• History is Jammed With Fake News, Too

    24.04.2018 • United StatesComments Off on History is Jammed With Fake News, Too

    Bill Bonner – Bill Bonner’s Diary (United States) –

    BARCELONA – The streets were crowded last night.

    On the main ramblas, so many people were strolling about that we could barely cross the intersection. Many of the women held a single red rose.

    It was the Day of Roses and Books – Sant Jordi’s Day – in the Catalan capital city. Women are given roses to celebrate the slaying of the dragon by Sant Jordi (Saint George) in the 4th century.

    Men are given books coincidentally, to recall the deaths of the two giants of Western letters, William Shakespeare and Miguel de Cervantes, both of whom died on the same day: April 23, 1616.

    Dragon Infestation

    Fake news is our subject today. We open our eyes and see it everywhere.

    Myths and legends – like political slogans, federal budget projections, and declarations of eternal love – are not subject to proof.

    According to legend, the town of Montblanc in Catalonia had a dragon infestation. In order to keep the dragon satisfied, the town fed it one person every day.

    And the person selected on the 23rd of April, 303, was – improbably – the town princess.

    It was on this day that Sant Jordi, a Christian knight, showed up and quickly went to work. He drove his lance into the beast. The dragon was killed, its blood spilled upon the ground. And from the blood-soaked ground grew a red rose.

    The story is probably fake news.

    If the historians are to be believed, the real Saint George was not in Montblanc that day in AD 303.

    Instead, he was in the ancient Greek city of Nicomedia, undergoing the kind of punishment that Donald Trump wants to give drug dealers.

    Saint George offered religion – Christianity, to be specific. And Emperor Diocletian had declared war on Christians. He ordered that all Christian soldiers were to be arrested.

    According to this account, George refused to renounce his religion and his was cut off, making him a martyr to the cause.

    Either a Fool or a Genius

    History is jammed with fake news, too. The bare facts may be reported correctly. But facts lack all sense and meaning unless there is context.

    In addition to the “what,” “where,” and “when,” you need a “why.” And the “why” is almost always so distorted by time, delusion, and wishful thinking that the meaning is more myth than reality.

    Barcelona’s streets – at least in this part of town – are wide with a center strip for pedestrians, protected from the Mediterranean sun by sycamore trees on both sides.

    image

    Sycamore trees shade the pedestrian walkway

    Buildings are handsome 19th or early 20th century constructions, many with elaborate overhanging balconies, often set distinctively on the corners and enclosed in stained glass.

    Architecture is important here; the city is most-often remembered as the home of Antoni Gaudí, whose works are remarkably inventive, clever, and playful.

    But when he began his career, it was not at all clear where he would end up. When he graduated from architecture school, his class director said: “Today, we give this degree to either a fool or a genius. We will see later.”

    By the time he died in 1926, his peers had made up their minds; Gaudí was a genius.

    (Later today, we are going to see his famous cathedral, the Sagrada Família… Stay tuned.)

    Independence Movement

    From our brief inspection, the traditional or vernacular architecture of the city is fascinating in itself. The proportions are handsome. And the details are eye-catching and pleasant.

    The dark wooden shutters, for example, are much more attractive than the white metal ones of Paris.

    But what’s going on here? From balconies all over the city hang red and yellow banners.

    image

    Catalan flags, a symbol of the independence movement

    “Ahh… there’s an independence movement,” explained a friend. “They’re asking for a separate government for Catalonia. They want to break away from Spain.

    “And I know what you’re thinking… that they want freedom and independence so they don’t have to suffer the win-lose deals from Madrid. But you’re wrong. The separatists are like the originarios in Latin America. They want independence so they can impose their own win-lose deals.

    “It’s not about liberty; it’s about control.”

    We wondered what the history books will say.

    Will they say it was a brave struggle for the rights of man, for “self-determination”… and an echo of the Declaration of Independence?

    Or will they say it was just another political bamboozle, where a small bunch of zombies and cronies tried to get control of a government so they could rip off the public?

    It depends how it turns out!

    The victors write the fake news. If you want to be a hero, make sure you win. Otherwise, Gaudí would be a fool, we’d have a Diocletian Day rather than a St. George’s Day, and Barcelona would be celebrating the dragon!

    Regards,

    signature

    Bill

    MARKET INSIGHT: RETAIL IS BACK

    By Joe Withrow, of Research, Bonner & Partners

    Despite being left for dead in 2017, retail is the best-performing industry so far this year…

    That’s the story of today’s chart, which maps the year-to-date stock percentage gains by sector.

    Chart

    As you can see, retail stocks lead the pack with a 14.6% year-to-date return.

    Software stocks come in a distant second at 5.5%… followed by healthcare equipment stocks with a 3.8% return… semiconductor stocks at 2.8%… and tech hardware stocks at 2.2%.

    – Joe Withrow

    -Read more at bonnerandpartners.com-

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  • Bitcoin Will Become the World’s Reserve Currency

    24.04.2018 • United KingdomComments Off on Bitcoin Will Become the World’s Reserve Currency

    Andrew Lockley – Exponential Investor (United Kingdom) –

    Remember, all this week, we’re covering the world of cryptos. Not because crypto markets are over $100bn up from a couple of weeks ago. That’s just lucky timing.

    But because I have a new service out, dedicated to exploring cryptos in more depth than we can in Exponential Investor. If that sounds like something you’d be interested in reading, you can find out all about it here.

    We hear a lot about how cryptos will change the world. But what are they supposed to be changing specifically?

    What is the big impact blockchain and other crypto tech is actually supposed to have, and on what areas of our lives?

    Well, in today’s issue I’m going to list the top five predictions I’ve seen for what this technology will do in the coming months and years.

    And we’re not talking over the very long term here. As I wrote yesterday, with adoption rates’ ever increasing speed, many of these predictions could come true within five to ten years.

    1.Bitcoin will become the world’s reserve currency

    This is what Twitter and Square co-founder Jack Dorsey believes will happen “probably over ten years, but it could go faster.”

    He revealed his views in an interview with The Times on 21 March this year.

    “The world ultimately will have a single currency, the internet will have a single currency. I personally believe that it will be bitcoin,” he told The Times. This would happen “probably over ten years, but it could go faster”.

    Mr Dorsey accepted that bitcoin “does not have the capabilities right now to become an effective currency”.

    “It’s slow and it’s costly, but as more and more people have it, those things go away. There are newer technologies that build off of blockchain and make it more approachable,”

    And we know what those “newer technologies” are. He’s talking about bitcoin’s Lightning Network.

    This is a technology Dorsey and many other big tech names are heavily invested in. It aims to make bitcoin suitable for smaller and much faster payments. It will essentially eliminate most fees and make transactions almost instantaneous.

    Although it’s not without its flaws, it could be a game changer for the biggest crypto out there.

    Could bitcoin really become the world’s reserve currency? I guess we’ll have to wait and see.

    But with tensions high around the world, and with the US’ “trade war” with China, and Iran switching over to euros for its reporting currency, perhaps a more neutral reserve currency make sense.

    I have read more than a few conspiracy theories that this is China’s big plan. Most of the world’s bitcoin mining takes place in China. And if there was ever a push to make bitcoin the world’s reserve currency, China would make a killing, and gain a lot of power.

    2. World trade will be run through blockchain

    If you were reading Exponential Investor back in January, you might remember this prediction from IBM’s general manager of blockchain, Jason Kelley.

    He made it in his presentation at London Blockchain Week.

    He said the traditional supply (or value) chain is owned by intermediaries.

    This is the process the supply chain takes.

    Production > distribution > processing > regulations and compliance > manufacturing > point of sale.

    At every step of the way there is an intermediary taking a cut. Kelley’s vision is that the blockchain will eliminate these intermediaries.

    And he showed us the partnerships IBM is forming with Walmart and Maersk.

    Maersk is the world’s largest shipping company. If any industry can benefit from blockchain technology, it is Maersk. And it knows it.

    As Kelley showed, Maersk projects the savings and efficiency gains blockchain will provide will lead to a 5% increase in world GDP and a 15% in world trade volume.

    Here’s the slide from Kelley’s presentation.

    Slide from Maersk projects the savings and efficiency gains blockchain will provide will lead to a 5% increase in world GDP Slide from Maersk projects the savings and efficiency gains blockchain will provide will lead to a 5% increase in world GDP Source: Harry’s phone camera

    So, as you can see, this prediction is already on its way to coming true. We have some of the world’s biggest companies already testing it out. And the benefits they believe it will provide are massive. A 5% increase in world GDP and a 15% increase in total trade volume.

    3. We will have self-sovereign identities stored on blockchain

    Instead of our identities being stored on centralised systems, we will have control of our own identities. And we will have control of who we share them with.

    Imagine your passport being your iris or fingerprint. With our identities stored on cryptos there would be no need for a centralised database, and no need for a paper document that proves we are who we say we are.

    As you’ve seen in the last few years, passports have been going electronic. But this will be about more than passports. You will be able to store your medical data – blood type, past history, etc – on the blockchain.

    This may not sound that beneficial. But, while I was at the Event Horizon conference last week, the co-founder of TenX gave a presentation about exactly this topic.

    He used to be a trauma surgeon. And he said one of the biggest difficulties they faced was getting people’s medical records. If you’re in a different country or were brought in unconscious with no ID, it’s very hard to know how to treat you.

    Do you know where all your medical data is stored – or how you could give it to a surgeon if you were taken ill in a foreign country?

    Now, using biometric data for security has some very big issues. But that is a problem that is constantly being worked on.

    Solving the problem of identity is one of the main use cases that blockchain has. And there are already number of big players in this area. For example, here’s Microsoft’s take on identity and the blockchain:

    We aspire to a world where the billions of people living today with no reliable ID can finally realize the dreams we all share like educating our children, improving our quality of life, or starting a business.

    To achieve this vision, we believe it is essential for individuals to own and control all elements of their digital identity. Rather than grant broad consent to countless apps and services, and have their identity data spread across numerous providers, individuals need a secure encrypted digital hub where they can store their identity data and easily control access to it.

    Each of us needs a digital identity we own, one which securely and privately stores all elements of our digital identity.  This self-owned identity must be easy to use and give us complete control over how our identity data is accessed and used.

    We know that enabling this kind of self-sovereign digital identity is bigger than any one company or organization. We’re committed to working closely with our customers, partners and the community to unlock the next generation of digital identity-based experiences and we’re excited to partner with so many people in the industry who are making incredible contributions to this space.

    This will go even further than just identity, it will also involve asset ownership. The deeds to your house will be stored on the blockchain.

    In the UK, you might think, why? The system we have is okay as it is. But in many parts of the world, property rights and proving you own something is a massive issue.

    4. Stock and bond markets will be run on Ethereum

    As I have written about before, Ethereum could save bond markets billions by the use of smart contracts.

    If you missed my article on Ethereum and smart bonds, you can read it here.

    But to sum it up: Ethereum smart contracts will make it very easy and secure for companies to issue bonds themselves. This will cut out many of the intermediaries that leech money from both buyers and sellers in the bond market.

    And it will also mean bonds can be traded around the world at any time of the day or night, just as easily as people trade cryptos right now.

    And not only bonds, but the entire stockmarket could – and most likely will someday – be run on Ethereum. You can think of this in a similar way to when stockmarkets went digital. But its impact could be arguably even bigger.

    Brokers will go the way of HMV. And fees will either be eliminated or made completely negligible. It will also open up stockmarket investing to a whole new world of people.

    5. Energy markets will run on crypto

    Given that I spent all of last week at a conference dedicated to this vision, I can safely say, it is on the cards.

    As I wrote last week, there were industry leaders in energy in attendance from all over the world. And the overwhelming message was energy markets are changing. And changing fast.

    We already have Chilean regulators using Ethereum to track, store and secure energy data.

    Here’s what Chile’s energy minister, Susana Jiménez, said about the program earlier this month:

    “We are interested in taking this technology from a conceptual level to a concrete case, understanding that it’s considered to be the most disruptive technology of the last decade by world-class experts, and that it could be part of day-to-day life in the next few years.”

    But it’s not just governments and regulators. I saw presentations from the likes of Shell, the World Energy Council, The Energy Web Foundation, Centrica, MIT and others.

    The message was overwhelmingly that the energy markets are moving in a digital direction, and blockchain is making that move possible. They also believe this move will come about much faster than many realise.

    You see last Friday’s Exponential Investor here for more on this prediction.

    Until next time,

    Harry Hamburg
    Editor, Exponential Investor

    -Read more at www.exponentialinvestor.com-

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  • How Much of Your Wealth is in The Grip of These Gatekeepers?

    24.04.2018 • United KingdomComments Off on How Much of Your Wealth is in The Grip of These Gatekeepers?

    Boaz Shoshan – Capital and Conflict (United Kingdom) –

    Have you been investing in Iranian nuclear technology?

    If you have, I applaud your audacity. Fortune favours the bold, and investing moves don’t get much bolder than trying to profit from Iranian nukes.

    To be clear: I have not been investing in Iranian nuclear tech… but it was interesting to see what happened when some joked that I had.

    A friend of mine recently sent me fifteen quid over PayPal, to settle a small drinking debt. Similar to online bank transfers, PayPal lets you attach a note to the payment.

    My friend was feeling flippant. This is what showed up in my PayPal account.

    Screenshot of Boaz Shoshan's paypal account

    Screenshot of Boaz Shoshan's paypal account

    Payment declined. PayPal doesn’t want to take any chances with some funnelling cash into Iran’s nukes, even if it’s only £15.

    As you can see, I’ve redacted personal information, though these transaction attempts will have probably been picked up in the massive online surveillance sieves of intelligence agencies. (Hopefully Mossad doesn’t take it seriously. For the record, I am healthy and have no intentions of killing myself.)

    My friend tried again, making it quite clear that the money was not to be invested in the aforementioned Iranian nuclear industry.

    Screenshot of Boaz Shoshan paypal account 2

    Screenshot of Boaz Shoshan paypal account 2

    But no dice.

    All joking aside, the situation just goes to show how beholden we are to banks and payment processors, who may have political biases, or are themselves beholden to the state.

    How much of your wealth is in the grip of these gatekeepers? How financially crippled would you be if moving money to and from your accounts was impossible, because you are considered politically unpalatable?

    This happened to WikiLeaks in 2011, when intermediaries such as Visa and MasterCard would no longer accommodate it. In response, it started taking bitcoin donations and accepting bitcoin in the WikiLeaks online shop.

    This has worked out very well for it over the years. It’s made a fortune, while circumventing the financial intermediaries and middlemen who would freeze its finances. But as cryptocurrencies have taken off in popularity, it seems the problems of the old have returned.

    Coinbase, one of the world’s largest cryptocurrency exchanges, has blocked WikiLeaks from using its services.

    This isn’t so much of a threat to WikiLeaks as before, as Coinbase doesn’t hold nearly so much influence in crypto as Visa or MasterCard does in the paper currency world. WikiLeaks can just find a different crypto exchange when it wants to swap its bitcoin for fiat.

    But it’s interesting to see things go full circle, as a currency adopted for its lack of middlemen becomes a victim of its own success…

    In the meantime, the new digital currency world is beginning to look a lot like the old paper money world. I heard the following at a conference last week, from a “cryptocurrency investment banker”:

    “The future is even brighter than it’s been, and when I mention regulation, and things going back to the old world, these are not bad things. Not bad things at all.”

    What was the point of the new world, if it’ll be just the same as the old one?

    I’d love to know your thoughts in the comments below.

    For those interested in “unplugging” their wealth from the financial system, and avoiding the financial gatekeepers altogether, we’re working on a guide for it. Keep an eye out for it in the near future.

    All the best,

    Boaz Shoshan
    Editor, Southbank Investment Research

    -Read more at www.capitalandconflict.com-

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  • Reducing Debt Isn’t a Priority… So What Is?

    23.04.2018 • FranceComments Off on Reducing Debt Isn’t a Priority… So What Is?

    Simone Wapler – La Chronique Agora (France) –

    At the last meeting of the IMF and the World Bank, the United States was criticized for its “trade war” and its protectionist ambitions.

