Category Archives: Other Views

“US Debt Is 3 Times More Than You Think” Warns Former Chief US Accountant, by Tyler Durden

Posted on November 9, 2015 | Leave a comment

Debt, debt, and more debt. From Tyler Durden at zerohedge.com:

In a shocking admission for most of mainstream America, the former U.S. comptroller general says the real U.S. debt is closer to about $65 trillion than the oft-cited figure of $18 trillion, thanks to unfunded liabilities which simply cannot be ignored. As The Hill reports, unless economic growth accelerates, he warns, “you’re not going to be able to provide the kind of social safety net that we need in this country,” adding unequivocially that Americans have “lost touch with reality” when it comes to spending.

As The Hill reports,

Dave Walker, who headed the Government Accountability Office (GAO) under Presidents Bill Clinton and George W. Bush, said when you add up all of the nation’s unfunded liabilities, the national debt is more than three times the number generally advertised.

“If you end up adding to that $18.5 trillion the unfunded civilian and military pensions and retiree healthcare, the additional underfunding for Social Security, the additional underfunding for Medicare, various commitments and contingencies that the federal government has, the real number is about $65 trillion rather than $18 trillion, and it’s growing automatically absent reforms,” Walker told host John Catsimatidis on “The Cats Roundtable” on New York’s AM-970 in an interview airing Sunday.

The former comptroller general, who is in charge of ensuring federal spending is fiscally responsible, said a burgeoning national debt hampers the ability of government to carry out both domestic and foreign policy initiatives.

“If you don’t keep your economy strong, and that means to be able to generate more jobs and opportunities, you’re not going to be strong internationally with regard to foreign policy, you’re not going to be able to invest what you need to invest in national defense and homeland security, and ultimately you’re not going to be able to provide the kind of social safety net that we need in this country,” he said.

He said Americans have “lost touch with reality” when it comes to spending.

Walker called for Democrats and Republicans to put aside partisan politics to come together to fix the problem.

“You can be a Democrat, you can be a Republican, you can be unaffiliated, you can be whatever you want, but your duty of loyalty needs to be to country rather than to party, and we need to solve some of the large, known, and growing problems that we have,” he said.

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To continue reading: “US Debt Is 3 Times More Than You Think”

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Black Swan Lands In Portugal As Socialists Move To Overthrow Government, by Tyler Durden

Posted on November 9, 2015 | Leave a comment

Here we go again? First it was Greece; is it Portugal’s turn now? Stay tuned for more thrills and spills in Europe. From Tyler Durden at zerohedge.com:

Late last month we highlighted to reappointment of Portuguese PM Pedro Passos Coelho, noting that, in the words of Communist leader Jerónimo de Sousa, the President’s move to ignore the left’s attempt to form a government in the wake of largely inconclusive elections may be a “manifest waste of time.”

As FT put it a few weeks back, “no government on the left or right [can] hope to survive without support from the PS, which won 32.3 per cent [in October]” which means President Anibal Cavaco Silva might have made a mistake in propping up Coelho as the PM’s restoration will only serve to embolden an already angry left coalition.

Well sure enough, socialist leader Antonio Costa has now “formalized” plans to unite with the Left Bloc and Communists in order to reject the Coelho government. Here’s Bloomberg:

Portugal’s Socialists approved a plan to join forces with three other parties and oust Prime Minister Pedro Passos Coelho’s administration, raising the prospect of a new government committed to speeding the reversal of spending cuts tied to the country’s international bailout.

The Socialist-led program “is clearly less market-friendly than the one of the incumbent government,” analysts at the Royal Bank of Scotland Group Plc in London, including Clement Mary-Dauphin, said.

The Coelho government will fall if the Socialists and their allies close ranks and guarantee a majority in parliament to reject the program in a vote scheduled for Tuesday. President Anibal Cavaco Silva, who has the power to name prime ministers, would then decide if he’ll ask Costa to form a coalition. Parliament can’t be dissolved less than six months after it’s elected, meaning Cavaco Silva doesn’t have the option of calling fresh elections.

“The conditions are in place to form a Socialist Party government supported by a majority in parliament,” the party said in a statement e-mailed early on Monday. The Socialist government can be “stable” and last for a full term, it said.

Well, it can probably be “stable” domestically, but don’t think for a second that Brussels and Berlin are going to put up with this.

