This Is The "Dilemma From Hell Dacing CBs"

We present some somber reading on this holiday Sunday from Macquarie Capital’s Viktor Shvets, who in this exclusive to ZH readers excerpt from his year-ahead preview, explains why central banks can no longer exit the “doomsday highway” as a result of a “dilemma from hell” which no longer has a practical, real-world resolution, entirely as a result of previous actions by the same central bankers who are now left with no way out from a trap they themselves have created.

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"It has been said that something as small as the flutter of a butterfly’s wing can ultimately cause a typhoon halfway around the world" – Chaos Theory.

There is a good chance that 2018 might fully deserve shrill voices and predictions of dislocations that have filled almost every annual preview since the GFC.

Whether it was fears of a deflationary bust, expectation of an inflationary break-outs, disinflationary waves, central bank policy errors, US$ surges or liquidity crunches, we pretty much had it all. However, for most investors, the last decade actually turned out to be one of the most profitable and the most placid on record. Why then have most investors underperformed and why are passive investment styles now at least one-third (or more likely closer to two-third) of the market and why have value investors been consistently crushed while traditional sector and style rotations failed to work? Our answer remains unchanged. There was nothing conventional or normal over the last decade, and we believe that neither would there be anything conventional over the next decade. We do not view current synchronized global recovery as indicative of a return to traditional business and capital market cycles that investors can ‘read’ and hence make rational judgements on asset allocations and sector rotations, based on conventional mean reversion strategies. It remains an article of faith for us that neither reintroduction of price discovery nor asset price volatilities is any longer possible or even desirable.

However, would 2018, provide a break with the last decade? The answer to this question depends on one key variable. Are we witnessing a broad-based private sector recovery, with productivity and animal spirits coming back after a decade of hibernation, or is the latest reflationary wave due to similar reasons as in other recent episodes, namely (a) excess liquidity pumped by central banks (CBs); (b) improved co-ordination of global monetary policies, aimed at containing exchange rate volatilities; and (c) China’s stimulus that reflated commodity complex and trade?

The answer to this question would determine how 2018 and 2019 are likely to play out. If the current reflation has strong private sector underpinnings, then not only would it be appropriate for CBs to withdraw liquidity and raise cost of capital, but indeed these would bolster confidence, and erode

pricing anomalies without jeopardizing growth or causing excessive asset price displacements. Essentially, the strength of private sector would determine the extent to which incremental financialization and public sector supports would be required. If on the other hand, one were to conclude that most of the improvement has thus far been driven by CBs nailing cost of capital at zero (or below), liquidity injections and China’s debt-fuelled growth, then any meaningful withdrawal of liquidity and attempts to raise cost of capital would be met by potentially violent dislocations of asset prices and rising volatility, in turn, causing contraction of aggregate demand and resurfacing of disinflationary pressures. We remain very much in the latter camp. As the discussion below illustrates, we do not see evidence to support private sector-led recovery concept. Rather, we see support for excess liquidity, distorted rates and China spending driving most of the improvement.

We have in the past extensively written on the core drivers of current anomalies. In a ‘nutshell’, we maintain that over the last three decades, investors have gradually moved from a world of scarcity and scale limitations, to a world of relative abundance and an almost unlimited scalability. The revolution started in early 1970s, but accelerated since mid-1990s. If history is any guide, the crescendo would occur over the next decade. In the meantime, returns on conventional human inputs and conventional capital will continue eroding while return on social and digital capital will continue rising. This promises to further increase disinflationary pressures (as marginal cost of almost everything declines to zero), while keeping productivity rates constrained, and further raising inequalities.

The new world is one of disintegrating pricing signals and where economists would struggle even more than usual, in defining economic rules. As Paul Romer argued in his recent shot at his own profession. a significant chunk of macro-economic theories that were developed since 1930s need to be discarded. Included are concepts such as ‘macro economy as a system in equilibrium’, ‘efficient market hypothesis’, ‘great moderation’ ‘irrelevance of monetary policies’, ‘there are no secular or structural factors, it is all about aggregate demand’, ‘home ownership is good for the economy’, ‘individuals are profit-maximizing rational economic agents’, ‘compensation determines how hard people work’, ‘there are stable preferences for consumption vs saving’ etc. Indeed, the list of challenges is growing ever longer, as technology and Information Age alters importance of relative inputs, and includes questions how to measure ‘commons’ and proliferating non-monetary and non-pricing spheres, such as ‘gig or sharing’ economies and whether the Philips curve has not just flattened by disappeared completely. The same implies to several exogenous concepts beloved by economists (such as demographics).

The above deep secular drivers that were developing for more than three decades, but which have become pronounced in the last 10-15 years, are made worse by the activism of the public sector. It is ironic that CBs are working hard to erode the real value of global and national debt mountains by encouraging higher inflation, when it was the public sector and CBs themselves which since 1980s encouraged accelerated financialization. As we asked in our recent review, how can CBs exit this ‘doomsday highway’?