    “If tariffs were to be generalized and increase by 10%, we would everywhere have a significant increase in imported prices and therefore loss of purchasing power. We would then witness a drop in world GDP of at least 2%, “said François Villeroy de Galhau, the president of the Banque de France.

    The game of win-win agreements requires that everyone exchange what they know best to acquire what they do not do well. Tariffs are just a form of tax that affects those who buy imported goods and – like any tax – cuts purchasing power without being a creator of wealth. But to quantify with such precision the effects of protectionism can only leave us breathless with admiration.

    Strange that our omniscient technocrats do not pursue their reasoning: conversely, if we lowered the customs duties, the GDP should increase. They should be able to calculate that too. In France, customs duties range from 3% to 20% for products imported outside the European Union. Why not delete them? It would be too simple ?

    The now well-worn theme of “too much debt”

    The IMF and the World Bank were also debating the hackneyed theme of “too much debt”. We should “take advantage of the good times to reduce debt and lead the reforms,” ​​says Villeroy de Galhau, Governor of the Bank of France, participating in this ball of hypocrites.

    Reducing debt is not at all the priority of welfare states since it is available in seemingly unlimited amount and costs nothing. On the contrary, the monetary and financial system is designed to favor it.

    This brings us back to our brief history of currency, from Sumer to Bitcoin, which began last week.

    Episode 9: After the end of Bretton Woods, the advent of credit

    After the end of the Bretton Woods agreements in 1971, all currencies are floating, without anchoring in the real world. Commodities are traded in dollars. To get oil, you need dollars. Dollars are therefore easily exported and central bankers store them. Of course, they do not store bundles of greenbacks but US treasury bills that yield a little something.

    At the same time, commercial banks collect deposits and are allowed to create credit, on the order of 10 to 30 times their own funds (the money the bank’s shareholders put in the pot).

    We are entering a system whereby “credits make deposits”.

    When a bank grants a loan, the corresponding money is created and will appear as a deposit elsewhere. For example, you buy a property on credit and the price of your property becomes a deposit in the bank of your seller.

    The so-called fractional reserve system allows banks to deposit only a small portion of deposits with the central bank on which it depends.

    Commercial banks receive a license to lend money that does not yet exist. Indeed, for 1 deposit, commercial banks can lend 99. This is called the fractional reserve system.

    This money is lent for private expenses (what your financial adviser calls “your projects”) or investments, or finally public expenses.

    Loan capital does not exist (at 99%), so lenders do not take risks, especially if they lend to states, the same states that granted them their money creation license.

    Lenders in bad shape will be saved by the Central Bank, their state – so you, taxpayer.

    Counterfeiters dubbed by the State

    “In essence, the current monetary creation by the banking system is identical, I do not hesitate to say so to make clear what is really involved, the creation of money by counterfeiters, so precisely condemned by law. Concretely it leads to the same results. The only difference is that those who benefit are different. Maurice Allais, The World Crisis Today, ed. Clément Juglar, 1999

    This system has nothing to do with capitalism. It works with credit and not existing money already.

    Credit is based on two pillars

    • Monetary creation ex nihilo, which is the result of the issuing monopoly of the central bank. It is based on the public debt, the government bonds, whose guarantors are the taxpayers.
    • The system of fractional reserves.

    It is an eminently unstable system that can only support credit growth. Any tightening of private credit in circulation leads to bankruptcies and therefore recessions. Any tightening of public debt leads to a decrease in consumption subsidized by redistribution expenditures.

    Central banks are supposed to regulate the mass of credit by adjusting their key rates.

    Financial crises increasingly frequent

    Financial crises and speculative bubbles succeed one another, always closer and more serious:

    • Japanese crisis
    • Krach of 1987 and crisis of savings banks and savings banks
    • Bankruptcy of speculative fund LTCM in 1998
    • Internet bubble of 2000
    • Crisis of subprime credit in 2008

    Debt growth implies a forced decline in long-term interest rates. Financial zombies must be able to appear viable by paying interest on a debt that they can not repay.

    At each crisis, central banks lower their key rates. They then raise them but without regaining the previous level.

    -Read more at la-chronique-agora.com (French)-

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  • Beware the Myth That Guides US Investments

    23.04.2018 • United KingdomComments Off on Beware the Myth That Guides US Investments

    Nick Hubble – Capital and Conflict (United Kingdom) –

    This issue of Capital & Conflict comes from my friend Akhil Patel. He unpacks one of the favourite arguments of the Austrians. Not the Austrians generally, but the followers of the Austrian School of Economics, like me.

    As you’ll see, it’s easy to interpret historical events to suite our preconceived ideas. Most schools of thought make this mistake. As Akhil puts it, “Do not be seduced by it. Or feel free to be, but do not let it guide your investment decisions.”

    But the real treasure in Akhil’s work is the alternative it presents. Instead of using economic theory or macroeconomic analysis, Akhil begins with an observation: cycles are inherent in the economic system. And therefore predictable.

    Using this idea, subscribers of Cycles, Trends and Forecasts invest to profit from the ups and downs of the various cycles fluctuating through markets around the world.

    If you agree with his ideas, there’s no denying they’re a powerful ally in the investment world. So let’s see if Akhil can convince you..

    Until next time,

    Nick Hubble
    Capital & Conflict

    Beware the fatal conceit of the Austrians

    Akhil Patel, Cycles, Trends and Forecasts

    Few people today know or remember the depression that took place in the US between 1920 and 1921. The glamour and excesses of the Roaring Twenties has obscured it and the Great Depression eclipsed it in both length and legend.

    But it’s important you understand what happened almost a century ago.

    In the wake of the high inflation – and, for the US, the booming business – of the First World War, the recently created Federal Reserve set about bringing prices under control. Sean Keyes, writing for MoneyWeek magazine a few years ago, described it thus:

    The various Federal Reserve banks raised interest rates by 244 basis points over the course of eight months, with rates peaking at 7% in June 1920.

    The Fed’s aggressive tightening seems to have yanked the economy to a halt. Output peaked in January 1920 when the Fed raised rates by 1.25% – still the sharpest single rise in the entire history of the system. Employment and output fell slowly at first, then collapsed in the summer after the final rate rise in June 1920.

    The word collapse is overused – but it’s entirely appropriate in this case. Production dropped by a third in just over a year. Wholesale prices more than halved. Indeed, the price collapse was probably the biggest the US has seen in its entire history. And the fall in output was second only to the Great Depression.

    The severe deflation meant that interest rates were – in real terms – very high and made the servicing of debts crippling. Farmers and businessmen who had expanded to cash in on high prices and the commodities boom of the 1910s went bankrupt as prices and demand fell.

    The fallacy of a common argument

    Despite Keyes’s observation that the fall in output was second only to the Great Depression in American history, the US recovered rapidly. And it did so with minimal government intervention. The 1921 recovery also did not involve any deliberate action from the Fed other than bringing interest rates down again.

    These points were included in a recent book by Jim Grant (of Grant’s Interest Rate Observer fame): The Forgotten Depression: 1921, the Crash That Cured Itself. Other “Austrian” economists (if you’re interested in the development of economic thought, you can read a good overview of their approach here) and analysts raise the same point. They view any government intervention as interfering and distorting the “natural” market.

    But this is mostly an ideological argument which is not grounded (I use this pun deliberately) in the real world. The Austrians point to what happened in 1920-21 as the appropriate response to the 2008 crisis, instead of the government bailouts and Fed money printing that we actually got.

    But this analogy is false. Do not be seduced by it. Or feel free to be, but do not let it guide your investment decisions.

    You cannot compare the 1921 recession with the 2008 version (or the Great Depression of the 1930s). This is because the downturn of 1921 did not involve land values collapsing, and by extension the banks. What happened in 1920–21 is actually just like the downturn of 2002 in the US and the one we anticipate for the end of this decade or early part of next. In other words, the mid-cycle slowdown of the longer-term real estate cycle.

    Hence the recovery after 1921 was much more likely to begin without requiring government assistance programmes, such as we saw after 2008, and without the Fed having to intervene as well (other than to reverse interest rate policy).

    Why is this important?

    I am not telling you this to score points or to lambast anyone’s deeply held beliefs about the monetary system.

    The problem with ideology is that it is used to create seductive stories and explanations and then send you in certain directions with respect to decisions about your wealth.

    Here is an example of the sort of argument that can be concocted to explain what has happened in recent years:

    • The Federal Reserve or Bank of England should not have intervened. Governments should have severely reduced the size of their budgets in response to the recession. They should have ignored the lessons of the Great Depression.
    • Rather than allow the rate of savings to regulate interest rates they messed with it by printing money – trillions of pounds and dollars. In doing so they broke the monetary system.
    • All of this “state” created money distorts the allocation of capital in the economy.
    • Businesses feel that there is more money in the economy than there actually is (money that represents savings) and therefore have allocated capital to investment to serve demand that is not there. The result? A massive programme of “mal-investments” which will come back to haunt them in the coming crash.
    • Then here the story diverges. For some, market investors have been blind to these problems (they haven’t read their Austrian economics textbooks) and have poured money into the stock market creating a massive bubble which will soon pop. High stock valuations support this view.
    • The alternative story is that actually investors have seen through this and this is reflected in the fact most markets have gone nowhere over the last two decades. Take the FTSE 100, which is currently where it was in January 2000: 18 years and zero returns. Over the same period, the price of gold has quintupled. This means that the market is in fact wise to the scale at which capital has been misallocated and has delivered its verdict based upon the relative performance of these two assets.

    Whichever version of the latter part of the story you believe, the investment advice is the same: you should be in cash or safe haven assets that store value – such as gold. Because the crash is coming – it has been coming for years in fact – and you need to be prepared.

    Seductive isn’t it?

    Let’s leave aside the fact that this view of money creation is wrong (I invite you to read my primer on this subject from last year – The secret life of banks). Let’s note in passing the deliberate selection of dates to show the relative outperformance of gold compared to the FTSE (the top of the dot com bubble vs. the bottom of the commodities cycle in 2000).

    My key contention here is that understanding the land market will help you see the movement of the economy much better. Austrian economists, or any other economists for that matter, do not incorporate land, or the economic rent, into their models.

    You know, however, that recovery from a land-induced bust requires action from the central bank. There is simply no way around it.

    And if you know your history, you’ll understand that the recovery from a land bust takes time to happen: on average four years from the prior cyclical peak. And that once it does, the economic expansion will be sustained until the land speculation once again overwhelms other economic behaviour.

    This pattern goes in cycles. It’s a long cycle and it happens over the course of years, not months. Once you know it, taking advantage of all the volatility will become easier to do.

    You can also come to see which economic arguments are flawed and invest appropriately. For example, since 2009 until late 2016 I was positioned for a deflationary environment. During that same time many “Austrian” investors bought gold and other inflation hedges in response to the money creation from the central banks because they expected hyperinflation. And over that same period, the outperformance of the FTSE relative to gold has been enormous.

    The time for protecting yourself from inflation is starting to arrive, right on cue. The past few years of waiting for it were wasted, I am afraid. Here’s what they don’t understand…

    The US Fed needed to print more

    The refrain over the past several years, since the Fed “QE” I, II and III, has generally been: “Never before has so much money and so much credit been created so quickly. It’s going to sink the dollar, ruin the US and cause economic mayhem, everywhere.”

    But is this actually true: That so much money and credit was created so quickly?

    Not according to Steve H Hanke, professor of Applied Economics at the Johns Hopkins University in Baltimore (he is also one of the very few economists who understands the land dimension and can spot the cyclical repeat). He had this to say (in 2015):

    Even though the Fed has been pumping out State Money at a super-high rate since the crisis of 2009, it hasn’t been enough to offset the anemic supply of money produced by banks – Bank Money. Even after six years of pumping, State Money still only accounts for 21 percent

    of the total money supply broadly measured. In consequence, the Divisia M4 money supply measure is growing on a year-over-year basis at a very low rate of only 1.7 percent.

    You can read his entire piece here, and I suggest you do.

    In fact, you could say the Fed did not actually print enough money. Banks were being forced to devote more of their balance sheets to holding more securities (in case of another bank run) instead of lending it out.

    In other words, all the money printing that took place did not make up for all the money destroyed in the downturn. We cannot emphasise this point enough. The Fed printing money is NOT the problem: the collapse of the money supply, caused by the credit (created against land values for the most part) being wiped out in the downturn and not replaced by new bank lending, was.

    The situation was worse in Europe, as Professor Hanke showed. This is why the eurozone took much longer to recover than the US or the UK.

    This situation has now come to an end, as it does every real estate cycle, as interest rates are lifted back to “normal”. This is around 8 to 9 o’clock on our property clock.

    Money and credit do matter. But land value matters even more.

    The alternative to seductive stories

    Back to why this is important for your investments. Let’s take a look at the FTSE 100 since 2000. As you can see, the dashed line shows that the index is currently where it was at the peak in 2000, at around 7,000.

    Remember, if you think that central banks have broken the monetary system, you’re going to be looking at this chart, at the fact that the FTSE has gone “nowhere” for two decades, and see weakness; possibly preparing for it to go much lower, but certainly to underperform other assets such as gold.

    FTSE evolution in the 21st centuryFTSE evolution in the 21st centurySource: Optuma

    Since 2000, the index approached the dashed line at the real estate cycle peak in 2007; it then briefly broke through in 2015, before doing so decisively in 2017.

    Here is what you need to know about this chart.

    Markets butting up against highs over a long period of time are rare events. And when they break up they run for years and years. So market history tells us.

    Let’s take a look at the Dow Jones between 1930 and 1950. In 1950 the Dow was at around 213, which was where it had been in 1930. Then it broke through and never looked back.

    Dow Jones evolution from 1930s to 1960sDow Jones evolution from 1930s to 1960sSource: Optuma

    It ran and ran. It reached a peak at around 1000 in 1966: two decades of going nowhere followed by a 500% gain in around 16 years.

    W.D. Gann said this, in his Truth of the Stock Tape, about stocks that test highs over a number of years (emphasis added):

    When stocks establish certain levels of accumulation or distribution over a longer number of months or years and then cross them it is almost a sure sign that they are going to new high or low levels before they meet with resistance again…

    When a stock advances…into new territory or to prices which it has not reached for months or years, it shows that the force or driving power is working in that direction. It is the same principle as any other force which has been restrained and breaks out. Water may be held back by a dam, but if it breaks through the dam, you would know that it would continue downward until it reached another dam, or some obstruction or resistance which would stop it. Therefore it is important to watch old levels of stocks. The longer the time that elapses between the breaking into new territory, the greater the move you can expect…

    Following the peak of 1000 around 1966, the Dow stalled at this level for many years. It touched this level in 1969, 1973, 1976/77 and 1980. Each time it reached those highs but failed to break through. In late 1979, BusinessWeek magazine ran an issue with the title “The Death of Equities”, so gloomy was the outlook then.

    But after 16 years of going nowhere, the Dow finally broke through 1,000 in 1982.

    Dow Jones evolution from 1960s to 1980sDow Jones evolution from 1960s to 1980sSource: Optuma

    After doing so it ran up for another 18 years, before peaking at around 11,000 in 2000. 16 years of going nowhere and then 18 years delivering a 1,100% gain.

    Are you starting to see a pattern?

    In my view, the conclusion you should be drawing from the chart of the FTSE is exactly the opposite to the one I paraphrased earlier.

    Be prepared for the FTSE to go much higher. Much much higher. Obviously it will not be all in a straight line and there will be volatility along the way (as in past examples of market breakouts). During that period we will have to contend with the mid-cycle slowdown and perhaps the peak of the real estate cycle.

    Incidentally, the market ructions of the past couple of months have brought prices back down to previous highs. If these hold, that is a strong set-up. And, if you’re interested in time cycles, note that this was exactly 180 months from the market lows in March 2003 (for an introduction to the idea of time cycles, and the significance of this time count, please review this newsletter).

    So now you have both a price point of support and a time point of support for this set-up. I will discuss both of these points in more detail in future newsletters.

