transform any Android smartphone into a high-tech security system for detecting intrusions.

Snowden, while currently on the run from the CIA, hiding somewhere in Moscow until 2020, has found enough time to launch his new mobile security app last Friday for the sufficiently paranoid person (e.g. activists, dissidents, journalists, & etc).

"When the lead developer explained the project to his young children, they found another use for it: "We’re going to catch Santa!" " https://t.co/Beangjk90g

— Edward Snowden (@Snowden) December 23, 2017

Haven is designed to be installed on any Android smartphone, particularly inexpensive and older devices. It operates like a home surveillance system, leveraging on-device sensors to provide surveillance of physical areas. Sensors within the Android phone monitor motion, sound, vibration and light, watching for unwanted guests to notify a user. Combining Haven with an array of sensors in any smartphone, coupled with the most secure communications technologies like Signal and Tor, the app is providing Snowden and other activists around the world with a mobile security system.

The app was developed by Freedom of the Press Foundation, Guardian Project, and Snowden. According to the Guardian Project, the app’s prototype funding was provided by FoPF, and donations to support continuing work can be contributed through their site: https://freedom.press/donate-support-haven-open-source-project/.

According to the Guardian Project, this is how the app works,

Haven only saves images and sound when triggered by motion or volume, and stores everything locally on the device. You can position the device’s camera to capture visible motion, or set your phone somewhere discreet to just listen for noises. Get secure notifications of intrusion events instantly and access the logs remotely or anytime later.

On-device sensors monitor for disturbance, and then logs the data:

• Accelerometer: phone’s motion and vibration


• Camera: motion in the phone’s visible surroundings from front or back camera


• Microphone: noises in the environment


• Light: change in light from ambient light sensor


• Power: detect device being unplugged or power loss

Further, the group explains why Haven is well suited for Android devices and does make the claim, a version for the iPhone is on the horizon.

While we hope to support a version of Haven that runs directly on iOS devices in the future, iPhone users can still benefit from Haven today. You can purchase an inexpensive Android phone for less than $100, and use that as your “Haven Device”, that you leave behind, while you keep your iPhone with you. If you run Signal on your iPhone, you can configure Haven on Android to send encrypted notifications, with photos and audio, directly to you. If you enable the “Tor Onion Service” feature in Haven (requires installing “Orbot” app as well), you can remotely access all Haven log data from your iPhone, using the Onion Browser app. So, no, iPhone users we didn’t forget about you, and hope you’ll pick up an Android burner today for a few bucks!

If one of the sensors was triggered, a notification would be sent to one of the following platforms:

• SMS: a message is sent to the number specified when monitoring started


• Signal: if configured, can send end-to-end encryption notifications via Signal

 

My partner has been testing Haven for a few months with a spare phone. Every time you open the closet, it sends a picture by Signal. In addition to impressive intrusion detection capabilities, you can also use it to send helpful reminders! ? https://t.co/FHi1bjFsLP pic.twitter.com/IS58HzDVha

— lex.txt (@lex_is) December 22, 2017

As for Snowden, he remains in an asylum somewhere in Moscow until 2020 when his residence permit expires.

With the launch of Haven, it seems as Snowden is attempting to change the calculus of risk for when US authorities come hunting for him once more.

If all else fails, Snowden might have just invented a baby monitor for the broke millennial. 

Charles Hugh Smith Explains "Why I"m Hopeful"

Authored by Charles Hugh Smith via OfTwoMinds blog,

A more human world lies just beyond the edge of the Status Quo.

Readers often ask me to post something hopeful, and I understand why: doom-and-gloom gets tiresome. Human beings need hope just as they need oxygen, and the destruction of the Status Quo via over-reach and internal contradictions doesn"t leave much to be happy about.

The most hopeful thing in my mind is that the Status Quo is devolving from its internal contradictions and excesses. It is a perverse, intensely destructive system with horrific incentives for predation, exploitation, fraud and complicity and few disincentives.

A more human world lies just beyond the edge of the Status Quo.

I know many smart, well-informed people expect the worst once the Status Quo (the Savior State and its corporatocracy partners) devolves, and there is abundant evidence of the ugliness of human nature under duress.

But we should temper this Id ugliness with the stronger impulses of community and compassion. If greed and rapaciousness were the dominant forces within human nature, then the species would have either died out at its own hand or been limited to small savage populations kept in check by the predation of neighboring groups, none of which could expand much because inner conflict would limit their ability to grow.

The remarkable success of humanity as a species is not simply the result of a big brain, opposable thumbs, year-round sex, innovation or even language; it is also the result of social and cultural associations that act as a "network" for storing knowledge and good will--what we call technical and social capital.