Investors and CBs are facing a convergence of two hurricane systems (technology and over-financialization), that are largely unstoppable. Unless there is a miracle of robust private sector productivity recovery or unless public sector policies were to undergo a drastic change (such as merger and fiscal and monetary arms, introduction of minimum income guarantees, massive Marshall Plan-style investments in the least developed regions etc), we can’t see how liquidity can be withdrawn; nor can we

see how cost of capital can ever increase. This means that CBs remain slaves of the system that they have built (though it must be emphasized on our behalf and for our benefit).

If the above is the right answer, then investors and CBs have to be incredibly careful as we enter 2018. There is no doubt that having rescued the world from a potentially devastating deflationary bust, CBs would love to return to some form of normality, build up ammunition for next dislocations and play a far less visible role in the local and global economies. Although there are now a number of dissenting voices (such as Larry Summers or Adair Turner) who are questioning the need for CB independence, it remains an article of faith for an overwhelming majority of economists. However, the longer CBs stay in the game, the less likely it is that the independence would survive. Indeed, it would become far more likely that the world gravitates towards China and Japan, where CB independence is largely notional.

Hence, the dilemma from hell facing CBs: If they pull away and remove liquidity and try to raise cost of capital, neither demand for nor supply of capital would be able to endure lower liquidity and flattening yield curves. On the other hand, the longer CBs persist with current policies, the more disinflationary pressures are likely to strengthen and the less likely is private sector to regain its primacy.

We maintain that there are only two ‘tickets’ out of this jail. First (and the best) is a sudden and sustainable surge in private sector productivity and second, a significant shift in public sector policies. Given that neither answer is likely (at least not for a while), a co-ordinated more hawkish CB stance is akin to mixing highly volatile and combustible chemicals, with unpredictable outcomes.

Most economists do not pay much attention to liquidity or cost of capital, focusing almost entirely on aggregate demand and inflation. Hence, the conventional arguments that the overall stock of accommodation is more important than the flow, and thus so long as CBs are very careful in managing liquidity withdrawals and cost of capital raised very slowly, then CBs could achieve the desired objective of reducing more extreme asset anomalies, while buying insurance against future dislocation and getting ahead of the curve. In our view, this is where chaos theory comes in. Given that the global economy is leveraged at least three times GDP and value of financial instruments equals 4x-5x GDP (and potentially as much as ten times), even the smallest withdrawal of liquidity or misalignment of monetary policies could become an equivalent of flapping butterfly wings. Indeed, in our view, this is what flattening of the yield curves tells us; investors correctly interpret any contraction of liquidity or rise in rates, as raising a possibility of more disinflationary outcomes further down the road.

Hence, we maintain that the key risks that investors are currently running are ones to do with policy errors. Given that we believe that recent reflation was mostly caused by central bank liquidity, compressed interest rates and China stimulus, clearly any policy errors by central banks and China could easily cause a similar dislocation to what occurred in 2013 or late 2015/early 2016. When investors argue that both CBs and public authorities have become far more experienced in managing liquidity and markets, and hence, chances of policy errors have declined, we believe that it is the most dangerous form of hubris. One could ask, what prompted China to attempt a proper de-leveraging from late 2014 to early 2016, which was the key contributor to both collapse of commodity prices and global volatility? Similarly, one could ask what prompted the Fed to tighten into China’s deleveraging drive in Dec ’15. There is a serious question over China’s priorities, following completion of the 19th Congress, and whether China fully understands how much of the global reflation was due to its policy reversal to end deleveraging.

What does it mean for investors? We believe that it implies a higher than average risk, as some of the key underpinnings of the investment landscape could shift significantly, and even if macroeconomic outcomes were to be less stressful than feared, it could cause significant relative and absolute price re-adjustments. As highlighted in discussion below, financial markets are completely unprepared for higher volatility. For example, value has for a number of years systematically underperformed both quality and growth. If indeed, CBs managed to withdraw liquidity without dislocating economies and potentially strengthening perception of growth momentum, investors might witness a very strong rotation into value. Although we do not believe that it would be sustainable, expectations could run ahead of themselves. Similarly, any spike in inflation gauges could lift the entire curve up, with massive losses for bondholders, and flowing into some of the more expensive and marginal growth stories.

While it is hard to predict some of these shorter-term moves, if volatilities jump, CBs would need to reset the ‘background picture’. The challenge is that even with the best of intentions, the process is far from automatic, and hence there could be months of extended volatility (a la Dec’15-Feb’16). If one ignores shorter-term aberrations, we maintain that there is no alternative to policies that have been pursued since 1980s of deliberately suppressing and managing business and capital market cycles. As discussed in our recent note, this implies that a relatively pleasant ‘Kondratieff autumn’ (characterized by inability to raise cost of capital against a background of constrained but positive growth and inflation rates) is likely to endure. Indeed, two generations of investors grew up knowing nothing else. They have never experienced either scorching summers or freezing winters, as public sector refused to allow debt repudiation, deleveraging or clearance of excesses. Although this cannot last forever, there is no reason to believe that the end of the road would necessarily occur in 2018 or 2019. It is true that policy risks are more heightened but so is policy recognition of dangers.