    I am sometimes asked: what if I am wrong about cycles and these patterns? That’s a big question. I will be the first to admit that it could well happen. But what this type of analysis throws up are very clear time and price points at which you will know this definitively and you can respond accordingly.

    I want you to be wary of ideology masquerading as investment strategy. All you need to do is to understand the land cycle and learn your market history.

    And the rest will take care of itself.

    Best wishes,


    Akhil Patel
    Editor, Cycles, Trends and Forecasts

    -Read more at www.capitalandconflict.com-

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  • Trump’s “Roaring Back” Delusions Debunked

    23.04.2018 • United StatesComments Off on Trump’s “Roaring Back” Delusions Debunked

    Bill Bonner – Bill Bonner’s Diary (United States) –

    BARCELONA – This just in… from our man in Argentina…

    I stopped in Cafayate for lunch… In the square were some students from different schools celebrating “El día del aborigen Americano” [Day of the original American] as you can see in the picture.

    The teachers’ speeches were depressing… “The land is ours… We belong to the land… We have the right to the land… ” etc. Poor students. What can we expect from them? The lazy ones will probably claim to be originarios when they grow up and make their living [on welfare]…

    image

    Students assemble during El día del aborigen Americano

    Every’s got an angle. From our correspondent in Los Angeles, Matt Gordon, comes word of a new hustle:

    Here in Los Angeles County, according to something called the Los Angeles Homeless Services Authority, there’s now a homeless population of precisely 57,794. For perspective, Chavez Ravine (i.e., Dodger Stadium), has a capacity of 56,000.

    This army of indigents, roaming about the LA LA land paradise, has become a significant embarrassment for local leaders. Haphazard urban campsites litter the bank tops of the colossal, concrete Los Angeles River Channel between Downtown Los Angeles and Downtown Long Beach. The massive collection of tents and makeshift shelters has become too much to ignore.

    A Novel Pilot Program

    Matt continues…

    Hence, the clever folks at the LA Community Development Commission have launched a pilot program to pay homeowners to construct backyard dwelling units to house the homeless.

    Loans of $75,000 are being granted for constructing a new backyard unit for the purpose of housing vagrants. There’s even a design competition for model secondary dwelling units. What’s more, loan interest stops accruing after five years in the program, and the loan is forgiven after 10 years.

    We can imagine how that will turn out. A lot of “vagrant” adult children and widowed mothers-in-law will end up in backyard apartments, paid for by the taxpayers.

    But that’s the way government always works. The few exploit the many.

    Roaring Back

    Matt goes on to wonder how come there are so many homeless people in LA when the economy is doing so well.

    After the second-longest expansion ever… “more than full employment”… inflation under 2%… stocks near record highs… and a 400% increase in the S&P 500…

    …shouldn’t everyone be rich?

    And from the White House we hear that not only is the economy great… it’s getting better! Donald J. Trump:

    …America is strong and roaring back. Paychecks are climbing. Tax rates are going down. Businesses are investing in our great country. And most important, the American people are winning.

    It really seems to be the best of times and the worst of times. Or… is this “best of times” story a form of fake news?

    Colleague and budget advisor under President Reagan, David Stockman, has done a superb job of sorting through the data.

    He found no evidence that “America… is roaring back” or that “paychecks are climbing”… or that “businesses are investing” or that the “American people are winning.”

    Instead, he found:

    Paychecks are keeping pace with inflation, nothing more. Just as they did during the Obama years.

    Real business investment has been on a downward trend for at least the last 7 years. That trend is still in place.

    As a result, labor productivity continues to decline, too… averaging only half the rate of its historic average.

    There has been no pickup in employment, either. Looking at the hours worked, the rate of increase is slightly weaker than it was under Obama.

    Which leaves the American people not winning at all. They have only been able to continue spending by taking a half-billion dollars out of their savings… leaving them deeper in debt and more vulnerable to a downturn than ever before.

    And now, these losers are losing even more… because the feds are loading even more debt on their backs… $1 trillion/year in deficits (two and a half times more than GDP growth).

    In other words, expect more favelas – makeshift slums – in America.

    The strength of the U.S. economy is fake news. But in public policy, fake news is the only kind of news there is…

    More to come…

    Regards,

    signature

    Bill

    MARKET INSIGHT: CRUDE ON THE RISE

    By Joe Withrow, of Research, Bonner & Partners

    U.S. crude oil continues to rise…

    Today’s chart tracks the price of West Texas Intermediate (WTI) crude oil – the U.S. benchmark – from the start of 2015 through today.

    Chart

    As you can see, U.S. crude oil climbed 160% since bottoming in February 2016.

    At over $68 per barrel, oil is now trading at its highest level in more than three years.

    – Joe Withrow

    -Read more at bonnerandpartners.com-

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  • How to Benefit Directly from the Speedy Crypto Adoption

    23.04.2018 • United KingdomComments Off on How to Benefit Directly from the Speedy Crypto Adoption

    Harry Hamburg – Exponential Investor (United Kingdom) –

    This week we’ll be taking a “deep dive” into the world of crypto.

    If you’re a regular reader, you’ll know just how world-changing I believe this technology is.

    And if you’d like to know more about what I believe are the best cryptos out there right now, and how you can invest in them, you should check out my new service Frontier Tech Investor: Crypto Wire.

    As an Exponential Investor reader, you I’ve arranged for you to get a 71% saving off the regular price with this code: CWSAVING.

    In Frontier Tech Investor: Crypto Wire I cover crypto topics in much more depth than I have space to do in Exponential Investor.

    And I also look into more specific cryptos and weigh them up using a unique ranking system. If you want to know more about it, click here now.

    Of course, I’ll still be covering cryptos in Exponential Investor, but if you want a more in-depth look and a pure crypto focus, as well as exclusive crypto rankings, you can click here to claim your 71% discount on Frontier Tech Investor: Crypto Wire.

    Tech adoption is speeding up

    I’m going to show you a chart from Our World in Data. If you haven’t heard of it, here’s its own explanation of what it does.

    Our World in Data is an online publication that shows how living conditions are changing. The aim is to give a global overview and to show changes over the very long run, so that we can see where we are coming from and where we are today. We need to understand why living conditions improved so that we can seek more of what works.

    Basically it collates loads of historical data about all aspects of life, all over the world, and makes it easy to understand.

    It’s a great website to have a play on, if you want to ever get to the truth behind a lot of scaremongering news stories.

    But anyway, here’s the chart:

    This chart shows how long new technology takes to get adopted.

    What may not be clear at first is that as time goes on, new technology is getting adopted at a faster and faster rate.

    If we zoom in on the more recent technologies that trend is much easier to see:

    As you can see, the lines are getting steeper and steeper with each new technology.

    Why tech adoption is speeding up

    This then brings up two questions (at least it did for me):

    1. Why is tech adoption speeding up?
    2. What does this mean for future tech trends?

    The first question has a simple answer. New technology no longer has to create its own infrastructure.

    Think about the amount of engineering needed to lay water pipes, or electricity pylons, or radio antennas. In the past, new technology also had to create entirely new infrastructure to support its use.

    Later technology just adapted infrastructure that was already in place. Take internet use, for example. The infrastructure it needed was already in place. It simply piggybacked off existing phone lines.

    Telephones, by comparison, had a much harder time of it.

    But there is also another aspect to increased adoption speed: connectivity.

    Today, if someone tries out a new technology and it improves their lives, you can bet all their friends will know about it within minutes. And not just their friends that live close by, but their friends all over the world.

    Look at the line on that chart for tablets. It’s almost vertical.

    This instant connectivity we now have is the reason we can get the latest TV shows within 24 hours of US viewers. The companies know that if they don’t give us them, we’ll just get them through other means – torrents, streaming, using VNPs to change our location, etc.

    I’m re-watching all of Breaking Bad right now on Netflix. I remember when it first aired, I used to download it through torrents because it wouldn’t air on UK TV for months. By the last season it was shown on UK TV the day after it aired in the US.

    It’s exactly the same with Game of Thrones, and other big TV releases.

    What this means

    The fact that all this adoption is speeding up means when a new, belter technology emerges, you can bet it will make it big extremely fast. How fast? Take a look at this chart:

    The amount of money flowing into these industries throughout their adoption was huge. And they all have one thing in common: it was very hard for the average person to invest in them directly.

    It’s not like you could just invest in “radio” or “television” or “electricity”. Had you been able to, you could have made a fortune.

    But the world doesn’t work like that. Or, at least, it didn’t used to.

    The world is very different now

    Well, cryptos change that paradigm.

    Cryptos are the first world-changing technology that you can directly invest in yourself.

    You can own a piece of the actual technology. You can literally own bitcoin, or Ethereum or IOTA.

    Sure, back in the day you could invest in Microsoft or Apple or Sony. But it’s not like you would actually own a piece of every computer, iPhone or TV they produced.

    With cryptos, you do. If the technology succeeds – and we’ll be covering more on that in the coming days – you can literally own a small part of it.

    And that small part, as I’m sure you’re aware could soon be worth a whole lot of money.

    You’ve seen how fast new technologies get adopted “nowadays”. Well, crypto is next on that list. This year it has reached the point where it can be used in real-world application. And more importantly, it is being. Again, I’ll cover more about that this week.

    But the key takeaways here are:

    Crypto will be adopted faster than almost anyone realises.

    And by owning crypto you can directly financially benefit from this adoption.

    If you want to find out how you can do that for yourself, remember to check out Frontier Tech Investor: Crypto Wire. When you join you’ll get everything you need to start investing in crypto yourself – and I do mean everything, have a look here to see what I mean.

    And don’t forget, as an Exponential Investor reader, you can claim a 71% discount by using the code: CWSAVING.

    Until tomorrow,

    Harry Hamburg
    Editor, Exponential Investor

    Related Articles:

    -Read more at www.exponentialinvestor.com-

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  • America’s Plagued and Trump Can’t Cure It

    20.04.2018 • United StatesComments Off on America’s Plagued and Trump Can’t Cure It

    Bill Bonner – Bill Bonner’s Diary (United States) –

    ON THE CELTIC SEA – We drove up to Cherbourg yesterday, boarded a ferry, and are now cruising towards Ireland. The trip takes nearly an entire day, but the wifi works onboard… so we were able to stay in contact.

    image

    Harbor at Cherbourg

    image

    Aboard the Oscar Wilde

    It can be a miserable crossing for someone who gets seasick easily. But the sky was sunny when we got on board, and the trip has been smooth. We have only a couple more hours to go; we are approaching the Irish coast already.

    The ship is full of children – French teenagers who are going to Ireland. There must be at least a hundred of them. They are everywhere… and they are always in motion.

    We sat in the bar this morning, drinking a cup of coffee while watching them go by. One way… then the other. In twos and threes. Some walking. Some running.

    Where were they going? We are on a ship; there is nowhere to go. But they couldn’t sit still. Instead, they wandered up and down, round and round… talking, laughing.

    We pitied their poor chaperones, who tried to keep them quiet and under control. Whoever invented school trips must have done so to torture them.

    Below… we follow up on how the feds are bankrupting America… and why a stock market crash, a bear market in bonds, and a depression are now probably inevitable.

    Second-Place Debt

    The International Monetary Fund (IMF) now predicts that the U.S. government debt load will be worse than Italy’s by 2023. This will put America in second place, just behind Japan, in the race to go broke. It is expected to have a debt/GDP ratio of 117%.

    This IMF forecast assumes that things will go well. That is, it assumes that there will be no shocks or unexpected developments. But we have already gone a long time without a recession – 109 months. The record is 119 months.

    Most likely, a recession will begin… fairly soon. Then, all the estimates will be tossed aside and replaced with much worse numbers.

    Instead of a $30 trillion debt in 2028, for example, the debt will explode to $40 trillion… or even to $56 trillion, as one of our Dear Readers forecasts.

    But even as things now stand, extrapolating only budget projections and visible trends, the federal government is already programmed for bankruptcy. Yes, it can “print” money to cover its debts, but this is just bankruptcy masquerading as inflation.

    That’s what happens when receipts habitually fail to meet outlays and debt rises faster than the economy that supports it.

    Some will want to blame Donald J. Trump immediately. But let’s not rush to judgment. The disease was well advanced long before Mr. Trump appeared at the craps game with his MAGA cap.

    The desire to balance the budget is described as a “conservative” attitude. But “conservativism” only makes sense in a world of scarcity. If you’re going to live forever anyway… why bother with an estate plan?

    We try to save time because we know our time is limited. We try to save money because we know it doesn’t grow on trees. But since 1987, when Alan Greenspan rescued the stock market from a correction, the Fed has appeared to have an especially green thumb.

    Even at today’s Fed Funds rate of 1.69%, the real rate of interest is less than zero. Because consumer prices are rising at about 2% per year. The Fed’s money is free (to member banks, of course).

    Even at nominal yields, there is still some $7 trillion in bonds worldwide trading below zero. For nearly three decades, this new money has seemed to be unlimited.

    Reality TV White House

    Together, central banks have increased their holdings by $17 trillion over the last 10 years. That’s money that didn’t exist before.

    This gush of liquidity did remarkable things to the economy. Chiefly, it shifted the focus from making things and earning money… to consuming things and speculating with credit.

    The price of financial assets rose, while the price of the working man’s time stayed about the same. The resulting “wealth effect” made it seem benign.

    But it was malignant. And it gave the feds the wrong idea – that deficits really don’t matter because there is an almost unlimited amount of money for them to borrow.

    The illness was entering its terminal phase even before Donald J. Trump was elected. But his ascendance seemed to give some people hope.

    He promised to “drain the swamp.” In an era of mealy mouthed, double-talking politicians, Mr. Trump sounded direct… almost honest. Maybe he had a cure!

    The difference turned out to be mostly aesthetic. Instead of normal TV programming… we got Mr. Trump’s reality TV, in which things are staged to look as though they aren’t staged.

    And instead of Deep State insiders calling the shots, we now have an administration that pretends to be fighting the elite, but is even more enthralled to the insiders than its predecessors, largely because it has no idea what else to do.

    And instead of a budget deficit of $700 billion as scheduled by Obama-era programs, we now have an additional $300 billion, giving us a projected budget deficit of $1 trillion, under DJT’s leadership.

    The Washington Post elaborates:

    By 2022, the U.S. government is projected to spend almost as much money on interest payments for its massive debt as it will on the Pentagon, more than $600 billion every year.

    The spiraling expense underscores a frightening reality in Washington: President Trump and Congress have not only massively expanded the U.S. government’s debt, they have broken free of multiple guardrails intended to keep budgets balanced, freeing future lawmakers to further expand the yawning gap between what the government takes in and what it spends.

    Now, this borrowing binge appears impossible to reverse…

    All the hoopla and razzmatazz about trade deals, Russian meddling, Syrian bombing, and porn stars may not amount to a hill of beans.

    But $300 billion is a lot of money. That’s on top of the $700 billion already authorized. And it comes as the Fed tries to reverse course.

    Instead of enabling the feds’ fantasies by buying their bonds, for the first time in 30 years, the Fed is selling bonds.

    The combination of frauds and foolishness undoubtedly deserves an “extreme warning.” It may or may not be imminent. But it is surely inevitable.

    Disaster to follow.

    Regards,

    signature

    Bill

    P.S. You may have heard of our estate in Nicaragua – Rancho Santana. It’s nestled up against some of the most beautiful Pacific coastlines in all Latin America. We bought the property more than 20 years ago. Back then, the government wasn’t very accommodating to private property rights… or foreigners. But the people were warm, and the views spectacular.

    I mention this because there’s been a development down at Rancho. Rather than hear it from us, we’ll let our daughter Maria tell you the whole story.

    MARKET INSIGHT: CHINESE STOCKS SINK

    By Joe Withrow, of Research, Bonner & Partners

    U.S. stocks have gotten off to a rough start this year… partly due to trade war fears. Despite its recent rebound, the S&P 500 is still 6% off its January high.

    But for some perspective, Chinese stocks have fared even worse in 2018.

    Today’s chart follows the Shanghai Composite Index – which tracks all stocks trading on the Shanghai Stock Exchange – from the start of 2017 through today.