After all, the whole point of putting Alexis Tsipras through round after round of “mental waterboarding” over the summer was to discourage any Syriza sympathizers from attempting to use a euro exit (i.e. proving that the EMU is in fact “dissoluble” despite the protestations of many a eurocrat) as a bargaining chip on the way to negotiating for debt relief. As we put it, “the real question is whether or not the ATM lines, empty shelves, and gas station queues in Greece have had their intended psychological effect on Spanish (and Portuguese) voters. In other words, the question is whether the troika has succeeded in undercutting the democratic process outside of Greece by indirectly strong-arming the electorate.”

To continue reading: Black Swan Lands In Portugal

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From Protesting Vietnam to Demanding “Safe Spaces” – What Happened to America’s College Kids? by Michael Krieger

Posted on November 8, 2015 | 1 comment

Another disturbing article on what’s happened to America’ colleges. Be sure to click the link and watch the video at the end. You won’t believe the shrieking, screaming creature is a Yale student. From Michael Krieger at libertyblitzkrieg.com:

I grew up hearing stories of protest. About those years, a decade or so before I was born, during which America’s youth rebelled against the prevailing establishment, and forever changed the nation’s course in some meaningful ways.

Of course, many of you will accurately state that not much about the imperial state has actually changed since those days of protest, and that in fact, the out of control abuse of power both abroad and at home has gotten far worse in the subsequent decades. I will concede this point, but want to add a caveat. Certain things really did change, particularly with regard to racial discrimination in these United States. Not to say things are perfect, but to discount the significant gains achieved in this regard would be unfair.

Nevertheless, as far as the “shadow government” is concerned, not much has changed. Other than the fact that the status quo learned important lessons from those years of rebellion, and was forced to operate even more secretly than it did before. As an example, the military-industrial complex learned that it couldn’t have genuine journalists running around war zones after images taken in Vietnam shocked the nation and helped turn popular sentiment against it. As such, reporters in war zones these days are nothing more than propagandists and imperial shills. Indeed, increasingly effective propaganda and a captured corporate media has probably been the single most important tool used by the shadow government to maintain and consolidate control over all these years. In a nutshell, people have been dumbed down, as well as mentally and emotionally castrated, to the point of being almost unable to rebel against anything of real importance.

Which brings me to the point of this post. The reason I brought up the civil disobedience and activism of the 1960’s, is because it did at least represent a true conflict with that generation’s status quo, and it did in fact attempt to tackle some of the pressing issues of power, justice and freedom that existed at the time. This is in stark contrast to what passes as “activism” on college campuses today, which essentially amounts to “pro-censorship” students vigilantly defending an entirely invented and unconstitutional right to “not be offended.” Whereas the 60’s movements, for all their failings, were at least ostensibly about freedom (of the mind and body), today’s college movements are strikingly focused on shackling the mind, and turning campuses in unintellectual, zombie-filled wastelands.
Of course, while someone like myself might be tempted to just laugh off such infantile and pathetic “activism,” it is in fact one of the most dangerous trends facing modern American society. You’d think that a culture in which the most vibrant source of college activism centered around the defense of a non-existent right to not be offended, would be one where all other issues of national import had been successfully addressed.

To continue reading: What Happened to America’s College Kids

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Jim Grant: The Fed Is A Sleepwalking Relic Of The Age Of Command And Control, by James Grant

Posted on November 8, 2015 | Leave a comment

James Grant, editor of Grant’s Interest Rate Observer, usually has trenchant and incisive things to say, or write, and a way with words. Grant on the Federal Reserve, from davidstockmanscontracorner.com:

Central bank’s experimental policies are only hurting America instead of leading the nation into financial prosperity, exclaims James Grant, editor of Grant’s Interest Rate Observer. “The Fed is a relic of the age of command and control. The Fed is an anachronism,” Grant tells Bloomberg TV in this excellent interview, “The Fed ought to get out of the business of masterminding ‘the American enterprise,’ what we call the U.S. economy.” Central bankers, Grant adds, by pressing rates to nothing, have given rise to this “very pleasant kind of inflation we call bull markets.” While bull markets are great insofar as they reflect what is actually going on, “they are very dangerous to the extent that they are the artificial creation of artificial interest rates.”