We therefore remain constructive on financial assets (as we have been for quite some time), not because we believe in a sustainable and private sector-led recovery but rather because we do not believe in one, and thus we do not see any viable alternatives to an ongoing financialization, which needs to be facilitated through excess liquidity, and avoiding proper price and risk discovery, and thus avoiding asset price volatilities.

Mark Zuckerberg"s Long Litany Of Failings - Mainstream Media Turns On Social Media

The mainstream media is a fickle beast beholden to the direction of the prevailing political winds. Unfortunately for Facebook, Google and Twitter, those winds have turned about face in recent weeks as the political establishment thrashes about in its misguided efforts to prove that – aided by social media - Russia changed the course of the 2016 presidential election. While Facebook’s share price has suffered very little so far, the mainstream media is going to work on the reputations of Facebook and its billionaire founder. For example, according to Vanity Fair last month.

"…the tech giant is broadly focused on repairing its reputation following revelations that its platform was weaponized by Russia in the 2016 election."

“Weaponized” seemed a very strong word to use.

With the social media platform deemed “fair game” in the mainstream media, the Financial Times has lined up Mark Zuckerberg in its crosshairs. The FT journalist who penned the piece on Zuckerberg, Edward Luce, is cut from establishment cloth…and then some. Luce is the son of Richard Luce, now Baron Luce, the former MP, former Lord Chamberlain to the Queen and Knight of the Garter. Edward Luce read PPE at Oxford, took a sabbatical as a speech writer for Larry Summers and is the FT’s chief US commentator.

We are no fans of Zuckerberg and sympathise with some of it, but we recognise a hatchet job when we see it. In the article, Luce accuses Zuckerberg of...

Self-evident observation, or “stating the bleeding obvious”, to use the English vernacular:

Here is what Mark Zuckerberg learned from his 30-state tour of the US: polarisation is rife and the country is suffering from an opioid crisis. Forgive me if I have to lie down for a moment. Yet it would be facile to tease Mr Zuckerberg for his self-evident observations. Some people are geniuses at one thing and bad at others. Mr Zuckerberg is a digital superstar with poor human skills.

Political inadequacy and insincerity:

Facebook’s co-founder is not the first Silicon Valley figure to show signs of political inadequacy - nor will he be the last. But he may be the most influential. He personifies the myopia of America’s coastal elites: they wish to do well by doing good. When it comes to a choice, the “doing good” bit tends to be forgotten. There is nothing wrong with doing well, especially if you are changing the world. Innovators are rightly celebrated. But there is a problem with presenting your prime motive as philanthropic when it is not. Mr Zuckerberg is one of the most successful monetisers of our age. Yet he talks as though he were an Episcopalian pastor. “Protecting our community is more important than maximising our profits,” Mr Zuckerberg said this month after Facebook posted its first ever $10bn quarterly earnings result — an almost 50 per cent year-on-year jump.

Self-promotion, acting like a Soviet dictator and losing touch with ordinary people:

When a leader goes on a “listening tour” it means they are marketing something. In the case of Hillary Clinton, it was herself. In the case of Mr Zuckerberg, it is also himself. Making a surprise announcement that Mr Zuckerberg would be having dinner with an ordinary family is the kind of thing a Soviet dictator would do — down to the phalanx of personal aides he brought with him. This is not how scholars find out what ordinary families are thinking. Nor is it a good way to launch a political campaign. Ten months after Mr Zuckerberg began his tour, speculation of a presidential bid has been shelved. Say what you like about Donald Trump but he knows how to give the appearance of understanding ordinary people.

Helping Russia in its attempts to secure Trump’s election victory:

More to the point, Facebook has turned into a toxic commodity since Mr Trump was elected. Big Tech is the new big tobacco in Washington. It is not a question of whether the regulatory backlash will come, but when and how. Mr Zuckerberg bears responsibility for this. Having denied Facebook’s “filter bubble” played any role in Mr Trump’s victory — or Russia’s part in helping clinch it — Mr Zuckerberg is the primary target of the Democratic backlash. He is now asking America to believe that he can turn Facebook’s news feed from an echo chamber into a public square. Revenue growth is no longer the priority. “None of that matters if our services are used in a way that doesn’t bring people closer together,” he says.

Avoiding Tax (indirectly via Facebook) and masking self-interest:

How will Mr Zuckerberg arrange this Kumbaya conversion? By boosting the community ties that only Facebook can offer. Readers will forgive me if I take another lie down. Mr Zuckerberg suffers from two delusions common to America’s new economy elites. They think they are nice people — indeed, most of them are. Mr Zuckerberg seems to be, too. But they tend to cloak their self-interest in righteous language. Talking about values has the collateral benefit of avoiding talking about wealth. If the rich are giving their money away to good causes, such as inner city schools and research into diseases, we should not dwell on taxes. Mr Zuckerberg is not funding any private wars in Africa. He is a good person. The fact that his company pays barely any tax is therefore irrelevant.