    Chart

    As you can see, Chinese stocks have plunged 14% from their January high. That’s more than double the S&P’s fall during the same time.

    – Joe Withrow

    -Read more at bonnerandpartners.com-

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  • U.S. Missileers Stand Ready as the Russian Nuclear Arsenal Grows

    20.04.2018 • United KingdomComments Off on U.S. Missileers Stand Ready as the Russian Nuclear Arsenal Grows

    Boaz Shoshan – Capital and Conflict (United Kingdom) –

    Have you heard of the Kanyon? It’s a new addition to Russia’s nuclear arsenal. It’s an underwater drone, designed to be fired from a submarine like a torpedo.

    It can race across the ocean for days, thousands of feet below the surface… before reaching its target and triggering a nuclear tsunami.

    Kanyon was the CIA’s codename for it. In Russia, it was named the Poseidon – after a public vote! (If “Boaty McBoatface” is any guide, I sure hope our nuclear deterrent doesn’t get renamed by the public.)

    The Kanyon sounds straight out of a Hollywood film – the lengthy wait before it reaches its target provides plenty of time for character development and for the hero to save the day.

    Technology makes truth stranger than fiction – especially so when it comes to nuclear weapons and drones. The title of this email is taken from a patch worn by the US “Missileers”, who stand ready around the clock to launch the US’ nukes.

    Enforcement of uniform standards is notoriously slack for the Missileers. Should a nuclear war break out, they’ll probably be wearing “snuggies and slippers” as they reign death on an untold scale across the planet.

    Strange. And technology continues to make the world stranger. Just earlier this month a drone was used to fly a monstrance across a church into the hands of a Catholic priest, in the middle of a service.

    Meanwhile, the US military wants its drones taught to find, identify and kill people – all on their lonesome, without humans in the loop. The US Department of Defence – who I mentioned last week is vastly expanding its drone arsenal – is requesting that companies with artificial intelligence capabilities partner with it to develop the nefarious system.

    From the brief (emphasis mine):

    OBJECTIVE: Develop a system that can be integrated and deployed in a class 1 or class 2 Unmanned Aerial System (UAS) to automatically Detect, Recognize, Classify, Identify (DRCI) and target personnel and ground platforms or other targets of interest. The system should implement learning algorithms that provide operational flexibility by allowing the target set and DRCI taxonomy to be quickly adjusted and to operate in different environments. 

    The brief goes on to mention the potential use of these drones in a “homeland security” environment. What could possibly go wrong?

    Interestingly, those who write the learning algorithms that give the American drones the “intelligence” the military would like, stand to become high value targets in the event of a war.

    From The Conversation:

    The legal implications of these developments are already becoming evident. Under current international humanitarian law, “dual-use” facilities – those which develop products for both civilian and military application – can be attacked in the right circumstances. For example, in the 1999 Kosovo War, the Pancevo oil refinery was attacked because it could fuel Yugoslav tanks as well as fuel civilian cars.

    With an autonomous drone weapon system, certain lines of computer code would almost certainly be classed as dual-use. Companies like Google, its employees or its systems, could become liable to attack from an enemy state. For example, if Google’s Project Maven image recognition AI software is incorporated into an American military autonomous drone, Google could find itself implicated in the drone “killing” business, as might every other civilian contributor to such lethal autonomous systems.

    Proxy wars, of the kind we’re now involved in with Syria, become even more abstract with such weapons. Consider autonomous drones endlessly roaming and refuelling themselves over contested areas, automatically destroying targets they have learned are enemies, and enemy drones that are doing the same thing.

    Private military contractors are politically palatable to use in war as their deaths are not recorded as official military casualties – autonomous drones will be politically delicious.

    Technology bends reality, and not necessarily for the better. But like it or not, it will be bent. And investors a of the curve stand to make great gains from it. Our tech specialist Sam Volkering has already recommended one drone company poised to soar into this strangeness to his readers, and explained in his most recent issue of Revolutionary Tech Investor where he thinks the industry will next.

    Curiously, as we progress into the future the past becomes strange too: it’s become hard to imagine a world without phones or the internet.

    Until next time,

    Boaz Shoshan
    Editor, Southbank Investment Research

    -Read more at www.capitalandconflict.com-

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  • India’s Short on Cash… Again

    20.04.2018 • IndiaComments Off on India’s Short on Cash… Again

    Vivek Kaul – Vivek Kaul’s Diary (India) –

    There is a currency shortage in large parts of the country with the ATMs running dry, even before the wells could run dry this summer. Various reasons have been offered for this, but primarily this is a supply problem.

    This basically means that there isn’t as much currency (or cash) going around in the economy, as the economy needs.

    The growth in currency in circulation is closely linked to the growth in gross domestic product (GDP, a measure of economic growth). Take a look at Figure 1, which basically plots the growth in currency in circulation along with nominal GDP growth (i.e. GDP growth which hasn’t been adjusted for inflation), over a two-year period, over the years. We have taken two-year periods into account, primarily to adjust for demonetisation, which had led to a massive fall in currency in circulation.

    Figure 1:

    What does Figure 1 tell us? It tells us that during the two-year periods between 2012 and 2014, and 2014 and 2016, the currency in circulation grew by over 20%, as did the nominal GDP.

    This changed between 2016 and 2018, when the currency in circulation grew by just 10%, whereas the nominal GDP grew by 21.7%. Hence, the growth in currency in circulation has slowed down substantially.

     

    And this is basically what has created the shortage of currency or cash, in large parts of the country. There simply isn’t enough currency or cash going around.

    Let’s try and estimate the gap. The currency in circulation as of March 31, 2016 was at Rs 16.63 lakh crore. This increased by 10% over a period of two years, and as of March 31, 2018, stood at 18.29 lakh crore.

    But as we showed earlier, this increase is an anomaly and is too low, compared to the economic growth during the same period. Now let’s say, demonetisation hadn’t happened and the currency in circulation had grown at the kind of pace, as it used to before.

    Let’s say this growth was 25% (an average of the growth for the previous periods). At 25%, the currency in circulation as on March 31,2018, should have been around Rs 20.8 lakh crore. Of course, some part of this currency in circulation would have been replaced by digital transactions. The State Bank of India in a report points out: “The shift to digital modes could be at least Rs 1.2 lakh crore.”

    This basically means that the currency in circulation as of March 31, 2018, should have been at Rs 19.6 lakh crore (Rs 20.8 lakh crore – Rs 1.2 lakh crore). It is currently at Rs 18.29 lakh crore. This means a gap of around Rs 1.3 lakh crore.

    If we assume a more conservative growth of 20%, then currency in circulation should have been around Rs 18.8 lakh crore, or Rs 50,000 crore more than it currently is.

    While, the currency in circulation number can change depending on the assumptions we make, the broader point is that there is a shortage of currency. The government has also admitted to it. As the economic affairs secretary SC Garg put it: “We print about 500 crore of Rs 500 notes per day. We have taken steps to raise this production 5 times. In next couple of days, we’ll have supply of about 2500 crore of Rs 500 notes per day. In a month, supply would be about Rs 70000-75000 crore.”

    Actions speak louder than words. And this is the government admitting to the fact that there is a shortage of currency, and they are looking to increase the supply. Also, this is yet another indicator of the fact of how demonetisation cost this country dear and continues to create problems, despite its ill-effects coming down. If the Modi government hadn’t demonetised Rs 500 and Rs 1,000 notes, in November 2016, the current shortage of currency would have never happened.

    Another theory being offered is that elections in Karnataka scheduled on May 12, 2018, have also played their role in the shortage. Data shows that the currency in circulation tends to increase much faster, when elections (state assemblies or Lok Sabha) are around the corner.

    The trouble is that elections happen all the time, but ATMs don’t run dry, as they have during April 2018. So how do we explain this situation?

    In the week ending April 13, 2018, the currency in circulation has gone up by around 1.8% or Rs 33,000 crore. This is clearly on the higher side. In the past, similar jumps have happed around election time, which basically means that people (or should we say politicians) hoard on to money in order to be able to spend it before elections.

    Clearly, something of that sort is happening in Karnataka as well, given the historical evidence. Past evidence also shows that such hoarding happens in the states bordering the state where elections are scheduled.

    Over and above this, currency shortages have been on in a few states for a while now. Take the state of Telangana. On a recent visit to Hyderabad (in early April) we were told that the state had been facing a cash shortage for a couple of months.

    In fact, MPs had even raised this question in Parliament, asking the government, if it was aware that large number of ATMs in the states of Telangana and Andhra Pradesh, had been running out of cash. This question was answered on March 18, 2018. (Here is the link to the government’s answer).

    The government in its reply said that the RBI had supplied Rs 51,523 crore to its Hyderabad office, between April 2017 and February 2018, which was the highest in the country. Clearly it wasn’t enough.

    The feeling we got when we were in Hyderabad was that people were generally worried about the money they had in the banks. This was aggravated by the Nirav Modi episode, which brought to the fore, the mess that public sector banks are in and all the WhatsApp rumours going around the proposed FRDI bill.

    This led to people withdrawing more money from ATMs and banks than they normally would. This hoarding of cash (for both electoral as well as non-electoral reasons) obviously made the already fragile situation where the economy was generally short on cash, even more precarious. It also explains why ATMs did not run out of cash during elections previously, but have this time around.

    The best way to prove this would have been to look at the total amount of cash withdrawn by people from ATMs in the states of Andhra Pradesh, Telangana, Bihar etc., where there has been a significant cash crunch. But given that state wise cash-withdrawal data is not publicly available, we will have to give this a skip.

    Over the past few days as the news of cash crunch has spread, it has become what economists call a self-fulfilling prophecy. The expectation that something will happen is making it happen.

    Also, as we have mentioned in the past, the economy is finally coming out of the ill-effects of demonetisation, and this has led to greater economic activity and more demand for cash, given that most economic activity in India is carried out in cash.

    Further, the Rs 2,000 note, which was introduced after demonetisation, is the preferred note of choice, when it comes to hoarding cash. The logic is simple. You can hoard more money in lesser notes. Also, the next highest denomination note now, after the Rs 2000 note, is the Rs 500 note, unlike the Rs 1,000 note earlier. And it takes four Rs 500 notes to replace a Rs 2,000 note. This accentuates the cash crunch.

    All these reasons have been responsible for the shortage of currency in India. But the major reason remains the lack of supply of enough notes in the financial system.

    Regards,
    Vivek Kaul
    Vivek Kaul
    Editor, Vivek Kaul’s Diary

    PS: Research analyst, Tanushree Banerjee has made a prediction: Sensex 100,000. If she’s right, there will be a lot of winning stocks. Some may already be in your portfolio. But you’ll also miss out on some. However, you don’t need to take unnecessary risks to make solid double or triple digit gains. Tanushree’s premium service, StockSelect, will safely guide you to the best stocks in the market. You can get full details here…

    -Read more at www.equitymaster.com-

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  • We Barely Avoided the Critical Doom Point

    20.04.2018 • United StatesComments Off on We Barely Avoided the Critical Doom Point

    Bill Bonner – Bill Bonner’s Diary (United States) –

    NORMANDY, FRANCE – Bitcoin is making itself useful. Bloomberg is on the case:

    “Bolívar to Bitcoin Market Hits Record $1 Million Per Day”

    The Venezuelan bolívar to bitcoin market reached a record on Tuesday, as the dollar-starved nation increasingly seeks the digital token in exchange for its nearly worthless currency.

    Venezuela is a disaster. Inflation is expected to hit 13,000% this year.

    But disaster isn’t sedentary. It’s nomadic. And our guess is that it is ed our way.

    Doom Index

    First, let’s turn to the research department to find out how close it might be…

    What’s up with the Doom Index?

    As you recall, our researchers – led by the indefatigable Joe Withrow – came up with a way to tell when a crash was likely to happen. We call it the Doom Index.

    No guarantees, because these things are unpredictable. But a measure based on a broad group of indicators should be more reliable than your editor’s hunches, right?

    Well, who knows.

    But yesterday, Joe gave us an update:

    The Doom Index spiked up to 7 – our extreme warning level – back in January… and it will remain at 7 for at least another three months based on first-quarter numbers.

    But it is not signaling the crash alert flag… yet.

    What has kept the crash alert flag in storage – and perhaps what will keep the markets chugging along for another quarter – is an uptick in credit growth. After falling to 1.6% last quarter, credit growth increased to 2.4% during Q1 2018.

    Remember, we are leaning on economist Richard Duncan’s analysis here. Duncan says that the modern economy requires at least 2% credit growth to avoid recession. So 2.4% is just enough to avoid a Doom Point.

    On the flip side, there was a sharp drop in non-farm payrolls. Non-farm payrolls steadily increased for 29 consecutive quarters – that takes us back to 2010. But they plunged 1.2% during Q1 2018. 1.2% sounds like a small move, but that’s the biggest drop in non-farm payrolls since the start of 2009.

    So we saw an uptick in credit growth, but a fall in wages this past quarter. Perhaps those two moves are related… I don’t know… But we find ourselves right back where we were in January.

    Okay. “Extreme warning.” But no crash yet.

    Got that?

    Real Catastrophe

    And while the data is giving us an “extreme warning,” so are the fundamentals – which is why a catastrophe may be ed towards us… and why there may be no way to avoid it.

    Markets go up and down all the time – sometimes sharply.

    People never know what things are worth. They discover prices by bidding against one another. And human beings tend to overdo it.

    They get overly optimistic or overly pessimistic… driving prices too high or too low… causing mini-booms and panics.

    Between the end of the War Between the States and the Great Depression, there was the Panic of 1873, the Panic of 1884, the Panic of 1893, the Panic of 1901, the Panic of 1907, and the Depression of 1920–21.

    The pain and damage done by these setbacks varied. But generally, they came and went. Markets quickly adjusted. Prices fell. Companies went broke. Entrepreneurs and speculators picked up the pieces… and got back to work.

    Anyone can make a mistake. But if you want a real catastrophe, you need the government. The feds began to “do something” about these periodic overshoots following the crash of ’29. The result was the Great Depression.

    Then, the Federal Reserve got in on the action.

    Taking Away the Punchbowl

    The Fed was set up in 1913. At first, its job was modest: to protect the currency and make sure the big banks made money.

    This it did cautiously, at first, by “taking away the punchbowl,” as former Fed chief William McChesney Martin described it, when the party started to get out of hand.

    It wasn’t until the 1980s that the Fed became the life of the party itself. By then, the U.S. had a new currency (the ever-stretchy, post-gold-backed dollar)… and the politicians had realized that “deficits don’t matter.”

    They didn’t seem to matter because beginning in the late-’80s, the Fed was no longer restraining excess spending… It was enabling it.

    Deficits used to draw down the nation’s savings. That’s because the feds had to borrow to fill in the hole. And when you borrowed, you borrowed what someone else had saved.

    No more. The new dollar and the Fed’s low interest rates made real savings irrelevant. The Fed dropped interest rates to make saving unattractive… and covered the deficits with fake savings – credit it invented “out of thin air”; it bought U.S. Treasury bonds itself.

    Back when the feds had to borrow real savings to close the gap between outlays and tax receipts, there was a natural limit on what they could spend.

    If they borrowed too much, they “crowded out” private borrowers. Interest rates rose. Savings increased. The economy cooled down. And tax receipts fell.

    Every lawmaker knew that the federal government had to manage its finances responsibly. Neither party wanted to get a reputation for incompetence with money.

    But now, all that has changed. The illusion of abundance – provided by the Fed’s EZ-money policies – has bamboozled them all.

    More to come…

    Regards,

    signature

    Bill

    MARKET INSIGHT: TRUMP GREENLIGHTS LEGAL MARIJUANA

    By Nick Giambruno, Editor, Crisis Investing

    The legal marijuana market just got a huge boost thanks to President Trump…

    Some readers may remember that, earlier this year, Trump’s attorney general, Jeff Sessions, rescinded an Obama-era policy that made it easier for legal marijuana businesses to operate.

    You see, marijuana is legal in many states. But it’s still a Schedule I drug according to the federal government.

    And what Sessions did in January made it easier for federal authorities to crack down on the legal marijuana industry.