“We are in a regime of price administration. Price control is a policy that has failed for millenia. When prices are manipulated, manhandled, and otherwsise distorted, real decisions follow and the real decisions are distorted… there’s bricks, mortar, and human lives attached to these [interest rate decisions]… and that’s why they matter“

“How do they know the funds rate ought to be zero?”

“The world’s central bankers went to the same schools, talk the same language, have the same world view.

They have shared conditions. They believe, for example, that an average of prices, which they believe they can calculate, must rise at two percent a year unless the world fall into something they choose to call deflation.

They believe that they can see into the future. They believe that they have the knowledge and the dexterity to manipulate interest rates to the benefit of society.

To continue reading: The Fed Is A Sleepwalking Relic

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China’s trade drops well below expectations in October, from Reuters

Posted on November 8, 2015 | Leave a comment

From Reuters:

BEIJING — China’s trade figures disappointed analyst expectations by a wide margin in October, reinforcing views that the world’s second-largest economy will likely have to do more to stimulate domestic demand given stubborn softness in overseas markets.

While Beijing has already repeatedly cut interest rates and softened the exchange rate to prop up the economy, latest trade numbers suggest that a greater risk of a hard landing remains.

October exports fell 6.9 percent from a year ago, dropping for a fourth month, while imports slipped 18.8 percent, leaving the country with a record high trade surplus of $61.64 billion, the General Administration of Customs said on Sunday.

Economists polled by Reuters had expected dollar-denominated exports to fall 3.0 percent after a September’s 3.7 percent dip, and imports to decline 16.0 percent, improving from a sharp drop of 20.4 percent.

Combined exports and imports fell 8.5 percent in the first 10 months of the year from the same period a year earlier, well below the full-year official target for growth of 6 percent.

“We see that the trade will unlikely turn around the momentum in the near term, and the renminbi exchange rate will be under downward pressure especially as Fed signals to hike soon,” Commerzbank China economist Zhou Hao said.

To continue reading: China’s trade drops well below expectations in October

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The Marginal Productivity of Chinese Debt Has Gone From Bad to Much Worse – Not Good for the Rebalancing Case, by Bryce Coward

Posted on November 8, 2015 | Leave a comment

Debtonomics explains the declining marginal economic impact of additional debt. That phenomenon is playing out in China. From Bryce Coward, at gavelkalcapital.com:

Taking the Chinese GDP statistics at face value (an increasingly big assumption these days) we point out a rather ominous scenario which seems to be developing in the productivity dynamics of Chinese debt-financed growth. Basically the amount of growth that each new unit of credit produces is plunging to levels not seen since 2009-2010 when the Chinese unleashed the largest GDP adjusted stimulus program in the world. As it stands now, each new unit of debt is buying less than .5 units of marginal growth, and that, again, is taking for granted the accuracy of the GDP stats (chart 1). In reality the ratio is probably much lower than the current reading of .47.

Is this sustainable? Of course not. As we have been saying for several years now, Chinese growth is going much lower as the economy rebalances from being an investment led model to a consumption led model. One of the signs we’re looking for to indicate that the transition is taking place is actually a slowing of new loan growth and improvement in the indicator in chart 1. We’ve got exactly the opposite so far, which is an indication of the Chinese pushing on the debt string even more to fuel growth rather than accepting slower growth still, but a rebalanced economy. This, in a perverse way, probably increases the risk of the dreaded hard landing as the chances of a credit “event” rise even further.

To continue reading: The Marginal Productivity of Chinese Debt Has Gone From Bad to Much Worse

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“A Thin-Skinned Minority Is Ruining This Nation”: Professor Crushes “Political Correctness” Wave Sweeping America, by Tyler Durden

Posted on November 8, 2015 | 3 comments

From Tyler Durden at zerohedge.com:

In a time where college students are offended by pretty much everything, The Federalist Papers reports that one professor at UNC-Wilmington decided to cut through the rhetoric and let his students know that they aren’t the special snowflakes liberals and their parents would have them believe.

His epic class introduction has gone viral, and for good reason: this is the most common sense lecture to come out of any college in a long time.