Destroying communities and the noble profession of journalism:

The second liberal delusion is to believe they have a truer grasp of people’s interests than voters themselves. In some cases that might be true. It is hard to see how abolishing health subsidies will help people who live in “flyover” America. But here is the crux. It does not matter how many times Mr Zuckerberg invokes the magic of online communities. They cannot substitute for the real ones that have gone missing. Bowling online together is no cure for bowling offline alone. The next time Mr Zuckerberg wants to showcase Facebook, he should invest some of his money in an actual place. It should be far away from any of America’s booming cities — say Youngstown, Ohio. For the price of a couple of days’ Facebook revenues, he could train thousands of people. He might even fund a newspaper to make up for social media’s destruction of local journalism. The effect could be electrifying. Such an example would bring a couple more benefits. First, it would demonstrate that Mr Zuckerberg can listen, rather than pretending to. Second, people will want to drop round to his place for dinner.

Having dinner with Mark Zuckerberg was way down the list at ZH, with top choices including Donald Trump, Vladimir Putin, Neil Young, Bruce Springsteen, Margaret Thatcher (if she was still alive), David Bowie (if he was still alive), John Lennon (ditto) and John F. Kennedy (ditto).

While we are finding the FT’s attempts at ridiculing Zuckerberg and his company entertaining, we are questioning whether it merely reflects the shifting political winds. Maybe there is more to it. When Pearson sold the Financial Times in 2015 after being the “proud proprietor” for almost 60 years, it cited the “inflection point in media, driven by the explosive growth of mobile and social”. 

700 Years Of Data Suggests The Reversal In Rates Will Be Rapid

Have we been lulled into a false sense of security about the future path of rates by ZIRP/NIRP policies? Central banks’ misguided efforts to engineer inflation have undoubtedly been woefully feeble, so far. As the Federal Reserve “valiantly” raises short rates, markets ignore its dot plot and yield curves continue to flatten. And thanks to Larry Summers, the term “secular stagnation” has entered the lexicon.  While it sure doesn"t feel like it, could rates suddenly take off to the upside?

A guest post on the Bank of England’s staff blog, “Bank Underground”, answers the question with an unequivocal yes. Harvard University’s visiting scholar at the Bank, Paul Schmelzing, normally focuses on 20th century financial history. In his guest post (see here), he analyses real interest rates stretching back a further 600 years to 1311. Schmelzing describes his methodology as follows.

We trace the use of the dominant risk-free asset over time, starting with sovereign rates in the Italian city states in the 14th and 15th centuries, later switching to long-term rates in Spain, followed by the Province of Holland, since 1703 the UK, subsequently Germany, and finally the US.

Schmelzing calculates the 700-year average real rate at 4.78% and the average for the last two hundred years at 2.6%. As he notes “the current environment remains severely depressed”, no kidding. Looking back over seven centuries certainly provides plenty of context for our current situation, where rates have been trending downwards since the early 1980s. According to Schmelzing, we are in the ninth “real rate depression” since 1311 as shown in his chart below. We count more than nine, but let’s not be picky.

Furthermore, he believes that we are still locked into a 500-year downward trend.

Upon closer inspection, it can be shown that trend real rates have been following a downward path for close to five hundred years, on a variety of measures. The development since the 1980s does not constitute a fundamental break with these tendencies.

Now to the useful bit, Schmelzing looks at how these "real rates depressions" ended. The chart below shows the path of real interest rates in each reversal period following the trough.

He calculates that the average reversal has been 315 basis points within 24 months.

Most reversals to “real rate stagnation” periods have been rapid, non-linear, and took place on average after 26 years. Within 24-months after hitting their troughs in the rate depression cycle, rates gained on average 315 basis points, with two reversals showing real rate appreciations of more than 600 basis points within 2 years.

While we’d rather he ignored tainted “maestro”, Schmelzing states that there is “solid historical evidence” to support Greenspan’s view that real rates will rise “reasonably fast” once they turn. In Schmelzing’s opinion, and we would broadly agree, the best analogy in “recent” times for today’s situation is the Long Depression that followed the Panic of 1873.

Most of the eight previous cyclical “real rate depressions” were eventually disrupted by geopolitical events or catastrophes, with several – such as the Black Death, the Thirty Years War, or World War Two – combining both demographic, and geopolitical inflections. Most cyclical real rate depressions equally coincided with inflation outperformances. But for a minority of cycles, economic fundamentals were decisive, and exhibited both excess savings and subdued inflation. The prime example – and likely the closest historical analogy to today’s “secular stagnation” – is represented by the global “Long Depression” of the 1880s and 1890s. Following years of a global railroad investment frenzy, and global overcapacity indicators inflecting in the mid-1860s, the infamous “Panic of 1873” heralded the advent of two decades of low productivity growth, deflationary price dynamics, and a rise in global populism and protectionism.