    That had many investors on edge… uncertain of the future.

    But now, it looks like the president is putting his foot down.

    It’s being reported that Trump is abandoning the Justice Department threat to crack down on recreational marijuana. The decision came after a Colorado senator appealed directly to the president.

    In short, Sessions got overruled by his boss.

    Trump the Businessman

    I think there are a few reasons why Trump gave the marijuana industry a green light.

    For starters, legal marijuana is now very popular among Americans. Have a look at the data recently released from Pew Research:

    Chart

    As of last year, marijuana legalization was favored by 61% of Americans. Compare that to only 12% back in the late-’60s.

    But I think there’s another reason why Trump is happy to let the legal marijuana industry grow: money… and lots of it.

    The legal marijuana industry is estimated to be worth around $7.7 billion today. But by 2021, it’s predicted that it will hit $31.4 billion and that it will see a compound annual growth rate of 60%.

    Think about that. The legal marijuana industry is expected to more than quadruple in the next three years.

    And as I’ve reported in the past, states like Illinois with unfunded pension liabilities will need the tax revenue from legal marijuana to dig themselves out of the financial holes they’re in.

    That’s not wild conjecture. The Wall Street Journal confirmed as much when reporting on the Illinois gubernatorial race last month:

    Democrats running in state primaries across the country have been promoting legal marijuana as a painless way to raise money while avoiding tax increases.

    In Illinois, the candidates vying to be the party’s gubernatorial nominee are so invested in the issue they have been attacking one another for failing to embrace it with enough vigor.

    So let’s think about this…

    More Americans want legal marijuana than ever before… the industry is expected to skyrocket… and more and more state governments are getting on board.

    No matter what you think about the president, remember, he started life as a businessman. And he knows a promising investment when he sees one.

    – Nick Giambruno

    P.S. Don’t worry if you missed the first wave of marijuana investing. We think the 2018 marijuana boom could be eight times bigger than the first… when pot stocks averaged peak gains of 24,000%.

    But this second chance is time-sensitive. We’re sharing all the details on Thursday, April 26 at 8 p.m. ET, during the Pot Stock Millionaire Summit. Space is limited. So click here to reserve your spot now.

    -Read more at bonnerandpartners.com-

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  • Goldman Sachs CEO: The Return Has Begun

    20.04.2018 • United KingdomComments Off on Goldman Sachs CEO: The Return Has Begun

    Nick Hubble – Capital and Conflict (United Kingdom) –

    Today we imagine a return to a normal world. Or at least try to. Because it wouldn’t last long.

    Goldman Sachs CEO Lloyd Blankfein gave an interview on CNBC after his company announced its earnings for the first quarter of 2018. Here’s what he said:

    “People will debate back and forth what’s normal, what’s the new normal, but conditions where interest rates are zero, yield curves are flat, there’s no risk premium. Where central banks all around the world are buying all the risky assets which then therefore put a damper on volatility and the opportunities to perform, that’s not a natural state.

    “We have not reversed all of that, but we’re walking that back and walking to so the first indications of a withdrawal from what is an unnatural state.

    “The market becomes a bit more volatile, people get compensated for the risk that they’re taking. Our clients are doing better consequently we’re doing better with them. So I wouldn’t say we’re popping champagne corks. But we can certainly see what happens when we start to walk back towards a normal financial market.”

    And now for the context. Goldman’s equities trading branch posted a bumper profit, both higher than expected and higher than previous results.

    The question is of course why. And the answer is the 10% crash in February.

    Investment banks like Goldman Sachs make good money on trading volatility. The problem is, the central banks have quashed just that volatility. Blankfein is both complaining about this and celebrating the return of volatility in February.

    Yay for Goldman Sachs. Who gave me a scholarship and internship, by the way, for the sake of disclosure.

    The problem here is that the rest of us are not Goldman Sachs. And trust me, you don’t want to be.

    We’re stuck with the real economy and struggle to make money on market crashes. The team is preparing a report on how to do just that, so keep an eye on your inbox.

    But let’s imagine a return to what Blankfein calls the “natural state”. Where markets are more volatile, the yield curve unmanipulated, interest rates are higher and central bankers don’t buy risky assets. What would that world be like?

    A total nightmare.

    The International Monetary Fund’s (IMF) Global Financial Stability Report estimated 20% of US companies amounting to $4 trillion in assets are at risk of going under if interest rates go up, with half of those already in trouble.

    In Europe, the so-called “zombie firms” are kept alive by banks to avoid having to realise losses. The problem is that bank funding costs will rise as the European Central Bank tightens. Italy’s bad debt problems alone are the size of US sub-prime defaults.

    What would the Japanese stockmarket look like if the Bank of Japan hadn’t bought up three quarters of stock exchange-traded funds, about 4% of the total market?

    Worst of all is sovereign debt. If the interest bill on sovereign debt were at a “natural” level, budgets around the world would be wobbling.

    The natural state is simply not tenable. It won’t be allowed. But…

    How long can it be avoided?

    The real question is whether the reckoning can be prevented indefinitely. Could a recession occur in the face of very easy monetary policy and quantitative easing (QE)?

    If you run with the drug analogy, then the question is whether the QE and interest rate drug is becoming ineffective. If the patient is so used to the drug that it can’t fight off a depression, what happens next?

    The IMF is forecasting a slowdown in two years’ time. As is the US yield curve. So we might soon find out whether QE can save us once more.

    The thing to keep in mind here is that debt levels are steadily worsening in the meantime. Despite decent growth, low interest rates and vast levels of support.

    The government and central bank rescues have sent the world a clear signal that debt doesn’t matter by preventing a reckoning. And so everyone did the predictable thing – borrowed more.

    How long can something like this continue? The answer is, a lot longer than you think. That’s why logical analysis is sometimes not so helpful. The moment you depart from the natural state, things start to look bizarre. But they can get a lot more bizarre, so pointing out the coming reckoning doesn’t help until it happens. It’s all about timing.

    Akhil Patel has a very good understanding of the machinations of governments and central banks. But they’re not his focus. He’s all about timing.

    The best part is, the whole cycle of upswings and downswings that Akhil has identified is predictable. Because of that, Akhil is always on the record. His predictions are always clear cut. So what does he say right now?

    That’s for his subscribers to know. But I’m allowed to say this: we’re mid-cycle. A time characterised by a slowdown, or a minor downturn. Not a crash or a reset.

    To find out what you should do to profit from the coming upswing, click here.

    -Read more at www.capitalandconflict.com-

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  • Understanding the “Crypto Paradox”

    20.04.2018 • United KingdomComments Off on Understanding the “Crypto Paradox”

    Harry Hamburg – Exponential Investor (United Kingdom) –

    Yesterday, I revealed that I’ve been working on an exciting new project.

    Today, I’m going to reveal the nature of that project – and why I think it could have a huge positive impact on your life and wealth going forward.

    But first I want you understand why I have dedicated the last few months of my life to this new idea.

    It involves something I’ve called…

    The Crypto Paradox

    Late one night a few months ago, I went down a bit of an internet rabbit hole…

    And I stumbled across a strange phenomenon – the Coastline Paradox.

    The Coastline Paradox is a mathematical anomaly. First stumbled upon in the early 20th century by Lewis Fry Richardson. The phenomenon has a touch of Doctor Who about it, so I think you’ll find it interesting.

    Richardson was attempting to accurately measure the coastline of Great Britain. And what he discovered is mind-bending…

    If the coastline is measured in units of 100km, then the length of our coastline is 1,700 miles. Simple.

    But if the unit of measurement is 50km, the length of our coastline is 2,100 miles.

    So, the measured length of the coastline depends on the method used to measure it.

    Take that in for a moment. The length of our coastline is not an objective fact. It is based purely on the decision to measure it in a certain way.

    This quirk of fractal dimensions got me thinking about cryptocurrencies.

    How can you measure the true worth and impact of cryptos?

    Again, it depends on how you decide to measure them…

    As a speculative investment, you can only conclude they offer an unprecedented level of return…

    8,338% – Stellar

    35,010% – NEO

    822% – Monero

    1,057% – Stratis

    76,033% – Nano

    464% – Dash

    1,630% – Steem

    13 April 2017 – 13 April 2018

    Remember: Past performance is not an indicator of future results.

    Ok, but what about as a form of currency…

    Well, by that measure, cryptos lag way behind.

    The crypto market is valued at about $345bn at time of writing.

    Not bad for a form of currency born around eight years ago – up against a monetary system more than 7,000 years old.

    But a long way to go, yet. Until you can spend your crypto in Tesco, at the petrol pump and on websites like Amazon, it’s just a cute blip in the long history of money.

    What if we look at cryptos as a store of wealth?

    Well, it depends on your timescale.

    Over the last five years a £10k investment in gold – everyone’s go-to wealth bunker – would see you sitting on £10,260 right now.

    A £10k investment in bitcoin – what many call “digital gold” – over the same period would have landed you a profit of around £550,000.

    That’s not fair, I hear you cry! Five years isn’t long enough (note: it’s most definitely “long enough” for those sitting on a half a million profit!).

    But gold has held value for millennia. Maybe in a hundred years we can draw a conclusion. Unfortunately I won’t be writing to you then – and I’ll lay money you won’t be reading.

    So let’s be reasonable… bitcoin, like all cryptos, is wildly volatile… so it doesn’t give you the “sleep easy” feel of owning a lump of shiny metal.

    As a species we attribute an inherent value to gold like nothing else. If you disagree, let me ask you this: in an apocalypse, when you’re trying to barter your way on to the last helicopter out of London – do you think the pilot will want your USB drive or your sack of sovereigns?

    What about cryptos as a commodity…?

    There can only ever be 21 million bitcoins mined… and we are approaching the 17 millionth fairly soon. Similar circulation limits are placed on many of the most valuable crypto assets.

    A supply crunch in bitcoin’s future is a distinct possibility. Especially if it continues to expand its user base and popularity at such an astonishing rate.

    That said, there is an advantage that other commodities have over cryptos:

    Oil powers your car. Lithium charges your phone. Gas cooks your spaghetti.

    The demand for fossil fuels and precious industrial metals can be said to be “real”.

    So, you see the problem, the Crypto Paradox. The “worth” of cryptos depends on how you decide to measure them.

    But I believe there is a very simple way to avoid the Crypto Paradox:

    View cryptos as a technology.

    If you do so, then the breakthrough that cryptos have made… the tokenisation of assets and the decentralisation of information, energy and power… means only one thing:

    The most significant invention since the internet

    Yes, crypto and the blockchain is changing the way we accumulate, store and spend our wealth… but that is just a tiny part of the greatest wave of tech disruption the world has ever seen.

    You can compare it to the internet revolution… but the impact could be even greater than that.

    We are witnessing the early stages of an entirely new system to exchange information and ownership.

    If you’ve read Exponential Investor for any length of time, you’ll know this is something of an obsession of mine. I won’t apologise for it.

    Firstly, it’s a useful obsession – cryptocurrencies have changed my financial life.

    Secondly, my aim is to help you do the same. More on that in a moment.

    What I want you to see is that the crypto rush is about more than rolling £500 into bitcoin or Litecoin on a jolly and crossing your fingers.

    This is a tech overhaul akin to the laying down of railroads or fibre optic cables. It is a new type of tech infrastructure on which the future of business, healthcare, finance and entertainment is being built.

    And some of the world’s biggest and most influential entities are vying to grab a slice of it. Here is just a glimpse of the daily mad rush of investment into crypto and blockchain tech:

     

    This is just a snapshot of the stampede into crypto and blockchain technology… the trickle before the flood.

    Forget crypto assets as speculation… as a commodity… as a bunker for your wealth… and look at the bigger picture. This is a torrent of technological change. And it is happening now.

    But just what could this mean for the market?

    How big could this get?

    A $10 trillion surge

    It is impossible to predict with any real hope of accuracy how big the blockchain market could become.

    For example, if the securities market – currently valued at around $18.5tn – “upgrades” to run on the blockchain (as many believe it will)… how can you calculate its worth?

    How much is the internet worth?

    How much are railroads worth?

    Or oil pipelines?

    We’re talking about technology that underwrites our civilisation. And that is hard to round down to the nearest trillion.

    A few respected financial minds have had a crack at doing so, however:

    Jesse Powell – founder of giant alt-coin exchange Kraken – believes the crypto market could surge to $1tn this year.

    It’s hard to know if any of these predictions will ever be proven correct.

    But what’s worth noting is the scale of the numbers being suggested. These kinds of figures give you a major hint at what is just around the corner.

    Nothing less than the greatest tech revolution – and financial opportunity – any of us have ever seen.

    You can boil it down to two undeniable factors staring you in the face:

    1. A torrent of technological change and innovation that is transforming everything from energy to healthcare to finance to property ownership. Crypto tech is a completely new information exchange comparable to a new sort of internet. That’s big.
    2. The potential to make life-changing money is real. Not a dream. Not a far-flung fantasy. It is real. The crypto market is already the fastest rising asset class we’ve ever seen. It has already minted a wave of millionaires. And where it goes from here could be historically spectacular.

    Presented with those two facts, you have a straightforward choice to make.

    To become a part of it… to learn everything you can about this exciting technology and do everything you can to profit from it.

    Or walk away… and just be a passenger as crypto and blockchain technology evolves and changes the world around you.

    My hope is that you can see the enormous, exciting potential to be an active participant in what’s happening… to not miss out on the second great tech revolution of your lifetime. One that could prove even bigger and more impactful than the rise of the internet and monstrously rewarding stocks like Google, Netflix, Amazon and Cisco.

    If that’s the case…

    My new project is for you

    It has taken three months to bring my new project to you.

    It’s a way for you to gain unrivalled research and insight into what’s happening in crypto and blockchain technology… and have a clear idea of how you could profit from it.

    I’m not on the outside looking in, here. I’m right alongside you for the ride. I am a crypto investor and over the last 18 months I have made more money from cryptos than I would ever have thought possible.

    It has changed my life and I am confident it can change yours.

    My goal is to show you my approach in totality:

    My know-everything level of research… my special crypto-asset ranking system… my methods of mitigating the high risks as much as possible… how to draw in crypto income.

    I want to show you everything I have learned from this new and thrilling world.

    Because – as I will show you tomorrow – my research tells me we could be on the verge of the next phase of extreme growth in the crypto market.

    Getting clued-up now could see you catch the most aggressive wave of asset growth in history.

    You won’t get left behind. I’m going to show you everything in a way that is easy to digest and easy to understand. I’m going to walk you through all of this in a way I wish someone had shown me 18 months ago.

    If I do it right, you could use this insight and experience to invest in cryptos capable of outrageous long-term growth.

    I’ve been in financial publishing for seven years. No opportunity has spoken to me like the rise of cryptocurrencies. Not small cap stocks. Not biotech stocks. Not gold miners.

    That’s because this isn’t just about the wild financial rewards that are possible… but because of the deep, liberating change the technology brings.

    My goal is to marry those two big, compelling ideas together for you: that this world-changing technology is capable of generating life-changing wealth.

    Tomorrow, at last, I can bring you in on what I’ve been working on.

    If you have liked my work in Exponential Investor so far… I think you’ll love what’s next.

    Until tomorrow,

    Harry Hamburg
    Editor, Exponential Investor

    -Read more at www.exponentialinvestor.com-

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  • Corporate Bad Loans Account for 80% of All Indian Bank Loans

    18.04.2018 • IndiaComments Off on Corporate Bad Loans Account for 80% of All Indian Bank Loans

    Vivek Kaul – Vivek Kaul’s Diary (India) –

    We have extensively written about how corporate loan defaults have screwed up the state of banks in general in India, with public sector banks in particular.

    This can be made out from the fact that the aggregate domestic corporate lending non-performing assets (or bad loans) of scheduled commercial banks, as of December 31, 2017, stood at Rs 6,63,877 crore. Bad loans are loans on which repayment has not been made for 90 days or more.

    The total domestic bad loans of scheduled commercial banks on December 31, 2017, stood at Rs 8,31,141 crore. This means that the corporate bad loans account for 80% of the overall bad loans of banks.