Welcome back to class, students! I am Mike Adams your criminology professor here at UNC-Wilmington. Before we get started with the course I need to address an issue that is causing problems here at UNCW and in higher education all across the country. I am talking about the growing minority of students who believe they have a right to be free from being offended. If we don’t reverse this dangerous trend in our society there will soon be a majority of young people who will need to walk around in plastic bubble suits to protect them in the event that they come into contact with a dissenting viewpoint. That mentality is unworthy of an American. It’s hardly worthy of a Frenchman.

Let’s get something straight right now. You have no right to be unoffended. You have a right to be offended with regularity. It is the price you pay for living in a free society. If you don’t understand that you are confused and dangerously so. In part, I blame your high school teachers for failing to teach you basic civics before you got your diploma. Most of you went to the public high schools, which are a disaster. Don’t tell me that offended you. I went to a public high school.

Of course, your high school might not be the problem. It is entirely possible that the main reason why so many of you are confused about free speech is that piece of paper hanging on the wall right over there. Please turn your attention to that ridiculous document that is framed and hanging by the door. In fact, take a few minutes to read it before you leave class today. It is our campus speech code. It specifically says that there is a requirement that everyone must only engage in discourse that is “respectful.” That assertion is as ludicrous as it is illegal. I plan to have that thing ripped down from every classroom on campus before I retire.

One of my grandfathers served in World War I. My step-grandfather served in World War II. My sixth great grandfather enlisted in the American Revolution when he was only thirteen. These great men did not fight so we could simply relinquish our rights to the enemy within our borders. That enemy is the Marxists who run our public universities. If you are a Marxist and I just offended you, well, that’s tough. I guess they don’t make communists like they used to.

Unbelievably, a student once complained to the Department chairwoman that my mention of God and a Creator was a violation of Separation of Church and State. Let me be as clear as I possibly can: If any of you actually think that my decision to paraphrase the Declaration of Independence in the course syllabus is unconstitutional then you suffer from severe intellectual hernia.

Indeed, it takes hard work to become stupid enough to think the Declaration of Independence is unconstitutional. If you agree with the student who made that complaint then you are probably just an anti-religious zealot. Therefore, I am going to ask you to do exactly three things and do them in the exact order that I specify.

First, get out of my class. You can fill out the drop slip over at James Hall. Just tell them you don’t believe in true diversity and you want to be surrounded by people who agree with your twisted interpretation of the Constitution simply because they are the kind of people who will protect you from having your beliefs challenged or your feelings hurt.

Second, withdraw from the university. If you find that you are actually relieved because you will no longer be in a class where your beliefs might be challenged then you aren’t ready for college. Go get a job building houses so you can work with some illegal aliens who will help you gain a better appreciation of what this country has to offer.

Finally, if this doesn’t work then I would simply ask you to get the hell out of the country. The ever-growing thinned-skinned minority you have joined is simply ruining life in this once-great nation. Please move to some place like Cuba where you can enjoy the company of communists and get excellent health care. Just hop on a leaky boat and start paddling your way towards utopia. You will not be missed.

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To continue reading: “A Thin-Skinned Minority Is Ruining This Nation”

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ArcelorMittal Is Latest Victim of China’s Steel-Export Glut, Thomas Biesheuvel

Posted on November 7, 2015 | Leave a comment

Gluts in natural resources, the product of history’s biggest credit bubble, are now moving up the supply chain to finished goods, in this case steel. From Thomas Biesheuvel at bloomberg.com

Full-year Ebitda forecast reduced to $5.2 billion-$5.4 billion

Third-quarter profit declines 29% from a year earlier

ArcelorMittal is taking the latest knock from record Chinese steel exports hurting producers across the globe.

The world’s biggest steelmaker on Friday cut its full-year profit target and suspended its dividend, putting the blame on the flood of cheap steel from China’s loss-making mills. The market is being overwhelmed with material coming from the nation’s state-owned and state-supported producers, a collection of industry associations said Thursday.

“It is obvious that we are operating in a very challenging market,” Chief Financial Officer Aditya Mittal said on a call with reporters. “This is essentially the result of very low export prices out of China that are impacting prices worldwide.”

The steel industry has been roiled by the slowest economic growth in two decades in China, the biggest consumer. The flood of cheap exports from the nation has drawn complaints from Europe and the U.S. that the shipments are unfair. Bloomberg Intelligence estimates Chinese steel shipments overseas will exceed 100 million metric tons this year, more than the combined output of Europe’s top four producing countries.