I have devoted significant portions of my books--

Survival+

An Unconventional Guide to Investing in Troubled Times

Resistance, Revolution, Liberation

Why Our Status Quo Failed and Is Beyond Reform

A Radically Beneficial World: Automation, Technology & Creating Jobs for All

Money and Work Unchained

to an explanation of how community and self-reliance have atrophied under the relentless expansion of the dominant Savior State.

The social capital and "return on investment" earned from investing time and energy in community and other social networks has been replaced by a check from the Savior State--a transfer payment that surely beats the troublesome work of investing in community in terms of risk and return.

The net result of the Savior State dominating society and the economy is the rise of a pathological mindset of entitlement and resentment--the two are simply two sides of the same coin. You cannot separate them.

Once self-reliance has been lost, so too has self-confidence been lost, and the Savior State dependent--individual and corporation alike--soon distrusts their ability to function in an open market.

This is a truly sad, self-destructive state of affairs, and deeply, tragically ironic. The calls for "help" quickly lead to dependence on the Savior State, and that dependence quickly breeds complicity and silence in the face of repression and predation by the State and its corporate partners.

In a very real sense, citizens relinquish their citizenship along with their self-reliance and self-worth once they accept dependence on the State.

I often mention that the U.S. has much to learn from so-called Third World countries that are poorer in resources and credit. In many of these countries, the government is the police, the school and the infrastructure of roadways and energy. Many of these countries are systemically corrupt, and the State is the engine of enforcing that corruption.

Rather than something to be embraced and lobbied, involvement with the State is something to be avoided as a risk. In everyday life, people rarely encounter the government except in law enforcement or schooling.

As a result, people depend on their social capital and community for sustenance, support, work and connections.

This is not altruism, it is mutually beneficial.

Once a community dissolves into atomized individuals who each get a payment from the Central State, then they no longer need each other. Rather, other dependents on the State are viewed as competitors for the State"s resources.

These atomized, isolated individuals have a perverse relationship with the State and what remains of the community around them: lacking the self-worth earned from work or engagement/investment in a community, then their only outlet for self-identity is consumption: what they wear, eat, drink, etc. as consumers.

This dependence on the State also serves the State"s goal, which is a passive, compliant populace of dependents, and distracted, passive workers who pay their taxes. Thus dependence on the State and a hollow consumerism are ontologically bound: one feeds the other.

The era of debt-based consumption as the engine of "growth" and "prosperity" is coming to an end. Adding debt via credit no longer creates growth; it actually takes away from the economy by expanding debt service (interest payments).

The vast majority of developed-world people have had the basics of life since the late 1960s -- transport, food, shelter and utilities. The "growth" since then depended on cheap, abundant oil and a consumerist mentality in which one constantly re-defines and renews one"s identity not from social investments in others or the shared community but from consumption.

Not coincidentally, this dominance of consumption as the only metric for "growth" (as opposed to, say, productive activity) has been paralleled by the dominance of the Central State.

The end of credit-based consumption will be a very positive development, as will the devolution of the Savior State. The Savior State is like oil--both are at their peaks and are starting their inevitable slide down the S-curve. The world they created was not as positive for human fulfillment and happiness as we have been told.

Indeed, study after study has found that people with the basics for life, a higher purpose that requires sacrifice and a tight-knit community are far and away happier than isolated, atomized, insecure consumers, regardless of their wealth and consumption.

This potential to re-humanize our economy is why I am hopeful.

 

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I"m offering my new book Money and Work Unchained at a 10% discount ($8.95 for the Kindle ebook and $18 for the print edition) through December, after which the price goes up to retail ($9.95 and $20). Read the first section for free in PDF format. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Bitcoin Breakdown: How-to, Step by Step

Third part in a series. Part 1, Part 2 

Article First Appeared on HedgeAccordingly.com

By @sellputs

Merrrrrrrrrry Bitmas!

Bitcoin has been crashing like a Bad Santa all week long—it had surged up to $19,856 last Monday and had plunged as low as $11,590 by Friday, bouncing back up to $14k and change. So anyone who bought bitcoin last Monday is still smarting, and those who bought below $12k yesterday are feeling just plain smart.

Either way, this column will tell you how to join the fun.

In search of a Christmas miracle, we’re going to map out the ten steps for setting up your own bitcoin trading account. It is so fast and simple that in 15 minutes or so, you will be linked-up, “appified” and able to invest in bitcoin and other digital currencies from your smartphone. Once you are set up, you can make each crypto purchase in seconds.

If you dare. Lately it has been a pretty scary videogame.

Millions of people seem undaunted; convinced this bubble still has plenty of room to grow.  Coinbase, the cryptocurrency exchange, now is said to have 13.3 million accounts—more than Charles Schwab & Co. (10.6 million) and, maybe, sign of just how much this Bitcoin Bubble is inflating.

This, at a time when stocks are especially hot since the Trump election that has so many of my liberal pals in New York apoplectic and foaming at the mouth. (Then again, they never have felt so outraged and alive—they love it.)