    Having said that, it doesn’t make much sense to paint all the corporates with the same brush. Borrowing is an essential part of corporate growth and that cannot suddenly go out of the equation.

    Care Ratings has carried out a very interesting study on corporate borrowing and how the different kinds of borrowers (as per the total amount of borrowing) are placed in their ability to repay bank loans, at this point of time.

    Care Ratings took a sample of 2,314 companies, which excludes banks and other finance companies. The total borrowing of these companies stands at Rs 20.02 lakh crore as of March 31, 2017.

    The interest coverage ratio of these companies stood at 3.92. Interest coverage ratio is basically obtained by dividing operating profit of a company (or companies) by interest payments that need to be made on outstanding loans, during a particular period. This ratio fell to an almost similar 3.9 for the period April to December 2017.

    This tells us that on the whole, the corporates are making enough money to keep servicing the interest that is due on their debt. But averages as usual hide the real story, which starts to change, as soon as we start to dig a little more.

    Let’s look at this in detail one by one:

    1. For the period April to December 2017, 578 companies in the sample with an outstanding debt of Rs 4.78 lakh crore, which amounted to 24% of the total debt, had an interest coverage ratio (ICR) of less than 1. This basically means that companies which have taken on one fourth of the corporate debt (as per the sample used) are not earning enough money to keep servicing the interest payments on their debt.

      When the interest coverage ratio is less than one, the operating profit made by the company is less than the interest payment that is due. In such a situation, neither the company, nor the bank is left with many options. If the company’s situation does not improve, it is more than likely to default on the bank loan.

      How has the situation changed when we compare the financial year 2016-2017 with the period April to December 2017? In 2016-2017, 524 companies with total debt amounting to Rs 5.42 lakh crore, had an interest coverage ratio of less than 1.

      What this means is that in April to December 2017, more companies ended up with an interest coverage ratio of less than one. Nevertheless, a smaller amount of money was at stake.

    2. Let’s take a look at Table 1:
      Table 1: Distribution of companies and ICR according to debt size

      Table 1 makes for a very interesting reading. Let’s start with the large companies with a debt of Rs 5,000 crore or more. There are 68 such companies. Their interest coverage ratio has come down from 3.22 to 3.08. But this fall is not huge.

      Further, there are 23 companies with a total debt of Rs 2.82 lakh crore, with an interest coverage ratio of less than one. This basically means that large companies form a bulk of the debt of Rs 4.78 lakh crore of companies, with an interest coverage ratio of less than one.

      This basically means that the banks haven’t seen the last of corporate defaults and more defaults will happen in the time to come.

    3. The companies with a debt of Rs 2,500-5,000 crore are in the worst possible space. The interest coverage has fallen from 2.26 for 2016-2017 and to 1.73 during the period April to December 2017, respectively. Clearly the positon of these companies on their ability to keep paying interest on their debt has come down.

      There are 56 companies in this bracket. Of these 22 companies have an interest coverage ratio of less than one. These companies have a total debt of around Rs 75,000 crore. These companies (along with large companies with an interest coverage ratio of less than one) primarily operate in the steel, engineering and textiles sector. Take a look at Table 2.

      Table 2:

    4. Interestingly, companies with lower levels of debt seem to be better placed on the interest coverage ratio front.
    5. The study further shows that the companies with higher levels of outstanding debt have seen sharper declines in their interest coverage ratio during April to December 2017, in comparison to 2016-2017. As Madan Sabnavis and Rucha Ranadive, the authors of this report put it: “A combination of declining interest coverage ratio and interest coverage ratio less than 1 is a good signal to identify debt service failure.”

    To conclude, what these data points tell us for sure is that the banks haven’t seen the last of corporate defaults. There is more to come.

    Regards,
    Vivek Kaul
    Vivek Kaul
    Editor, Vivek Kaul’s Diary

    PS: Every day the markets are open, Ankit Shah cherry picks one idea from our 9 premium services, the one he considers the best money-making opportunity. This one idea is shared with an exclusive group of readers on Ankit’s ‘Insider’ list. Today, you have the chance to join this exclusive group. But you must hurry. This is a limited period offer. It ends at midnight tonight! Get full details here…

    -Read more at www.equitymaster.com-

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  • Bitcoin: The Go-To Escape Currency

    18.04.2018 • United StatesComments Off on Bitcoin: The Go-To Escape Currency

    Bill Bonner – Bill Bonner’s Diary (United States) –

    PARIS – “Your flight has been canceled.”

    Those were not the words we were hoping to hear when we got to Dulles International Airport last night. But Air France is on strike. So we quickly changed plans… and traveled to Paris on United.

    That wasn’t the end of it… because the French train crews are on strike, too. C’est la France!

    Ever resourceful, our U.S.-based assistant found a driver who would take us out to Normandy, where our car has been parked for the last two months, faithfully awaiting the return of its master.

    The car is very patient with us. The 12-year old Nissan Patrol sits for months… sometimes an entire year… waiting for us. Then, when we finally show up, the battery is dead.

    But that problem will be overcome later today, we hope, and we will be on our way to Ireland, taking the ferry overnight. Stay tuned.

    Connoisseurs of Disaster

    Meanwhile, as we mentioned yesterday, bitcoin seems to be useful. When other money fails… and gold is hard to get… bitcoin gives people a way to escape from the trap of a rapidly disintegrating paper currency.

    As long-term readers of this Diary know, we are connoisseurs of disaster.

    Give us a 1922 deutschmark… an excellent vintage! And it’s hard to beat. If you had bought a house in Berlin in 1921, you could have paid off your mortgage in 1923 for the price of a cup of coffee.

    Or, how about a Zimbabwean dollar from 2006? That was a great year. Plenty of liquidity. We used to have a 10 trillion Zim dollar note in our wallet, just to remind us not to trust paper money.

    But the South American blends are good, too.

    Both Brazil and Argentina have produced some fine catastrophes. In Argentina, the inflation rate hit about 12,000% in 1989. And in Brazil, one of our colleagues recalls what it was like living there in the ’80s:

    Dad would get paid twice a day. We’d meet him at the office. And then, we’d take the money right over to the grocery store. We had to get there as soon as possible because they marked the prices up all day long. If you waited, you’d get a lot less for your money. And there might not be anything left to buy.

    Vintages of Disaster

    There are many different vintages of disaster. There are natural disasters, such as the explosion of Vesuvius, which wiped out Pompeii in the first century, AD.

    There are military disasters, such as Athens’ foolish war against Sparta in the 5th century BC, Japan’s attack on Pearl Harbor in 1941, or the U.S.’s attack on Iraq in 2003.

    There are political disasters, too – such as the French Revolution or the coup d’état in Russia in 1917.

    Our favorites are the financial disasters… which often lead to disasters of the other sort.

    And as we write, a classic catastrophe is developing in Venezuela. The bolívar – the Venezuelan currency – is expected to lose about 99.99% of its value this year.

    Obviously, you don’t want to store your wealth in bolívars. Instead, you’ll want to get rid of them as soon as possible. Our report yesterday explained that those who could do so were moving to bitcoin.

    Rich people can avoid financial disaster by diversifying their wealth outside the national currency and outside the country. They open bank accounts in Miami or Switzerland, for example. And now, they have another option: cryptocurrencies.

    But poorer people often have no choice; they have no wealth to diversify, so they have to diversify themselves.

    Deserted by 2038

    The Financial Times reports that 5,000 people are leaving Venezuela every day. At that rate, the country will be completely empty by 2038. This is not just a matter of money, in other words.

    Financial disaster often leads to social, political, military, and health disasters. Were it not so, the coming U.S. financial crisis would be merely entertaining. After all, who cares if rich people lose money?

    For poor people, alas, the stakes are higher. More than 600,000 Venezuelan refugees already live in Colombia.

    They scrounge for food. They pick through trash for something they can eat… or use. They work at pick-up jobs, or as prostitutes, and sleep rough under bridges or in parks.

    “We are dying of hunger,” said a refugee to the FT. “Three members of my family have already died of starvation.”

    Most hospitals in Venezuela have no medicine, and little or no running water. Lack of food, medicine, and sanitation makes people more vulnerable to illness – especially communicable diseases.

    After a 40% drop in output, more than four out of five people are said to be impoverished. “Extreme poverty” has tripled in the last four years. Law and order are breaking down, too, both in Venezuela and in neighboring countries.

    Those who do manage to get across the border to Colombia or Brazil often find little hospitality.

    There are so many of them that local services are overwhelmed. Jobs are scarce. And few people are happy to have so many desperate refugees on their doorsteps.

    How do these crises happen? Slowly… and then all of a sudden. The feds spend too much money. Eventually, they run out of other people’s money. So they “print” more.

    Then, they are trapped by the bad money, too; the easiest way out is simply to print more and more… until the whole economy collapses.

    That process is already well underway in America (more tomorrow!)

    It’s great for connoisseurs of disaster; bad for everyone else.

    Our advice: Open a bitcoin account, just in case. And keep a “bolthole” – a little farm, or at least a place in a stable and largely self-sufficient community – where you can wait out the crisis.

    Regards,

    signature

    Bill

    Editor’s Note: Readers have asked Bill for advice on how to prepare for the next financial crisis. Now he delivers concrete steps you can take today. Here’s what to do…

    To learn how to open a cryptocurrency account and buy bitcoin today, refer to this free report. And if you’d like to join cryptocurrency expert Teeka Tiwari in actively trading the most explosive crypto plays, go right here.

    What about finding your very own “bolthole”?

    Subscribers to The Bill Bonner Letter can download this report to discover six overlooked, undervalued “bolthole” towns right here in America. If you’re not a subscriber to Bill’s monthly newsletter, go right here.

    MARKET INSIGHT: YIELDS ARE CLIMBING

    By Joe Withrow, of Research, Bonner & Partners

    Short-term interest rates are on the rise…

    That’s the story of today’s chart, which tracks the yield on 2-year Treasury notes from 2008 to today.

    Chart

    As you can see, short-term interest rates bottomed in 2011… but have now moved sharply higher.

    Short-term rates are important to watch. That’s because borrowing costs tend to “feed” off them. As Treasury yields rise, interest rates on corporate and consumer loans usually follow.

    At 2.4%, the 2-year Treasury yield is now at its highest level since 2008.

    – Joe Withrow

    -Read more at bonnerandpartners.com-

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  • Blockchain Tech Lets You Protect Your Personal Energy Data

    18.04.2018 • United KingdomComments Off on Blockchain Tech Lets You Protect Your Personal Energy Data

    Harry Hamburg – Exponential Investor (United Kingdom) –

    I’m writing to you from a hotel room in Berlin.

    I’m here at Event Horizon, which has nothing to do with one of the best sci-fi horror films ever made, and everything to do with energy.

    It’s basically a big conference where they get lots of energy bigwigs together to talk about the future of the industry. They even have the CEO of the World Energy Council here.

    It’s hosted in a former power plant, which is now a techno club, that has been kitted out for a conference. If you need help imagining what that looks like, here’s a photo I took this morning (the lasers never turn off).

    This year, the three words that are popping up in every single presentation are:

    1. Digitalisation
    2. Decentralised
    3. Blockchain

    Basically, most of the speakers really believe that a more decentralised energy structure is inevitable. A lot of them are working towards it, and the way they see it being enabled is through blockchain.

    You’ll know that the future of energy is a big topic here are Exponential Investor, and at Southbank Investment Research in general.

    The energy market is one of the last massive sectors yet to be disrupted by breakthrough technology.

    We’ve seen the internet transform retail and communication.

    We’re watching biotech and gene-editing change pharma.

    And we’re witnessing cryptocurrencies revolutionise the financial system.

    But the energy market is stubborn.

    For decade upon decade it’s been a variation of the same old tune… “Big Oil”, gas barons, shale kings, national grids, cartels… a handful of energy overlords with a tight grip on a multi-trillion dollar bounty.

    Now, finally, all of that is about to change….

    The future of energy is small

    One of the best talks I saw today was by Dr Hervé Touati, president of the Energy Web Foundation.

    He made the case that small is getting more profitable, while bigger is getting more expensive.

    What he meant by that is that all the innovation is happening in renewables, micro grids and digitalisation of energy.

    Fossil fuels and big centralised power plants are not innovating as they have already reached their point of near-maximum efficiency.

    Now renewables are undercutting old systems, and so they are being chosen for the majority of new installations.

    This in turn leads to them getting even cheaper still because more money is drawn into them. More money equals more competition and more innovation.

    We are now at a point where in many parts of the world it simply doesn’t make sense to build traditional power plants.

    Your personal energy passport on the blockchain

    And that industry-level innovation will soon be impacting us at the personal level, too.

    That’s because these new systems are digitised. By that he means the metering and flow of energy can be read as data.

    This means we can then analyse, sell and move that data.

    Basically, it allows people to have their own energy passport, in the same way you may have a data passport for your phone.

    This data is kept secure through… you guessed it – blockchain technology.

    And blockchain technology then lets you lease this data to companies, so you can find yourself the best deals. All this can be done automatically through smart contracts.

    Then, your energy bill will also just be set up as another smart contract.

    And all of the above will drastically cut down on energy prices and wasted energy.

    This can all work for three reasons… the same three reasons I mentioned earlier that everyone was talking about:

    1. Digitalisation
    2. Decentralised
    3. Blockchain

    I’ll be writing more about what I discover at Event Horizon soon. But for now, I think I should get some sleep.

    Harry Hamburg
    Editor, Exponential Investor

    -Read more at www.exponentialinvestor.com-

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  • A New War Is Starting

    18.04.2018 • SwitzerlandComments Off on A New War Is Starting

    Olivier Perrin – The Brave Little Economist (Switzerland) –

    Dear reader,

    To maintain your lifestyle,  you work 500 slaves .

    How are you going to do when the price of these slaves will go up … suddenly and soaring?

     

    They do not come from India, China or Africa.

    But it takes strength to push your car, train, planes, lift the elevator, lodge, transport your fruits and vegetables from around the world, just like your clothes, your consumer goods, to treat your trash, take you on a trip to Greece or simply to Le Touquet … The list is long.

    These slaves are neither men nor beasts.

    I’m talking about energy slaves.

     

    According to the expert in oil and energy, Nicolas Meilhan, every human being works on average the equivalent of 200 energy slaves … In France we are 500 on average.

    The resource war is back

    You see the tragedy for our welfare states that can not support 10% of the unemployed.

    But the day you double the price of access to energy … you  multiply the impact by  500 !

    This shows you how dependent we are on energy: oil, coal, gas, nuclear, renewable …

    Finally, especially oil, coal and gas, which represent 80% of the energy produced in the world.

    Wind and solar have increased by 50% in 10 years at the cost of intense efforts … They have increased from 2 to 3% in the global energy mix:  no hope on this side .

    A bad economist would tell you that the energy sector represents only 10% of the GDP of a country like France. Not enough to whip a cat.

    But Gaël Giraud, researcher at the CNRS (and Jesuit priest), observes above all that energy accounts for 60% of the  growth  of our modern economies.

     

    Translate:

      energy =     growth.

      energy =    growth … And very quickly  decrease .

    This empirical observation goes back a long way: the great growth phase in Europe in the 12th and 13th centuries, which led to the Middle Ages, was driven by  the invention and development of water and wind mills: a new source of energy. abundant energy .

    On the contrary, the classical theory linking growth to the accumulation of capital is largely false. According to Gaël Giraud, capital accounts for only 15% of growth.

    Besides Gaël Giraud shows that the concentration of capital in Europe began in the sixteenth century, yet it will take another two hundred years and coal for the first industrial revolution to take off.

    The bad price of gas

    Unless you are an expert on the subject, you probably calculate the price of energy in relation to your liter of gas.

    It is a very bad calculation.

    You pay today the same price for your liter of gasoline or diesel in 2008. Yet in 2008, oil was twice as expensive as today … The difference, you pay in  taxes .

    The truth is that today the price of energy is low.

     

    Energy is low because oil is low and coal even more … But coal still accounts for 28% of global energy production, with oil, that’s 61% of the world’s energy!


    The chart above shows oil prices in US dollars, euros and pounds sterling since the 2000s.