Low rates in the wake of a financial crisis, lack of productivity growth, rising populism, etc, all strike a chord with our current circumstances, obviously. Going into more detail about the exit from the real rates depression of the 1880s-1890s, Schmelzing emphasises a rebound in productivity, stronger wage inflation and monetary expansion.

What ended the Long Depression? Labor productivity bottomed out in 1892-3, prior to the discovery of gold at the Klondike, and the associated monetary expansion. Wage inflation started outstripping productivity increases as early as 1885, leading the recovery in general inflation. And US equities finally bounced back from their 15-year lows with the Presidential election of William McKinley – a Republican pro-business protectionist – in November 1896. In other words, there is strong evidence suggesting that the last “secular stagnation cycle” started fading relatively autonomously after just over two decades following the key financial shock, not requiring the aid of decisive fiscal or monetary stimulus.

We find his conclusion, that a rapid, non-linear recovery in real rates can occur without any “decisive” events or policy, almost counter-intuitive. It doesn"t feel like it"s about to happen, but maybe it didn"t in the 1890s either. Indeed, maybe the best analogy for rates today is the proverbial beach ball held under water.

Bill Ackman Joins Twitter

After years of purportedly cultivating relationships with journalists to burnish his image in the press, Pershing Square Capital Founder Bill Ackman has created a twitter account, presumably to cut out the middleman and speak directly to the people, after eating a series of embarrassing losses from bad bets on Valeant pharmaceuticals and Herbalife Inc.

Ackman confirmed to Bloomberg that the account, which bears the handle @BillAckman1, is, in fact, genuine. Unfortunately, his reluctance to join the service – which was launched 10 years ago – at an earlier date left him unable to secure a handle using just his own name: That handle, apparently, belongs to an imposter.

Ackman forced to use @billackman1

— zerohedge (@zerohedge) June 29, 2017

Ackman’s fund ate a $3 billion loss in March when it announced it had liquidated its entire stake in Valeant Pharmaceuticals and has effectively resigned from the board, saying he won"t stand for re-election. In a statement, Ackman said "it was time to get out of the position, investment required disproportionately large amount of time and resources."

Ackman hasn’t yet tweeted, nor has he added profile picture.

Here’s a breakdown of the accounts Ackman is following, via BBG:

• Ackman was following 46 accounts on Thursday morning, including President Donald Trump’s @Potus and @realDonaldTrump accounts, and Lin-Manuel Miranda, the creator of the hit Broadway musical “Hamilton”


• Following Anthony Scaramucci, PIMCO, GS CEO Lloyd Blankfein


• Also following Larry Summers, Mohamed El-Erian, Ben Bernanke


• Follows French President Emmanuel Macron, ex-U.K. Prime Minister David Cameron


• Follows Jeff Bezos, Elon Musk, Tim Cook


• Also follows tennis stars Roger Federer and Frances Tiafoe

Which begs the question: Where’s our follow-back, Bill?
 

Inside The So-Called 'Resistance'

Authored by Howard Kunstler via Kunstler.com,

Entropy never sleeps. It works remorselessly to transform things of value into useless, dissipated waste and heat. Complexity stokes it especially as the law of diminishing returns multiplies the wheels of futility spinning down to zero. Hence, the intellectual decay of American life in which spin is everything, anything goes, and nothing matters.

The latest manifestation of this dynamic is the curious movement that styles itself The Resistance, lately adopted by the grotesque handmaiden of the Deep State that the Democratic Party became in the regency of Hillary Clinton. Its mission is to undo the results of the last national election by claiming that Russia undid it. It pretends to seek the restoration of something — but what? Of dissipated power relations within the Deep State itself?

President Trump is actually taking care of that by turning government management over to his generals and the minions of Goldman Sachs. The generals are reinvesting in the strategic black hole of our military adventures overseas. The Goldman Sachs appointees are making Wall Street safe for the continued asset-stripping of the USA. The last time I checked, Hillary’s gang did not oppose either of these endeavors.

The Resistance employs cadres of useful idiots — Black Lives Matter, “undocumented” visitors, “Antifa,” the LGBTQ “community” — to pretend that it stands for social justice, but these are just straw persons fronting a gang devoted only to regaining the levers of “privilege” — which they also pretend to be against. The Resistance takes its name from the movement in World War Two France that fought the Nazi occupation, thus self-valorizing itself. But the pre-owned styling is just another victory of spin in the public relations nightmare that American political life has become.

It also begs the question: what would a real resistance look like? First, it would oppose the aforementioned asset-stripping that the US economy has become, the transfer of capital in all its forms — monetary, political, cultural, social — from the dis-employed former middle classes to the tiny, select beneficiaries of financial manipulation. Note that the things being manipulated — markets, currencies, securities, and interest rates — are increasingly phantom entities that appear to maintain their value only because the high priests of financial authority say that they do.