It took a full year for stocks to go up 30%, yet you can lose 20% on bitcoin in just two days. Example: if you bought into bitcoin, Ethereum and Litecoin this past Wednesday evening (12/20), by Friday afternoon you were down a sickening 20% in bitcoin and almost as much in ETH and LTC. Don’t ride this wild rollercoaster if you can’t stomach that kind of a setback.

For those of you who can, and for those of you who believe you are ready to get started on this tumultuous investing journey, here’s an easy guide, step by step, to setting up a cryptocurrency trading account. We did it the other day at Coinbase. When in doubt, go with the biggest, it may be the biggest for a good reason.

Step 1: Go to app store, download Coinbase app. In a minute or two it’s ready to go.

Step 2:  Before you open up the app for the first time, make sure you know, ahead of time, the online password to your checking account, if that is the account you will link up to Coinbase to transfer real U.S. dollars into purchases of tiny increments of untraceable bits. Same goes for the credit card you might link to your new Coinbase account (which triggers a 4% fee rather than the 1.5% fee charged for linking to your bank account).

Step 3: Open the app. Give fingerprint, and the opening screen shows the Bitcoin price at the moment, and a year-long fever chart that starts at $800 in January 2017 and soars to $19,205 by December 2017.  It is exhilarating. Two buttons beckon: Sign Up or Log In. Touch on Sign Up.

Step 4: A few screens in, the app has you use your phone-cam to snap a picture of your driver’s license, front and back, and then it has you take a selfie of your face.  It tells you it must verify the photos and will get back to you in five to 10 minutes.

Step 5:  Five minutes or so later, you are verified, and a fast questionnaire pops up: fill in your occupation and “employed by,” and a message flashes: “You’re almost ready to invest.” Click the green box labeled, “Complete account setup.”

Step 6:  The app teases you with the current flashing prices of the coins you anxiously are waiting to buy (BTC, ETH, LTC), as it sends a verification number to your phone. You enter that number into a box on-screen, and the next message says: “You’re almost ready to buy.” (Italics added). Note the change in verbiage from “ready to invest.”

Step 7:  “Please complete your account,” the app instructs. You add a payment source (your banking account is recommended), a user name and a password (write it down on a slip of paper and slide the paper into your wallet; security pros might preach against it, but they preach against most everything, and hacks keep happening anyway.)

Step 8:  Now take a deep breath and psyche up. For some people wary of how bubbly bitcoin is, talking yourself into making the first bet is like a testosterone-soaked trader trying to talk himself into getting married.  You never will be truly ready, so just take the leap. Do it in a small way, and don’t flinch when what you bought suddenly slides in value. 

Step 9: Commence buying. Touch the teensy “Prices” icon in the bottom left of your phone to see the latest coin bids, then touch “Accounts” and you get a screen of “wallets,” one for each coin type. Touch the bitcoin (BTC) wallet and a new screen pops with two buttons: Buy. Sell. Can’t sell what you don’t yet own, so you click Buy.

Step 10: Instantly a new screen shows up, with the numbers pad helpfully displayed near the bottom so you can enter in the dollar amount you are about to spend. You tap in the dollar figure into a box marked USD, the app calculates the microscopic portion of coin that sum will fetch, you tap on “Buy” at the top of the screen, confirm the buy on the next screen and BAM!

A new screen shows, against a field of royal blue, a checkmark in a circle at the top, and below it a headline declaring: “Your buy was successful!” And below that, the exact portion you just bought, starting with a zero and carried out to eight decimal places. Or in the case of this purchase (of bitcoin cash, BCH, a new offshoot that we bought at 11:19 p.m. on Friday night):

0.08721555 BCH

At the bottom of the screen a bar instructs: Go to Accounts. When you press it, up comes the listing of the asset you just bought, with the Buy and Sell buttons at the ready. One back-arrow press and you are back to the full Accounts page listing five “wallets” for buying five separate currencies (BCH, BTC, ETC, LTC and the good ol’ USD).

From there you can get fancier, setting price alerts to learn when a currency has fallen to the price you were waiting to see. “Never miss an opportunity,” the Coinbase app advises. This can get obsessive pretty quickly (and drain your time away from Facebook, Instagram and Snap). The app also can alert you when your bitcoin crashes down through a floor you specified, in case you want to sell.

Although, selling isn’t really the point here, is it? If you are bold enough (or unwise enough) to bet on this ethereal thing everyone is talking about, then maybe it is best to put up your money and leave it there for a while, electing patience over panic. You are a rough rider trying to stay on top of this giant, swelling bubble and hold on long enough to reap returns from those who jump on after you. With easy apps like Coinbase, millions more investors may be aiming to do just that. Giddyap!

Next: Five Easy Pieces of advice for bitcoin trading.