    You will notice that in euros (the blue curve), we are today at the same level as in 2005-2007 …

    EXCEPT that in the meantime, global energy consumption has increased by 30%!

    The technical reserves of oil, they, fell.

    So you have a growing demand for a good more and more expensive to produce:  prices should explode!

     

    The only reason they do not do it is because of a country: Saudi Arabia.

    The intolerable advantage of the Saudi

    Saudi Arabia is the only country in the world that does not exploit 100% of its oil capacity.

    Remember this fact, it is very important to understand the global geopolitical balance.

    This means that Saudi Arabia is the only country in the world to hold the button to drive down oil prices INSTANTLY.

     

    And that’s exactly what they do: they do not like the competition from American shale gas and oil, so they increase their production in order to break the price and shut down American wells, which are expensive to operate.

    This strategy only goes for a time because Saudi Arabia is also weakened by putting pressure on prices … But now the Crown Prince of the Saudi kingdom, Mohammed ben Salman has just confiscated, end 2017, 800 billion dollars to large Saudi families … enough to put afloat for a while and allow it to put pressure on the West.

    Mohammed ben Salman is the young prince of 32 who holds his old friend  Macron by the shoulder  as this photo suggests …

    Saudi Arabia is the leading oil exporter in France.

    But how expensive are we willing to pay for Saudi oil?

     

    In a recent interview, Alain Juillet, former Director of Intelligence at the DGSE, explains that all wars today incorporate an economic and energetic dimension.

    The war today is about access to resources.

     

    In the early 2000s, the CEO of Total, Christophe de Margerie, unfortunately died in 2014, predicted the war for access to resources, the liter of gasoline to 2 then 3 € …

    The 2008 crisis erased these gloomy predictions, but the reality behind it has been swollen: we have continued to consume more and more energy and materials without the resources available increasing.

    Today, the predictions of Christophe de Margerie appear prescient.

     

    But France and Europe no longer have the influence to position themselves advantageously on this geopolitical chessboard more unstable than ever.

    The strikes in Syria over bad allegations of chemical weapons are much more like allegiance to the Saudis than an exercise of sovereignty.

    They recall the infamous “weapons of mass destruction” of the Iraq war that we are still looking for …

    We buy a few years of rest, which we do not even know how to use to prepare ourselves.

     

    One thing is clear in any case: the promises of growth of our elites are powder in the eyes.

    There are only 2 things to do today and at the same time:

    • Learn to consume less;
    • Position yourself in advance to take advantage of the medium-term boom in energy and raw materials.

    It could well replace, at least partially, the pension that the state will not be able to serve you anymore.

    For that you can bet on the rise of the prices of the oil … Or then to invest on another source of energy, whose prices are rolled up at the moment, whereas the investments start pouring again.

    The resource with explosive potential for 2018

    Since a few months, we offer a strategic intelligence service to help you position yourself on the right subjects and in the right countries. We call it:  The Circle of Initiates.

    A few days ago, Rick Rule, the leading commodities investor, unveiled to members of the  Circle of Insiders  the potential of this mineral almost forgotten in recent years but which he predicts though:

    ”  Let ***** prices go up to cover production costs,  or lights go out  “

    Rick Rule also gives you 2 keys to invest well on this ore.

    The  Circle of Insiders  is a collective work, new and valuable, with 45 experts from around the world that  I invite you to discover by clicking HERE and the explosive recommendation of Rick Rule for 2018 .

    To your good fortune,

    Olivier Perrin

     

    -Read more at www.le-vaillant-petit-economiste.com (French)-

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  • All Hell Breaks Loose in the Aussie Mortgage Market

    18.04.2018 • United KingdomComments Off on All Hell Breaks Loose in the Aussie Mortgage Market

    Nick Hubble – Capital and Conflict (United Kingdom) –

    Do you remember when sub-prime mortgages were a small problem in an obscure part of the US mortgage market? Next thing, all hell broke loose.

    Well today we investigate a similar scenario. At first, it appears to be a small problem in an obscure part of the Australian mortgage market. The only problem is, it’s not small. And Australia’s banks have the potential to trigger a global contagion thanks to their reliance on overseas funding.

    The basic idea is that Australian lenders ignore lending standards. If you lack the income needed to buy a house in Australia, your mortgage broker will just stick a “1” in front of your income on the paperwork. And then you can afford the home with your additional $100,000 in income, at least as far as the bank is concerned. Sometimes the brokers even used a different coloured pen when they made their amendments.

    The loan application form will then be sent to the bank, where people who don’t speak English verify everything is in order. One bank has confirmed it didn’t verify mortgage broker claims because it “would be too complex, time consuming, and costly”. They didn’t think of hiring cheap foreign labour like their competitors. Too honest, I suppose.

    If the borrower still didn’t qualify for the loan after the mortgage broker’s adjustments, the banker would call up the broker to request further “amendments” to the paperwork. And question why the mortgage broker hadn’t manipulated the statement as they were trained to do by the bank in the first place. Adding in a spouse’s imaginary income and signing off for them is a possible follow-up solution.

    Or the bankers would just do it all themselves. One banker charged $2,800 for the service of providing false documentation, which is ironic given how much banks rely on such information. This particular bribery scheme was operating across multiple bank branches. It was also probably unnecessary given the lack of verification the back office performed. What a rip-off!

    These sorts of details are coming out as part of a Royal Commission into Australia’s banking sector. And countless court cases since 2006. So it’s public and verified information.

    Hilariously, the plan is to tighten the lending standards that are openly being ignored. This is like closing the barn door while the walls don’t exist.

    The key question is of course how common the practice is. But consider how hard that’d be to establish.

    Imagine going back through the loan application documentation of a borrower a few years ago and trying to compare it to their financial position back then. It’d take hours for each person, presuming the bank deigned to provide the information. Which they tend to resist in surprisingly creative ways.

    Over in the US, an analysis comparing tax filings with loan application forms found a huge divergence between income. But the same study hasn’t been done in Australia.

    So the estimates for how bad the problem is rely on surveys. And those vary wildly.

    Personally, I think the problem is big enough to cause a major crash in Australia’s financial system. A crash that goes global.

    It’s not just lending standards that are iffy. After 26 years without a recession, Australia’s economy doesn’t really know what a downturn is any more. And their lending habits reflect that.

    One academic at a top Australian university recently pointed out that Australian banks lend 25% more than US banks to comparable customers, often using falsified and inaccurate information. Interest-only loans reach as high as 40% of loans for some banks.

    And in the next three years, a huge portion of those interest-only loans reset to higher interest rates. That’s what snapped the US mortgage market in 2006.

    The contagion effect is pretty straightforward. Australian banks rely on offshore funding. This is a double-edged sword.

    First of all, it means any trouble in the Aussie banking system spreads overseas.

    Secondly, overseas sources of capital could dry up at the slightest sign of trouble, dramatically worsening the situation.

    Put the spiralling effect of the two together, and you realise that Australia and its financiers overseas are in deep trouble.

    -Read more at www.capitalandconflict.com-

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  • Neo-McCarthyism Sweeps the Western World

    18.04.2018 • United KingdomComments Off on Neo-McCarthyism Sweeps the Western World

    Nick Hubble – Capital and Conflict (United Kingdom) –

    A bad case of Russian hysteria is breaking out across the Western world again. It’s all too familiar for anyone with an interest in history. But there are some modern twists.

    Imagine this line at the height of McCarthyism: “Facebook and Reddit have shut down Russian troll farms.” It probably wouldn’t have surprised anyone in the 1950s that the Russians have troll farms. Facebook and Reddit sound like government surveillance programs.

    I don’t really know what Reddit is. But the news says 944 accounts linked to a Russian troll farm were closed by the company. Facebook previously closed accounts on its platform and Instagram that were linked to $167,000 in Russian-directed ad spending. They were largely linked to the helpfully named IRA, or Internet Research Agency.

    Did the ads break any rules? Nope, says Facebook’s chief security officer. The Financial Times explains the nature of the banned ads and accounts:

    Facebook had decided to take down the accounts because they were controlled by the IRA, not because their content broke company policies, he added.

    The pages and accounts were predominately in Russian, targeted at people inside Russia or Russian speakers in countries such as Azerbaijan, Uzbekistan and Ukraine. They included commentary on political issues, as well as the promotion of Russian culture and tourism, Facebook said.

    Over on Reddit, the evil machinations of the pesky Russians turn out to be even weaker:

    “Few” of the 944 accounts had a “visible impact on the site”, Mr Huffman said, and 145 had been banned before the 2016 election took place.

    “Our investigation did not find any election-related advertisements of the nature found on other platforms, through either our self-serve or managed advertisements,” Mr Huffman said. “I also want to be very clear that none of the 944 users placed any ads on Reddit. We also did not detect any effective use of these accounts to engage in vote manipulation.”

    Promoting Russian tourism unsuccessfully on social media seems like a strange way for Russia to go about the business of destroying Western democracy. As does posting in Russian and targeting Russian readers. But in the wake of attacking Syria, the Russians took to social media to retaliate reports the Financial Times:

    The Pentagon said earlier that the number of Russian bots active on social media had increased by 2,000 per cent in the wake of the Syria strikes. 

    The alleged Russia-linked online influence networks were “intended to discredit or undermine US and allied countries generally, and more specifically our objectives, motivations, and ultimately our actions, in Syria,” said Major Dave Eastburn, Pentagon spokesman.

    All this is downright pathetic. While the West bombs a rather long list of nations, the Russians are posting on Facebook, Twitter, Reddit and Instagram in Russian to try and confuse people into voting for Donald Trump and Brexit.

    If they’re this desperate, Western politicians must be absolutely panicking about the lack of Russia’s evil deeds they can point to. Well, they point about everything, but provide evidence of nothing.

    The social media censorship attempt is utterly hilarious in and of itself too. If there’s anything certain about the internet, it’s that censorship backfires spectacularly. If you really want something to go viral, try and keep it hidden.

    Of course, Facebook and Reddit know this perfectly well

    But if you’re in trouble with the government, banning small ineffective accounts looks like you’re doing something. The fact that it won’t actually achieve anything suits social media companies fine.

    If you watched the media’s coverage of Facebook’s CEO Mark Zuckerberg getting grilled in US Congress, you’ll have missed the key development. Zuckerberg looked like an evil megalomaniac pretending to hide his intentions to rule the world. Or perhaps he was actually an android conducting the Turing Test.

    But either way, all this is a misconception promulgated by the media. The reason for Zuckerberg’s strange behaviour, blank facial expressions, fake smiles and lack of knowledge about what his company does is simple. The questions were totally bizarre. They exposed that the US’ lawmakers are clueless to a spectacular extent about the basic functions of the internet. And how internet companies function.

    My favourite questions was this one: “How do you sustain a business model in which users don’t pay for your services?”

    Another lawmaker was unaware that Facebook already requires users to opt into the company’s private information sharing policies. As does just about every other internet product provider. In fact, I’m quite sure it’s a legal requirement. Imposed by the Congress that was asking Facebook to do what he already does…

    A third senator was shocked to discover that, given Facebook keeps his personal data, it is theoretically possible for that data to be shared. This is a tautology. Of course it could be shared if it’s kept. But it isn’t shared, in the same way that your bank doesn’t share your financial information.

    To be honest, I much prefer Russia’s troll farms to UK and US foreign policy. Far less people die that way. And you can opt out of social media, but not a bombing.

    In the end, social media warfare is probably just in the exploratory stage. But it’s far from the only game in town when it comes to cyber warfare.

    The troll farm under your desk

    It’s not just social media that the Russian hysteria has infected. Our national infrastructure is being attacked too. The Telegraph reports:

    Mr Godfrey, who monitors network intrusion for companies across the UK, said that he had spotted signs that our power is already under attack, pointing to a spike in power outages since Saturday morning.

    Mr Godfrey said: “Power cuts have gone through the roof since we have attacked Syria. It looks like they are trying to attack the grid but it is so compartmentalised it is difficult. The outages seem small but when you look at the curve, it is flat and then rockets in the last few days.”

    Power outages in parts of the UK as retaliation for striking Syria. Hmmm.

    The latest pitch is that Russia is using your own internet router to conduct its nefarious activities. This is a bit like hacking your PC to make it look like the misbehaviour is coming from you instead of from Russia.

    What I don’t quite understand is the motive in all this. Is Russia preparing for an invasion of the UK to occupy our valuable coal mines or enslave our population?

    The only motive I can find is that hysteria is an industry in and of itself. Defence, politics and security are artificially created needs. They must constantly be justified by finding an enemy and hurling accusations. Resorting to Facebook posts is probably the most pathetic accusation you can hurl, which reveals what the Russians are really up to. Not much.

    Still, in a world where Russia is supposedly fiddling with our energy infrastructure, the government will be forced to act. What’s the point of generating hysteria if you don’t do something about it? Voters won’t notice.

    Energy security is a long-time favourite cause politicians like to promote in times like these. Especially when it comes to hysteria over Russia. Usually energy security is used to promote an invasion of another country to take hold of their energy reserves.

    The good news is, a vast energy boom is about to take hold in Britain itself. The Russian drama may be just what it needs to get political backing.

    Until next time,

    Nick Hubble
    Capital & Conflict

    -Read more at www.capitalandconflict.com-

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  • Bitcoin Finds Its Footing at $7,000

    18.04.2018 • United StatesComments Off on Bitcoin Finds Its Footing at $7,000

    Bill Bonner – Bill Bonner’s Diary (United States) –

    BALTIMORE – Last week, we attended a conference in Miami. Several crypto enthusiasts were there… including Teeka Tiwari and our own “in-house” expert, one of our sons.

    The price of bitcoin has fallen from a high of around $20,000 to about $8,000 today. That kind of a fall would knock the wind out of most investors. But the bitcoin bulls are still surprisingly bullish.

    “This pullback is very healthy,” said one speaker. “There were so many bad deals in the initial coin offerings (ICOs – similar to initial public offerings, but with cryptocurrencies instead of stocks). Some of them were just absurd. And people who bought into those deals deserved to lose their money.

    “Now, we’re getting onto more solid ground.”

    He could be right. Bitcoin seems to have found its footing in the $6,800–$7,000 range. Thereafter, it began a modest recovery.

    “Look, a lot of people think there is ‘nothing’ behind these cryptos,” said one source. “But if there were nothing there, the price would have kept going down. The market would have discovered that there was nothing there… and the price would have gone to zero.

    “It didn’t. Instead, the market discovered firm ground in the $7,000 area… which is a lot more than zero.”

    What the market may have discovered is that bitcoin has a value as, well, bitcoin. When financial chaos strikes, gold holds its value… and bitcoin goes up.

    Geezers on the Internet

    “When you are in a crisis, it can be hard to get gold,” explained another of the cryptophiles. “The dealers don’t want to trade gold for local currency; no does. Gold tends to disappear…

    “It’s just Gresham’s Law at work. Bad money drives out good money. And usually, people are trapped. All that’s available is bad money. That’s the whole idea – to force people to use paper currency that is losing its value. That’s what is happening in Venezuela, for example, right now.”

    We turned to The Christian Science Monitor for confirmation:

    In the midst of a financial crisis with inflation nearing 2,000 percent, Venezuelans are using bitcoin to pay for groceries, medical bills, even honeymoons. Unaffected by the economic crisis, bitcoins give users an alternative to black market worthless government currency.

    “This is not a matter of politics,” [local Venezuelan] Mr Villar said. “This is a matter of survival.”

    Our boys bought bitcoin and other cryptocurrencies back in June 2017, against their father’s advice.

    The old man has waited for an “I-told-you-so” moment ever since. But it hasn’t come yet. In June, bitcoin was selling for about $2,500. Even after suffering a 60% drawdown, it’s still three times what they paid for it.

    “Hey Dad, remember when you introduced your readers to bitcoin… two years ago? You and Vern Gowdie tried to buy it. You got that young French girl, Claire, in the Paris office to help you. You made a video of it. I think the title was something like ‘Geezers on the Internet.’”

    “Ha ha… very funny.”