The shelf-life of that flim-flam approaches its endgame as it self-evidently immiserates the masses and their sheer faith in its recondite promises dwindles away to nothing. A genuine resistance would begin to deconstruct this clerisy and its institutions, namely Too Big To Fail banks and the Federal Reserve. The best opportunity to accomplish that would have been the early months of Mr. Obama’s turn in the White House, the dark time of the previous financial crash when the damage was fresh and obvious.

But the former president blew that under the influence of high priests Robert Rubin and Larry Summers. And the lower order clerics were allowed run their hoodoo machine flat out in the following eight years. Just look at the long chart of the Standard & Poors index. Tragically, this ever-upward arc is now taken to be the normal state of things, and when it fails the implosion will be orders of magnitude more violent than the last time.

One would think that a genuine resistance would also oppose the growing consolidation of power in the now-colossal spying apparatus of the nation — the often averred to “seventeen intel agencies” that show signs of being actively at war against other parts of the government and against citizens themselves. Hence, the non-stop murmur of allegation about “Russian interference in the election,” going back to the summer of 2016 without either any real evidence, or any clarification of what is actually alleged to have happened.

Another tragic turn is that this fifth column of rogue intel agencies has recruited the major organs of the news to incessantly repeat its allegations until the public accepts the story as established fact rather than just the manufactured story it so far appears to be. Well, the lives of persons and societies founder on versions of the “reality” they fabricate for their own purposes. A genuine resistance would show foremost some fidelity to a reality beyond the spin-factories of self-delusion. And it would lead in the hard work of shedding this over-burden of self-multiplying despotisms.

Maybe this Memorial Day is a good moment to question the claims of the so-called resistance, and perhaps patriotically meditate on what the nature of an authentic resistance would be to the ongoing decay of this nation while it is still possible.

The Final Show Of The Greatest Country On Earth

Authored by Simon Black via SovereignMan.com,

On May 31, 1866, John C. Ringling was born in Iowa to German immigrants in what felt like an extremely bleak year.

The chaos and devastation from the Civil War that had ended in 1865 were still keenly felt, and the US economy was in the midst of a deep recession

The country was still shaken from the assassination of Abraham Lincoln.

And the new President, Andrew Johnson, was embroiled in a major political crisis with Congress that would soon lead to his impeachment.

(Johnson was also a noted buffoon, once giving a speech in early 1866 to honor George Washington in which he referred to himself over 200 times and accused Congress of plotting his assassination.)

No doubt those were some of the darkest days in US history. And it would have been hard for Mr. and Mrs. Ringling to imagine a bright future for their children.

But John and four of his brothers went on to build the most successful circus empire in modern history– the Ringling Brothers and Barnum & Bailey Circus, known as the “Greatest Show on Earth.”

There were countless traveling circuses crisscrossing the United States in the 19th and early 20th centuries.

But what made the Ringling Brothers’ event so spectacular was sheer scale. They didn’t hold anything back– lions, tigers, elephants.

The Ringling brothers were also masters of efficient logistics.

Like Ray Kroc and Henry Ford, the brothers developed an assembly line approach to the construction, deconstruction, and transportation of their event so that they could swiftly move from town to town.

It was a spectacle itself simply to see their train of railway cars packed with exotic animals stretching on for more than a mile.

Their circus was considered the ultimate in entertainment back then, and John Ringling became one of the wealthiest men in America as a result of this success.

It seemed like the empire would last forever.

But it didn’t.

After peaking in the Roaring 20s, the circus took a major hit during the Great Depression that effectively bankrupted John Ringling, the sole surviving brother.

At the time of his death in 1936, in fact, Ringling only had about $5,500 in the bank (that’s after adjusting for inflation to 2017 dollars).

The circus limped along in the Depression and barely made it through World War II.

Towards the end of the War in 1944, right before they thought their luck would turn, the circus had a major accident in Hartford in which the tent caught fire, killing 167 people.

That nearly bankrupted the company a second time, and several executives went to jail for negligence.

In the decades that followed, American consumer tastes changed.

Television, movies, and music were far more interesting than circus performances, and Ringling Brothers went into terminal decline.

Fast forward to the age of Facebook and YouTube, and there simply wasn’t a whole lot left in the circus that was exotic or interesting anymore, not to mention the animal rights issues.

So yesterday, the Greatest Show on Earth held its final performance in Uniondale, New York, after 146-years in the business.

A century ago this would have seemed impossible.

The early 1900s were the absolute peak for Ringling Brothers, and no one imagined a future where consumers weren’t standing in line to buy tickets.

Candidly I find this story to be an interesting metaphor for the United States itself.

Rise from the ashes. Remarkable growth. Peak wealth and power. Bankruptcy. Gross negligence and incompetence. More bankruptcy. Terminal decline.

And just like how people viewed Ringling Brothers 100-years ago, it’s difficult for anyone to imagine a world in which the US isn’t the dominant superpower.

Instead of the Greatest Show on Earth, it’s the Greatest Country on Earth. And most of us have been programmed to believe that this primacy will last forever.