China"s Raging Against Dying Of The Light (Or Why Peak Employment Is Imminent)

Authored by Chris Hamilton via Econimica blog,

China"s working age population is clearly defined as those aged 16 to 50 years old for females (55 for "white collar" females) and 16 to 60 years old for males.  China mandates retirement at these outer age limits.  Perhaps of some interest should be that this working age population peaked in 2011 and has been declining since.  This decline will continue indefinitely as China has a collapsing childbearing population (detailed HERE), net emigration (outflow), and a still decidedly negative birthrate.

There is no evidence to believe the working age declines will abate any decade soon.  As the chart below shows, China"s potential workforce will be shrinking indefinitely... and by 2030 China"s potential workforce will be over 100 million fewer than the 2011 peak (an 11% decline)...and only further down from there.

China has one of the youngest average retirement ages in the developed world.  On average, according to a recent study (HERE), Chinese leave the work force by age 55 compared to age 63 in the US (Norway has the latest average departure at age 67).  So, perhaps China will be raising the retirement age to curb the ballooning 60+yr/old population entering retirement (chart below)?  More on that later.

Comparing the working age population versus the 60+yr/old population (chart below).  A shrinking potential workforce since peaking in 2011 and a rapidly growing elderly population.

Below, that elderly growth versus the working age depopulation as a % of all adults (chart below)...think hockey stick.  After nearly six decades of maintaining a consistent 60+yr/old % of the adult population...the elderly explosion is just beginning.

If we take the now declining total potential working age population vs. China"s still rising total number of employed individuals (according to Statista)...the chart below shows that if China adds just a mere million employees a year (about a third of the annual average employment growth seen from "06 through "16)...that by 2030 China"s employment will exceed 100% of the potential workforce.  Wait...what?!?  Or perhaps working from the premise that people who don"t exist can"t be employed...it"s time to start considering China"s employed population is set to begin falling.

This idea that there are "millions upon millions of Chinese just waiting to be incorporated into the workforce"...not so much.  While a continuing shift from rural to urban is likely, China has already or will soon experience peak employment. Simply put, there will be fewer consumers of everything (homes, cars, appliances, etc.) every year than the year before. 

Whatever overcapacity exists now will be joined by massive increases in excess housing, excess production, excess shopping malls as this depopulation plays out over the coming years and decades.

Five big points here:

1) China ends one child policy, with little to no impact...

• 
  

  Although China implemented its one child policy in 1979 and officially phased it out in 2015, China"s birthrate was actually consistently higher than most of the other major economies in East Asia (Japan, S. Korea, Taiwan, Singapore...chart below) and only N. Korea"s fertility rate is currently higher.

  
  

• 
  

  None of these other East Asia nations ever implemented birth restrictions.  Instead, their populaces chose not to replace themselves responding to the availability of birth control, surging costs of child rearing, and inclusion of females into the workforce, etc.  Simply put, the one child policy was inevitable and has now organically gone global.  The phase out of this policy will have little to no impact of China"s fertility rates.

  
  

2) China to raise retirement age, but no time soon...

• 
  

  In early 2015, China suggested it would detail in 2017 (which I still have not seen) a gradual, multiyear process to raise the retirement age (China"s version of political suicide).  Suggestions focused on slowly, incrementally, raising female retirement ages to match males and likewise, pushing retirements out by a month or two per year.  However, none of this was even suggested to start within the next five years and like most things, almost surely be back-end loaded so any real impacts are overstated.  Regardless Communist or "Capitalist" politicians, the game is the same.  A little "razzle-dazzle" that ensures any negative policy impacts never occurs on your watch.

  
  

3) China to institute Universal Pension Plan...

• 
  

  In late 2015, China said "We will achieve a basic pension for all employees nationally".  Currently, about 800 million of China"s 1.3 billion are eligible for state pensions.  According to Sinosphere, pensions for non-state employees vary widely, as high as 3000 RMB ($480) month in Beijing to as little as 80 RMB for rural farmers.  Civil Servants pensions are generally higher than those of non-state employees.  The party statement said, China would be;

  
  
  • 
    

    “Building a fairer and more sustainable social welfare system.

    
    
    
    

    Implementing plans for every person to take part in social insurance.

    
    
    
    
    
    

    Diverting capital from state-owned enterprises to social security funds.

    
    
    
    
    
    

    
    

    Offering all urban and rural residents insurance for serious illness.”

    
    

    
    
    
    
  
  

4) Chinese wages & average per capita disposable income rising but gains are hugely variable...