While demand for steel in the company’s largest markets of the U.S. and Europe is recovering, producers’ profits are being hit by slumping prices because China has been pushing excess supply onto the world market as its economy slows.

To continue reading: ArcelorMittal Is Latest Victim of China’s Steel-Export Glut

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Another Phony Payroll Jobs Number , by Paul Craig Roberts

Posted on November 7, 2015 | Leave a comment

Month after month the Bureau of Labor Statistics announces the employment statistics, and month after month various alternative internet sites thoroughly dismantle them, casting all sorts of reasonable doubt on their veracity. Month after month the mainstream media takes the numbers at face value, even though they will be “officially” revised several time before they’re put to bed. The points and criticisms of the alternative sites are never acknowledged or addressed. From Paul Craig Roberts at paulcraigroberts.org:

The Bureau of Labor Statistics announced today that the US economy created 271,000 jobs in October, a number substantially in excess of the expected 175,000 to 190,000 jobs. The unexpected job gain has dropped the unemployment rate to 5 percent. These two numbers will be the focus of the financial media presstitutes.

What is wrong with these numbers? Just about everything. First of all, 145,000 of the jobs, or 54%, are jobs arbitrarily added to the number by the birth-death model. The birth-death model provides an estimate of the net amount of unreported jobs lost to business closings and the unreported jobs created by new business openings. The model is based on a normally functioning economy unlike the one of the past seven years and thus overestimates the number of jobs from new business and underestimates the losses from closures. If we eliminate the birth-death model’s contribution, new jobs were 126,000.

Next, consider who got the 271,000 reported jobs. According to the Bureau of Labor Statistics, all of the new jobs plus some—378,000—went to those 55 years of age and older. However, males in the prime working age, 25 to 54 years of age, lost 119,000 jobs. What seems to have happened is that full time jobs were replaced with part time jobs for retirees. Multiple job holders increased by 109,000 in October, an indication that people who lost full time jobs had to take two or more part time jobs in order to make ends meet.

Now assume the 271,000 reported jobs in October is the real number, and not 126,000 or less, where are those jobs? According to the BLS not a single one is in manufacturing. The jobs are in personal services, mainly lowly paid jobs such as retail clerks, ambulatory health care service jobs, temporary help, and waitresses and bartenders.

To continue reading: Another Phony Payroll Jobs Number

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Why Are Primary Dealers Are Liquidating Corporate Bonds At An Unprecedented Pace, by Tyler Durden

Posted on November 7, 2015 | Leave a comment

From Tyler Durden at zerohedge.com:

By now it is common knowledge that over the past two years the primary source of stock buying have been corporations themselves (recall Goldman’s admission that “buybacks have been the largest source of overall US equity demand in recent years”) with two consecutive years of near record stock repurchases. However, now that a December rate hike appears practically certain following the “pristine” October jobs report, suddenly the question is whether the recent strong flows into bond funds will continue, and generously fund ongoing repurchase activity.

The latest fund flow report from BofA puts this into perspective

The increase in interest rates is starting to impact US mutual fund and ETF flows. Hence, the inflow into the all fixed income category declined to +$0.96bn this past week (ending on October 4th) from a +$2.80bn inflow the week before… Outflows from government funds accelerated further to -$2.43bn this past week from -$1.73bn and -$1.00bn in the prior two weeks, respectively.

But more concerning for corporations than even fund flows, which will surely see even bigger outflows now that both yields are spreads are set to blow out making debt issuance far less attractive to corporations whose cash flows continue to deteriorate, is what the NY Fed reported as activity by Primary Dealer, i.e., the most connected, “smartest people in the room” who indirectly execute the Fed’s actions in the public markets, in the most recent week.

As the charts below show, the Primary Dealers aren’t waiting for the December announcement to express how they feel about their holdings of both Investment Grade and Junk Bond (mostly in the longer, 5-10Y, 10Y+ maturity buckets where duration risk is highest).

Indeed, as of the week ended October 28, Primary Dealer corporate holdings tumbled across both IG and HY, plunging to the lowest level in years in what can only be called a rapid liquidation of all duration risk.

Investment Grade Bonds:

And Junk Bonds:

To continue reading: Why Are Primary Dealers Liquidating Corporate Bonds

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