But nothing lasts. History is full of failed dominant superpowers, from the Roman Empire to the Ottoman Empire. Many no longer exist.

Their declines were almost invariably due to excessive spending, unsustainable debt, military overreach, and a society that abandoned the core values which made it wealthy and powerful to begin with.

Every successive superpower always believes that they will never suffer the same fate. And every time they’re wrong.

This time is not different.

Yes, it’s still a wonderful country with plenty of positive things going for it.

But at its core the United States still has $20 trillion in public debt (over 100% of GDP) and an additional $46.7 trillion in net, unfunded future social obligations (like Social Security and Medicare).

Plus, the government spends an appalling amount of money, far more than they collect in tax revenue.

(In 2016 their total net loss exceeded an incredible $1 TRILLION.)

Former Treasury Secretary Larry Summers summed it up when he quipped, “How long can the world’s biggest borrower remain the world’s biggest power?”

The answer is– no one knows. Maybe months. Maybe decades.

Either way, this trend is one of the biggest stories of our time. And though few people want to acknowledge it, it’s already happening.

We now regularly witness government shutdowns, debt ceiling crises, and gross government incompetence. But this is just the beginning.

The national debt is growing far faster than the economy as a whole. And, especially if interest rates continue to rise, the trend will accelerate.

It’s simple arithmetic.

So while it seems impossible now, the Greatest Country on Earth will some day have its final show as well.

That doesn’t mean the US simply disappears.

But it’s foolish to assume that the insolvency of the world’s largest superpower will forever be consequence-free.

What’s your Plan B?

Cash No Longer King: Europe Moves to Begin Elimination of Paper Money

February 9, 2017   |   Shaun Bradley

(ANTIMEDIA) — In the shadow of Donald Trump’s spree of controversial actions, the European commission has quietly launched the next offensive in the war on cash. These unelected bureaucrats have boldly asserted their intention to crack down on paper transactions across the E.U. and solidify a trend that has been gaining momentum for years.

The financial uncertainty amplified by Brexit has incentivized governments throughout Europe to seize further control over their banking systems. France and Spain have already criminalized cash transactions above a certain limit, but now the commission has unilaterally established new regulations that will affect the entire union. The fear of physical money flowing out of the trade bloc has manifested a draconian response from the State.

The European Action Plan doesn’t mention a specific dollar amount for restrictions, but as expected, their reasoning for the move is to thwart money laundering and the financing of terrorism. Border checks between countries have already been bolstered to help implement these new standards on hard assets. Although these end goals are plausible, there are other clear motivations for governments to target paper money that aren’t as noble.

Negative interest rates and high inflation are a deadly combination that could further destabilize the already fragile union in the future. With less physical currency circulating, these trends ensure that the impact of any additional central bank policies will be maximized. If economic conditions deteriorate, the threat of citizens pulling cash out of their accounts and starting a bank run is eliminated in a cashless system. So long as the people’s wealth is under centralized control, funds can be shifted at will to conceal any underlying problems. But the longer this shell game is allowed to persist, the more painful it will be when reality overrides the manipulation.

Since former Chief Economist at the International Monetary Fund (IMF), Kenneth Rogoff, published a paper last year advocating for the U.S. $100 bill to be removed, governments around the world have pushed forward their agendas towards a cashless society. He wrote:

“There is little debate among law-enforcement agencies that paper currency, especially large notes such as the U.S. $100 bill, facilitates crime: racketeering, extortion, money laundering, drug and human trafficking, the corruption of public officials, not to mention terrorism. There are substitutes for cash—cryptocurrencies, uncut diamonds, gold coins, prepaid cards—but for many kinds of criminal transactions, cash is still king. It delivers absolute anonymity, portability, liquidity and near-universal acceptance.”

This announcement comes just months after the 500 euro note was discontinued, and it follows India’s lead in subverting the financial independence of their citizens. The incremental steps currently being taken may look trivial in isolation, but the ultimate end is to lay the foundation for an entire network for economic repression.

The German people have placed themselves in strong opposition to the action and previously pushed back hard against domestic legislation that would have limited cash. Nearly 80% of all transactions in Germany are made with paper currency, putting Europe’s economic engine in direct conflict with the vision coming out of Brussels.

The spillover effect has affected new forms of investment, like Bitcoin, which witnessed an astronomical rise over the last months and has been brought back into the discussion as a viable alternative to fiat currencies. Of course, the E.U. Commission is also attempting to impose similar limitations on crypto-currencies to make sure no transactions fall outside of their domain. The ECB and BOJ are working towards a trojan horse blockchain network that will serve only to entrap those naive enough to trust it.

Former Treasury Secretary Larry Summers wrote last year that the E.U. would likely be the trailblazer of the West towards this new digital model:

“But a moratorium on printing new high denomination notes would make the world a better place. In terms of unilateral steps, the most important actor by far is the European Union. The €500 is almost six times as valuable as the $100. Some actors in Europe, notably the European Commission, have shown sympathy for the idea and European Central Bank chief Mario Draghi has shown interest as well.”