• 
  

  While Chinese factory wages in tier 1 urban areas are now inline with Portugal or S. Africa, this terrific rise has created it"s own problems.  The rise in wages has been met with inflationary spikes in rents, fuel, food, etc. etc.  Average disposable income has risen in the urban areas but flat at best across rural China.  However, the response of employers to the spectacular rising wages has been automation, a shift away from labor intensive production, and outsourcing to lower cost countries.  This is at odds with the generally low skill/low education rural population looking for opportunity in the urban areas.  The breadth and size of further gains in disposable income is likely to be limited.  Economically, a declining total number of workers making marginally more money will not provide the desired growth.

  
  

5) China cannot export its way out of this...

• 
  

  The annual change to the 0-64yr/old combined populations of the 35 OECD nations (US, Canada, Europe, Japan, S. Korea, Australia/NZ) plus China, Brazil, and Russia begin declining in 2018 (chart below).  The core populations of the nations responsible for consuming 80%+ of all Chinese exports have peaked and begin shrinking.  Fewer consumers every year than the year before, indefinitely.  As for the nations that are doing all the growing, India and Africa, they consume about 4% of all Chinese exports.  BTW, the chart below shows when each nation/region 0-64yr/old population began declining.

  
  

Simply put, China is offering to increase and broaden it"s pension system to a ballooning population of elderly but will have a decreasing potential number of employees from which to pay for that increase?!? 

How will China achieve this?  Well, as the chart below shows, as Chinese core population growth has been decelerating, Chinese debt growth has been accelerating. 

While China"s GDP and energy consumption have led the world, they have not responded in kind to China"s debt explosion and exponentially more will be necessary to continue to show "growth".  Over a third and perhaps half of all the debt has been mal-invested in a housing bubble for a population that is never coming. 

What comes next isn"t going to be good for China nor the rest of the world as China looks to flood a depopulating nation with new debt only creating more housing overcapacity... China will look to beat the Japanese at the debt game.

For instance, the Chinese public-pension system as of 2014, took in 2.33 trillion yuan in revenue and paid out almost 2 trillion...with 3 trillion in net funds.  The net outflows and drawdown of those net funds is imminent.

But not to worry, the Communist Party explained that..."We will look at some opportunities with higher yields but will contain risk".  Again, no details were offered.  However, one asset it is clear the Chinese will not be buying...US Treasury"s (chart below, showing the net purchases since the debt ceiling debate of July 2011 according to TIC).  Since that date, China has been a net seller of US Treasury debt despite running record US dollar surplus" (BLICS = Belgium, Luxembourg, Ireland, Cayman Island, Switzerland).

From 2000 "til July 2011, China recycled 50% of its dollar trade surplus into US Treasury debt accumulating over $1.3 trillion.  Since July 2011, China has net sold over $100 billion and as of October, held about $1.2 trillion (chart below).

But I"m pretty sure those dollars aren"t sitting fallow and are finding their way into some asset, probably one in particular that is selling on the cheap about right now.

 

Paul Craig Roberts Rages Against Trump"s National Security Speech

Authored by Paul Craig Roberts,

What do we make of Trump’s national security speech?

First of all, it is the military/security complex’s speech, and it is inconsistent with Trump’s intention of normalizing relations with Russia.

The military/security complex, using Trump’s position as President, has defined Russia and China as “revisionist powers,” Washington’s rivals who seek to put their own national interests ahead of Washington’s unilateralism. Russia and China are “revisionist powers” because their assertion of their national interests limits Washington’s hegemony.

In other words, Washington does not accept the validity of other countries’ interests if those interests are contrary to Washington’s interests. So, how does Trump expect to work with Russia and China when he reads a speech that Russia and China seek to “shape a world antithetical to our interests and values.”

“Our values” means, of course, Washington’s dominance.

Trump begins by honoring the military, police, Homeland Security, and the Chairman of the Joint Chiefs of Staff. In other words, “America first” means domination by Washington over the citizenry as well as over foreign countries.

Trump then cloaks himself in the American people who “voted to make America great again.”

Then Trump’s speech picks up the Israel Lobby’s line about a bad deal with Iran and asserts that previous administrations tolerated ISIS, when in fact they created it and set in upon Libya and Syria.

Then he attacks environmental protection and complains of illegal aliens, while ignoring the refugees Washington’s wars imposed on Europe.

In an era of neoconservative celebration of US world hegemony, Trump accuses his predecessors of losing confidence in America. This is extraordinary.

When a country’s entire foreign policy is based on the assumption that it is the “exceptional and indispensable country,” how is this a loss of confidence? It is massive arrogance and hubris. The problem is not a loss of confidence by the rulers but an overbearing hubris.

Then Trump claims that through him, Americans again rule their nation.

He says that now Washington is serving the citizens. Looking at the tax bill, he must mean that citizens consist of the One Percent.

He next associates making America first with more money for the military.

Then he blames Iran for terrorism, something that Iran lives in fear of, but he does not mention Saudi Arabia’s support for terrorism or that of the US military/security complex’s which encourages terrorism as a weapon against Iran and Russia and as an excuse for its massive budget and power.

Trump then claims credit for the Russian/Syrian defeat of ISIS. It has been proved that ISIS is supported and financed by Washington. Trump’s claim is even more ridiculous than the previous claims of the Obama regime that the US defeated National Socialist Germany. Russia, which did defeat Germany, was not invited to the anniversary celebration.

Trump next demands that the countries we defend pay for it. Who are these countries and who do we defend them from? He can only mean Europe, Canada, Australia, Israel, and Japan. Is Washington defending them from Russia, China, North Korea and Iran or from the terrorists Washington creates, arms, and supplies to overthrow Libya, Syria and whatever countries Washington is successful siccing terrorists on. Apparently, some of these CIA-created terrorist organizations break loose from their creator and conduct operations on their own. So, Washington is a government that creates its own enemies.

Trump next brags on the sanctions he has imposed on “the North Korean regime.” He doesn’t mention, and I would bet he does not know, that Washington has withheld a peace treaty since the 1950s from North Korea. Washington has kept the war status open for 64 years. Having seen the fate of Libya, Iraq, Afghanistan, Syria, Somalia, etc., little wonder North Korea wants nuclear weapons.

Trump, standing there threatening the world, says that Washington will take all necessary steps to prevent North Korea from threatening the world.

Trump then delivers the establishment’s propaganda that unemployment is at an all time low and the stock market at an all time high. So, what is Trump rescuing Middle America from if unemployment is at an all time low? What happened to Trump’s case against jobs offshoring?

This is nothing but feel-good talk. Trump is repeating the lies because the lies make him look good. What Trump should be doing is pointing out the meaninglessness of the unemployment rate, because it doesn’t count the unemployed, only those few who looked for a job in the last 4 weeks. He should be pointing out that the stock market is not a sign of a growing economy but a sign of massive money creation by the central banks of the US, EU, UK, and Japan. The massive printing of money has flooded into paper assets, driving up their price and further enriching the One Percent.

Trump says that one leg of the strategy is to “preserve peace through strength.” What peace is he talking about? In the past two decades Washington has destroyed in whole or part eight countries and overthrown democratic governments in others. Is Trump equating peace with Washington’s wars? No other country has initiated wars and invasions and bombings and aggressive military actions on other countries’ borders. Trump says that America is threatened by enemies and to protect us the military will be enlarged. He said he was overturning the “defense sequester,” something that clearly does not exist.

My conclusion is that Trump has surrendered to the real rulers of America - the powerful interest groups such as the military/security complex, the Israel Lobby, the environmental polluters, Wall Street and the banks “too big to fail.”

America is a country in which despite the hopes flyover America had in Trump, an oligarchy rules.

The American people, regardless of who they elect, have no voice, no input, no representation.

The governments of Ronald Reagan and George H. W. Bush were the last governments that were subject to any accountability. With the Clinton regime the United States entered into the age of tyranny.

"Give Us The Man, We Will Make The Case": Civil Forfeiture, RussiaGate, And The Police State

Authored by Jim Jatras via TheDuran.com,

When do we realize we’re already living in a police state?

Maybe one clue is when our betters make a point of assuring us that we aren’t. Here’s Deputy Attorney General Rod Rosenstein testifying before a House Judiciary Committee inquiry into political bias in the Robert Mueller “Russia-gate” investigation:

Department of Justice employees are united by a shared understanding that our mission is to pursue justice, protect public safety, preserve government property, defend civil rights, and promote the rule of law.

Rosenstein’s contempt for his interlocutors’ intelligence was unconcealed. These aren’t the droids you’re looking for.

Rod’s on the job! Americans can certainly sleep peacefully tonight.

Or maybe not. Besides cracking down on states’ playing fast and loose with federal marijuana laws, one of the first enforcement actions ordered by Attorney General Jeff Sessions (R-Recused) was to step up use of civil forfeiture, which is a fancy way of saying “taking the property of people who have not been convicted of anything, or even accused of anything, with little recourse.”

But no sweat, there are “safeguards” to assure that property seizures only impact drug kingpins and gangsters – right?

Sessions’s order . . .  resuscitates a practice known as “federal adoption,” which allows police and prosecutors to circumvent state restrictions on asset seizures by collaborating with federal authorities. Through this partnership, state and local authorities turn their seizures over to federal colleagues, who “adopt” them for prosecution—ultimately returning up to eighty per cent of the assets to the originating cops or prosecutors to keep. One result, often unaddressed in critiques of forfeiture, is the tacit encouragement of racial profiling and targeting of property owners of color, who remain prime targets of the practice in much of the country.