Since the public’s attention has been drawn to emotional manipulations and political stunts, the threat the war on cash represents has gone unrecognized. Instead of feeding energy into systems meant to divide and conquer, individuals must educate themselves to secure their own financial futures. By submitting to the hive mind and following the media down whichever rabbit hole they choose, the most important issues of today will go unnoticed. The value of advocating for decentralized and physical alternatives to the banking system may not be easily grasped by the activists of today, but few other things have the potential to erode freedom on such a massive scale.

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This article (Cash No Longer King: Europe Moves to Begin Elimination of Paper Money) by Shaun Bradley is free and open source. You have permission to republish this article under a Creative Commons license with attribution to Shaun Bradley and theAntiMedia.org. Anti-Media Radio airs weeknights at 11 pm Eastern/8 pm Pacific. If you spot a typo, please email the error and name of the article to edits@theantimedia.org.

Why Davos CEOs Think They Have Control Over Trump

While President Trump chose not to attend the elite extravaganza in Davos last week, choosing instead to lambast the great-est and good-est of the world"s executives in their crony capitalist safe space, the cognitively dissonant CEOs reassured each other by saying "ignore the tweets", confident that "if [Trump] knows the facts, he’ll respond according to the facts." It depends whose "facts" those are, of course.

As Bloomberg so eloquently noted, executives gathered in the Swiss resort for the World Economic Forum this week keep repeating, like a soothing mantra, that Donald Trump is at heart a pragmatist who will avoid trade wars and regulations that make it harder to do business.

Everywhere you looked, and everything you were told confirmed that nothing has changed in the minds of the world"s elite community organizers... (as Bloomberg summarizes)

“What somebody’s saying is not necessarily what they’re going to do,” said David Cote, chief executive officer of Honeywell International Inc. He should hope so: Honeywell is a global manufacturing giant with far more employees outside the U.S. than in, and it has made major bets on projects like supplying parts for China’s first commercial jet.

“In the end if he knows the facts, he’ll respond according to the facts,” said Hideaki Omiya, chairman of Mitsubishi Heavy Industries.

Companies shouldn’t sweat the president’s “one-liners” and instead should focus on Trump’s cabinet nominees, said Jamie Dimon, CEO of JPMorgan Chase & Co. “I think that these very rational people will be very thoughtful when they go about the actual policy.”

Foreign companies say they’re similarly relaxed; Nissan Motor Co.’s co-CEO, Hiroto Saikawa, said he doesn’t believe Trump has any intention of severing trade ties that benefit the U.S.

With stock markets nearing record highs and business-friendly figures like billionaire investor Wilbur Ross named to the cabinet, a conviction has set in that a man who came to power as an anti-establishment populist might in fact usher in a golden age for business. Former Treasury Secretary Larry Summers, is however puzzled by the shifting views on Trump and cautions against “enabling” the new administration.

“I’ve been very troubled by the attitude of business people from the U.S... People who were terribly afraid of what this would mean for America’s place in the world are now hailing those who surround Donald Trump as great geniuses.”

Executives shouldn’t entirely discount what Trump says, warns Phil Levy, a senior fellow at the Chicago Council on Global Affairs and adviser to former President George W. Bush, noting that "usually when somebody who’s been elected president makes threats, people take it seriously."

Some Davos attendees were prepared to concede that optimism about Trump is built, at least in part, on wishful thinking.

“I don’t think anyone likes the unpredictability he brings to the table,” said Martin Eurnekian, a director at Buenos Aires-based conglomerate Corporacion America.

“Everybody wants to believe,” he said, “that it’s mostly for show.”

Still, the herd remains convinced that everything will be "business as usual" under Trump... judging by the first two days, however, we suspect a rude awakening looms.

Live From Davos: Ray Dalio, Christine Lagarde And Larry Summers Discuss How To Fix The "Middle Class Crisis"

How do you know with certainty that Davos has not only jumped the shark, but has become a parody of itself? One answer: when you have a handful of semi, and not so semi, billionaires - perplexed by the populist backlash of the past year - sit down and discuss among each other how a "Squeezed and Angry" middle-class should be fixed.

As Davos puts it, "once the lynchpin of developed economies, it’s now threatened by job losses and stagnant wages, paving the way for the rise of populism. In emerging markets, middle class growth rates are stalling. Have middle class problems been forgotten?" It asks rhetorically "What can be done?"

Apparently the answer is to have three people completely disconnected from the real world, sit down and provide "answers.":

In this session, starting at 0800 GMT, IMF Managing Director Christine Lagarde, Italian Finance Minister Pier Carlo Padoan and Founder, Chairman and Co-CIO of Bridgewater Associates, Ray Dalio, discuss what"s needed to restore growth in the middle class and confidence in the future.

And then they wonder why the annual Davos echo chamber boondoggle has become not only a global farce, but a symbol of everything that is wrong with globalization today...

Watch it live below