 

A seventy-three-year-old Amtrak retiree named Elizabeth Young understands what’s at stake in Sessions’s civil-forfeiture endorsement. In 2009, she was resting in her West Philadelphia home, recovering from a hospitalization for two blood clots in her lungs, when suddenly she felt her house begin to shake. “I really thought we’d had one of those landslides, like they have in California,” Young told me recently. “I said, ‘What in the world is happening?’ ” She poked her head out into the hallway from her second-floor bedroom, and that’s when she saw them: “a bunch of cops in fatigues,” storming her stairs in a swat-style raid; down below, they were ransacking rooms. The Narcotics North Division was tearing up the house in pursuit of Young’s son, whom they later alleged had sold some hundred and forty dollars’ worth of pot from the residence and from his mom’s 1997 Chevrolet. Nearly a year after the raid, Ms. Young got another round of alarming news: the Commonwealth of Pennsylvania had filed a petition to seize her house and car, by way of civil forfeiture. [ . . . ]

 

Sessions sees a different picture. “Four out of five administrative civil-asset forfeitures filed by federal law enforcement agencies were never challenged in court,” he said recently, implying that a lack of legal challenge is proof of guilt. But if hiring a lawyer to fight your civil-forfeiture case costs more than your property is worth, the math prevails. Unlike a criminal defendant, Young’s 1997 Chevrolet had no right to a public defender.

Or consider the global move toward what is euphemistically called international financial “transparency.” I mean, who can be opposed to a certified doubleplusgood concept like transparency?

But it depends on who’s being transparent about what. Take Ken Silverstein’s examination of the International Consortium of Independent (sic) Journalists: why do hardly any Americans get transparency-ed in the Panama Papers but so many folks with connections with Russia do? Why so little transparency about who’s lavishly paying the ICIJ piper and for what purpose? Why does a law like FATCA (“Foreign Account Tax Compliance Act”) catch so few actual “fat cat” tax cheats and recover so little revenue, but pours tons of private financial data of innocent middle class people into the maw of the intelligence agencies?

Why? For the same reason James Clapper perjured himself telling Senator Rand Paul that the NSA doesn’t collect our cell phone metadata:

Inquiring minds want to know.

 

If you have nothing to hide, why would you object.

 

Big Brother Is Watching You (and listening, and compiling your data, etc)…

 

…but it’s all for your own protection.

This is literally the opposite of genuine transparency: “It is a practice of good government for institutions to be transparent and open to the people. It is a practice of tyranny for individuals to be made transparent to the government.”

Police state? We hardly need mention the feds’ zeal to protect our virgin eyes and ears from “Russian propaganda” or any American media that betrays its disloyalty by carrying any news or opinion that allegedly resembles it.

Or take the guilty pleas of former National Security Adviser Mike Flynn and peripheral Trump foreign policy adviser George Papadopoulos for the non-crime of “lying to the FBI.” Both detractors and defenders of the Trump administration have gleefully piled on the hapless Flynn and Papadopoulos. They lied! They lied! They lied!

But did they lie? Are we that naïve about how our diligent organs of state security work? Take the case of Flynn:

Russia-gate enthusiasts are thrilled over the guilty plea of President Trump’s former National Security Adviser Michael Flynn for lying to the FBI about pre-inauguration conversations with the Russian ambassador, but the case should alarm true civil libertarians.

 

What is arguably most disturbing about this case is that then-National Security Adviser Flynn was pushed into a perjury trap by Obama administration holdovers at the Justice Department who concocted an unorthodox legal rationale for subjecting Flynn to an FBI interrogation four days after he took office, testing Flynn’s recollection of the conversations while the FBI agents had transcripts of the calls intercepted by the National Security Agency.

 

In other words, the Justice Department wasn’t seeking information about what Flynn said to Russian Ambassador Sergey Kislyak – the intelligence agencies already had that information. Instead, Flynn was being quizzed on his precise recollection of the conversations and nailed for lying when his recollections deviated from the transcripts.

Keep in mind that when these “interviews” take place –

…the federal agent is typically well-informed about the facts of the case, but plays dumb in order to instill a false sense of confidence in the interview subject. And, unlike you, the agent has had time to examine all relevant documents. (It also bears noting that the FBI will usually not tape record the interview and that the only official interview report will be an FBI 302, which is the agent’s own dictated version of the conversation. Agents usually work in pairs as well, so in any later dispute over what was said in the interview, guess whose version is likely to prevail? Yours, or the two FBI agents who dictated the 302?)

Good grief! You’re better off not saying anything at all. Except that’s not an option either:

If you are not in custody, your total silence, especially in the face of an accusation, can very possibly be used against you as an adoptive admission under the Federal Rules of Evidence.

This means you are subjected to questioning on a matter where you have done nothing wrong, your responses are being compared (without your knowledge) to detailed records (which you haven’t consulted) and to the agent’s subjective notes (to which you are not privy). Even though you’re not under oath every discrepancy of date, time, name, sequence, or other detail becomes a separate felony charge, each one of which is punishable by years in prison: Alright, Mr. or Ms. X. We’re prepared to charge you with 14 felony counts, which will put you in prison for the rest of your life. Or you can plead guilty to one charge of lying to the FBI, with a light or possibly suspended sentence. Which will it be?

Your other option is to go to trial before a jury of sheep your peers, where the feds have a 90 percent-plus conviction rate. Or you can try to fight the charges until you’ve utterly bankrupted yourself, you’ve gone into debt you can never pay back, and your marriage has broken up – they can afford to wait — and still be in the same pickle. The mystery is that everyone doesn’t take the plea offer right away.

In short, if they want to nail you, they can. Like the boychiks used to say in the good ol’ NKVD (People’s Commissariat for Internal Affairs; ???????? ??????????? ?????????? ???): “Give Us the Man, and We Will Make the Case.” (I guess nowadays, we should say “person.”)

Oh come on! What hyperbole! We don’t torture or shoot people like the NKVD did! We don’t work people to death in concentration camps!

That’s right, we – or rather, they – don’t have to resort to that kind of thing. In fact, during the late Soviet period they hardly shot anyone and didn’t even lock that many people up. For most, it was enough to know that they could lock you up.

That’s more than sufficient for the sort of weaklings today’s Americans are.

There you have it. Your property can be seized at any time. Your “private” information, isn’t. We are told what media to believe and what not. You can be put in jail if someone decides you need to be put in jail.

CalPERS Goes All-In On Pension Accounting Scam; Boosts Stock Allocation To 50%

Starting July 1, 2018 stock markets around the world are going to get yet another artificial boost courtesy of a decision by the $350 billion California Public Employees" Retirement System (CalPERS) to allocate another $15 billion in capital to already bubbly equities.  Of course, if this decision doesn"t make sense to you that"s because it"s not really meant to make sense. 

As Pensions & Investments notes, CalPERS" decision to hike their equity allocation had absolutely nothing to do with their opinion of relative value between assets classes and nothing to do with traditional valuation metrics that a rational investor might like to see before buying a stake in a business but rather had everything to do with gaming pension accounting rules to make their insolvent fund look a bit better.  You see, making the rational decision to lower their exposure to the massive equity bubble could have resulted in CalPERS having to also lower their discount rate for future liabilities...a move which would require more contributions from cities, towns, school districts, etc. and could bring the whole ponzi crashing down. 

The new allocation, which goes into effect July 1, 2018, supports CalPERS" 7% annualized assumed rate of return. The investment committee was considering four options, including one that lowered the rate of return to 6.5% by slashing equity exposure and another that increased it to 7.25% by increasing the exposure to almost 60% of the portfolio.

 

The lower the rate of rate means more contributions from cities, towns and school districts to CalPERS. Those governmental units are already facing large contribution increases — and have complained loudly at CalPERS meetings — because a decision by the $345.1 billion pension fund"s board in December 2016 to lower the rate of return over three years to 7% from 7.5% by July, 1, 2019.

Meanwhile, there was only one dissenting vote on the decision to hike the fund"s equity exposure.  Ironically, the dissent did not come from a rational investor looking to preserve the fund"s assets, but rather from a board member named J.J. Jelincic who wanted to go all-in on the pension accounting scam and hike the fund"s equity allocations to 60% so that discount rates could be raised even higher than the current 7%.

Of course, this is hardly a new topic for us. As we pointed out a year ago in a post entitled "CalPERS Board Votes To Maintain Ponzi Scheme With Only 50bps Reduction Of Discount Rate," each year CalPERS has to weigh mathematical realities against the risk of disrupting the ponzi scheme and forcing several California cities to the brink of bankruptcy with lower discount rates..."mathematical realities" rarely win that fight.

But a CalPERS return reduction would just move the burden to other government units. Groups representing municipal governments in California warn that some cities could be forced to make layoffs and major cuts in city services as well as face the risk of bankruptcy if they have to absorb the decline through higher contributions to CalPERS.

 

“This is big for us,” Dane Hutchings, a lobbyist with the League of California Cities, said in an interview. “We"ve got cities out there with half their general fund obligated to pension liabilities. How do you run a city with half a budget?”

 

CalPERS documents show that some governmental units could see their contributions more than double if the rate of return was lowered to 6%. Mr. Hutchings said bankruptcies might occur if cities had a major hike without it being phased in over a period of years. CalPERS" annual report in September on funding levels and risks also warned of potential bankruptcies by governmental units if the rate of return was decreased.

Under the plan adopted Monday, in addition to their 50% equity allocation, CalPERS will have a 28% weighting to fixed income, up from 20%.  Real assets, which includes real estate, will keep its 13% allocation, while private equity will remain at 8% and CalPERS" liquid portfolio, made up of cash and other short-term instruments, will fall to 1% from 4%.