    “Between the three of you, you couldn’t figure it out.

    “Well, if you had been a little more tech-savvy, you would have made a lot more money. The price of bitcoin was just $500 back then. Now, it’s 15 times that much.”

    More Than Zero

    The crypto market is no stranger to big numbers. Filecoin raised $187 million in one hour in its ICO. Ark – a “blockchain platform” – went up 1,000 times. Nano, whatever that is, rose 3,747 times, transforming an initial investment of $500 into $1.8 million.

    And there may be more big gains coming in the crypto space. Very, very few people own cryptos. They represent a tiny percentage of money transactions.

    The experts tell us that most owners have what they call, derisively, “dust,” – very small holdings. They imagine, say, 5% of the world’s transactions being enabled by bitcoin, which might increase today’s price by 100 times or more.

    We offer no opinion of our own. All we know is that there’s something going on… something more than zero.

    But whether any particular cryptocurrency will go up or down, we have no idea. So we pass along the comments of one of the enthusiasts:

    “Look… we’re still in the very early stages. Money is already mostly digital. And paper cash is disappearing. It makes sense that new forms of digital money arise… and some will catch on.

    “It’s not going to replace the dollar. It’s not going to replace gold. But it is going to provide another form of money. When we have a financial crisis – a money crisis – such as those in Zimbabwe, or Cyprus, or Venezuela, people will lose their money in government’s paper currencies and mainstream banks.

    “They will flee to bitcoin and other cryptos… and they will protect their wealth. That’s what real money is supposed to do. And that’s what bitcoin does. That’s what makes it valuable.”

    Regards,

    signature

    Bill

    Editor’s Note: As Bill mentioned, bitcoin fell hard to start the year. But as the cryptocurrency begins to recover, some are predicting a second major run. Teeka Tiwari, who Bill mentioned at the top of the Diary, recently claimed that bitcoin would hit $40,000 by the end of the year.

    If you’ve ever wanted to invest in cryptos, now might be your last, best chance. See how to get started here.

    MARKET INSIGHT: COAL BUSINESS PLUMMETS

    By Joe Withrow, of Research, Bonner & Partners

    The coal industry has been left for dead…

    That’s the story of today’s chart, which maps the Dow Jones U.S. Coal Index from 2008 to today.

    Chart

    The Dow Jones U.S. Coal Index – which tracks all stocks classified in the coal subsector trading on major U.S. exchanges – has plummeted 89% since April 2011. That makes coal the worst-performing subsector over the last seven years.

    By comparison, the Dow Jones Industrial Average has risen 88% during that time.

    – Joe Withrow

    -Read more at bonnerandpartners.com-

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  • Why You Didn’t Hear About the World’s Biggest Bank Heist

    16.04.2018 • United KingdomComments Off on Why You Didn’t Hear About the World’s Biggest Bank Heist

    Harry Hamburg – Exponential Investor (United Kingdom) –

    Go to an ATM at the right place, at the right time, and you could be collecting a whole lot of free money.

    Over $1.25 billion has been spewed out by cash machines, in over 40 countries, since 2013.

    Of course, had you managed to be at the right cash machine at the right time to collect this money, you’d have had to fight off a “money mule” to get it.

    Of course, some ordinary people will have been offered cash by these ATMs, for no apparent reason. But the majority was collected by criminal gangs.

    In fact, it was just one criminal gang, known as Carbanak.

    Carbanak is responsible for what must be, by far, the biggest bank heist in history. The fact is, no one actually knows how much money it has stolen altogether.

    A 2015 report by Kaspersky Lab put the figure around $1.25 billion. But that was before Carbanak developed its most sophisticated techniques. And it continued to operate until its alleged mastermind was caught last month.

    Now, I say alleged, because this was such a big operation, it’s doubtful any one person was in charge. It’s also doubtful that such a mastermind would be as stupid with their money as our alleged mastermind was.

    So, there is every chance Carbanak is still taking billions from banks, all around the world.

    How the world’s biggest bank heist went down

    People like to call software that does bad things “malware”, as in malicious software. And the particular malware that the robbers used was called Carbanak, hence the name the gang has been given.

    From what I can find, Carbanak was downloaded – as most viruses and other computer nasties are – from an email attachment.

    An email was sent to bank employees that was designed to look like it was coming from another employee, with an attached Word document. And the Word document contained the malware.

    As an aside, this is why it’s important to keep all your software updated. Most of the time, updates – particularly with Adobe reader – are patches for known security holes in the program.

    The reason the “WannaCry” hack was so successful was because most of our institutions are woefully inept with computers. So inept that many of them – such as much of the NHS – kept their systems running on Windows XP. Windows XP is decades old and no longer receives security updates. WannaCry had no effect on up-to-date systems.

    But anyway, back to the story.

    So the Carbanak malware once “in” the bank’s system, then replicated and infected more computers. It allowed the hackers to see what was happening on infected computers’ screens. The hackers could then see how real transactions and money moving looked.

    Then the hackers used their malware to take control of the system and fake real transactions. They created extra money and then got cash machines to release it.

    They had a network of money mules who were told which cash machines to wait at and when. Then these mules just collected the free money.

    The money was then laundered – much of it through bitcoin (which, if you ever read my article on Monero, you’ll know isn’t very hard to trace).

    Europol has made a fun infographic explaining it all, which you can see below (click for a bigger image).

    How the “mastermind” was caught

    Now, you’ll probably notice that I’ve put mastermind in inverted commas. That’s because I don’t really believe this guy was the mastermind.

    Still he was seemingly definitely involved, and likely one of the main coders of the malware.

    As Wired reports:

    The key to tracking the man down to his Alicante home was through Taiwan and Belarus, Ruiz says. A report from Europol and security company Trend Micro published last year details how both countries saw ATMs dispensing cash to mules.

    The report says $2.5m (£1.78m) was stolen from 41 Wincor Nixdorf ATMs operated by First Commercial Bank in Taiwan during July 2016 “without using cash cards or even touching the PIN pads”. After the attack arrests were made and malware was found within the bank’s system. “These were one of the typical ATM network attacks in Taiwan. They got access to the network in Taiwan and cashed out the money to mules,” Ruiz says.

    “The police were able to arrest a number of these mules so we started to co-operate with Taiwan to see where this was coming from. This was an important element as this led to a group in Belarus and there we were able to connect this target. We were able to connect Taiwan, Belarus and Spain through the information exchanged with partners.”

    Europol says “criminal profits” were laundered via cryptocurrencies. “Prepaid cards linked to the cryptocurrency wallets which were used to buy goods such as luxury cars and houses,” the international agency said in its statement.

    A report in El Mundo, Spain’s second-largest newspaper, claims Denis K [the mastermind] owned 15,000 bitcoins (currently valued around £84m) at the time of his arrest. Catalan newspaper El Periódico de Catalunyareported that the arrested man lived with his wife and son, drove two BMWs and had jewellery valued at €500,000 within the home. 

    If you’ve ever seen any crime film or TV show ever, you’ll know flashing your cash isn’t a very good plan. Yet this mastermind had two BMWs and half a million euros’ of jewellery.

    Europol also don’t give any information about how they actually tracked him down. I very much doubt the mules would have known anything about anyone near the top of Carbanak.

    I guess we’ll find out in due time though. No doubt there’ll be a number of films made about it.

    Or will there?

    Why you’ve probably never heard about it

    While you could say this is the biggest bank robbery of all time, and has affected multiple banking institutions in many different countries, it didn’t really get much press.

    Not while it was all going on, not at the time of the mastermind’s arrest, and not much since.

    In fact, it’s very hard to find out which banks were actually affected.

    This is because cybercrime is very very bad business for banks. Banks rely on their customers trusting that they will keep their money safe.

    If you knew your bank had lost millions of its customers’ money to hackers, how would you feel? Would you really trust it to keep your money safe?

    No, the thing most banks and big businesses that get hacked do is keep it quiet. The banks will have simply reimbursed any accounts that were affected and kept shtum.

    I have actually been following this story since the Kaspersky report back in 2015; actually come to think it, since before then. And it has never made major news.

    Sure, it gets a bit of coverage on Wired – a tech website, and one or two articles in Forbes. But given the scale of what’s going on, shouldn’t it be front-page news all over the world?

    We only really hear about these hacking stories when it affects customer’s records, so the institutions are forced to tell us. Otherwise, it’s all kept as quiet as possible.

    But rest assured, groups like Carbanak are operating all over the world, 24 hours a day. It’s just we rarely hear about them.

    This is just one reason cybersecurity is a world-leading investment opportunity

    Which is why cybersecurity will be one of the biggest investment areas, going forward.

    The amount of money on the line, for businesses in every industry, is phenomenal.

    Having good cybersecurity is just as important as having a lock on your door. You could argue that it is even more so. As hackers can be stealing without the business even finding out for months, or even years.

    This is why cybersecurity is what my colleague Eoin Treacy is showing his subscribers how to invest in. Make no mistake, there is a lot of money on the table here. And with every new hack, it’s only ever increasing.

    If you want to find out the single best cybersecurity stock Sam believes you can invest in right now, you can take out a trial to his service, Frontier Tech Investor here.

    This is an area that will be ever more important as time goes on. And we’ll be keeping you a of the game, as it continues to evolve.

    Is cybersecurity an area that interests you, and if so, do you invest in it? Let me know in the comments below.

    Until next time,

    Harry Hamburg
    Editor, Exponential Investor

    -Read more at www.exponentialinvestor.com-

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  • The Indian Job Crisis Continues to Grow with No Help from Modi

    16.04.2018 • IndiaComments Off on The Indian Job Crisis Continues to Grow with No Help from Modi

    Vivek Kaul – Vivek Kaul’s Diary (India) –

    The Indian Railways recently got 2.8 crore applications for around 90,000 jobs it had advertised for.

    This basically means that the ratio of number of applicants to the number of jobs stands at 311:1. Further, it means that 18.7% of India’s youth workforce (people in the age group 18-29) applied for it. Or to put it a little more simplistically, every one in five individuals who are a part of India’s youth workforce, applied for these jobs.

    This is even without taking any education qualifications into account. If we do that (i.e. people who have at least passed the tenth standard or some such parameter), the proportion of India’s youth workforce which applied for these jobs in the Indian Railways would go up even further.

    If this is not an indication of India’s massive jobs crisis, we don’t know what is.

    The argument being offered against this is that just because someone has applied for a government job, does not mean he or she is unemployed. Of course, this is a fair argument, but an incomplete one. Allow me to explain.

     

    Let’s us look at Table 1, a table we have used multiple times before.

    Table 1:

    Table 1 clearly tells us that only 60.6% of India’s workforce which is looking for a job all through the year, is able to find one. So, yes Indians may not be unemployed, but they are terribly underemployed. Hence, nearly 40% of Indians looking for a job all through the year are unable to find one. Or two in five Indians who are looking for a job all through the year are unable to find one.

    Further, this underemployment translates into low levels of income, as can be seen from Table 2.

    Table 2: Self-employed/Regular wage salaried/Contract/Casual Workers
    according to Average Monthly Earnings (in %)

    Table 2 shows us the income levels of India’s workforce. As far as the self-employed and the contract workers are concerned, nearly two-thirds of them make up to Rs 7,500 per month or Rs 90,000 per year. In case of contract workers, more than 84% of contract workers earn up to Rs 7,500 per month or Rs 90,000 per year.

    The per capita income in 2015-2016 was at Rs 1.07 lakh. This basically means that a bulk of India’s non-salaried workforce, earns a significantly lower income than the per capita income.

    The non-salaried workforce works largely in the informal sector, which forms a bulk of India’s economy (as high as 92% as per one estimate). As the Economic Survey of 2015-2016, points out: “By most measures, informal sector jobs are much worse than formal sector ones-wages are, on average, more than 20 times higher in the formal sector.”

    Given these low levels of income primarily because of huge underemployment, so many people tend to apply for government jobs in general, and the recent vacancies in Indian Railways are no exception to this. People are looking for a regular and stable source of monthly income. They want to get rid of the irregularity of payment that they have to regularly deal with in the informal sector.

    The Indian government is a good paymaster, especially at lower levels. As the Report of the Seventh Pay Commission points out: “To obtain a comparative picture of the salaries paid in the government with that in the private sector enterprises the Commission engaged the Indian Institute of Management, Ahmedabad to conduct a study. According to the study the total emoluments of a General Helper, who is the lowest ranked employee in the government is Rs 22,579, more than two times the emoluments of a General Helper in the private sector organizations surveyed at Rs 8,000-9,500.”

    Hence, the IIM Ahmedabad study “on comparing job families between the government and private/public sector has brought out the fact that…at lower levels salaries are much lower in the private sector as compared to government jobs.”

    In this scenario, it isn’t surprising that so many people apply for government jobs in India. The employment opportunities in the informal sector are irregular and simply don’t pay enough. India’s huge underemployment gets reflected in the number of people applying for government jobs.

    And at the end of the day, underemployment is also a representation of unemployment and the huge jobs crisis that India is facing. There simply aren’t enough jobs/employment opportunities which will keep individuals occupied for the full year, going around, for everyone who is a part of India’s burgeoning workforce.

    Indeed, that is something to worry about. And what is even worrying is that the Modi government is not worrying about this huge issue.

    Regards,
    Vivek Kaul
    Vivek Kaul
    Editor, Vivek Kaul’s Diary

    Post: Dear Reader, you must be wondering why are we still using 2015-2016 data even in 2018-2019. The Labour Bureau carried out six household-based Annual Employment-Unemployment Surveys (EUS) between 2010 and 2016. Of these, reports of five rounds have been released till date. The last report was released in September 2016. The question is, why has the report for the sixth round of the Survey not been released till date.

    Recently, in an answer to a question raised in Parliament, the government said, “On the recommendations of the Task Force on Employment, however, this survey has been discontinued.” Basically, a survey that brought bad news in the form of huge underemployment that India has been facing, has been discontinued, and then the government goes around talking about lack of data.

    PPS: Every day the markets are open, Ankit Shah cherry picks one idea from our 9 premium services, the one he considers the best money-making opportunity. This one idea is shared with an exclusive group of readers on Ankit’s ‘Insider’ list. Today, you have the chance to join this exclusive group. But you must hurry. This is a limited period offer. It ends at midnight tonight! Get full details here…

    -Read more at www.equitymaster.com-

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  • Economic Slowdown Reignites Global QE

    16.04.2018 • United KingdomComments Off on Economic Slowdown Reignites Global QE

    Nick Hubble – Capital and Conflict (United Kingdom) –

    Blowing up some portion of Syria’s chemical weapons infrastructure changes everything. Or nothing, depending on who you ask.

    Don’t ask me.

    All I know is that we’re walking into whatever was planned for us.

    If Bashar al-Assad actually launched a chemical weapons attack, it must’ve been to solidify his Russian support by escalating tensions with the West.

    If someone else launched a false chemical weapons attack, it must’ve been to goad the West into action in Syria.

    Either way, we’re nice and predictable. So whoever did launch the attack is doing well.

    But let’s turn to financial markets. The global economy continues to slow. And not when it’s supposed to.

    We’ve looked into the US yield curve a few times now. The yield gap between American short and long duration bonds just reached the lowest level since 2007. Any lower and it signals a coming recession.

    Part of the curve is inverted if you look at bets on interest rate policy in the forwards market. But only a few years into the future. This basically means speculators are anticipating an interest rate cut in about two years’ time. It’s the first time in 13 years that this has happened, taking us back to 2005.

    Despite those two ominous dates, there isn’t much concern over any of this. Perhaps because the bond market is so manipulated by central banks. Without a free market setting yields, it may be giving a misleading signal. So don’t worry about it too much, the media reassures me.

    The problem is, it might be misleading to the upside. An unmanipulated yield curve could be signalling a recession clearly. Remember, when quantitative easing (QE) was launched, monetary policy makers said it would push up bond prices and interest rates would go down. The precise opposite happened in the aftermath of each intervention. So it’s not like these people know what they’re doing.

    There are two explanations for what happened each time QE was implemented. Perhaps this is a case of “buy the rumour, sell the news”. QE did have the intended effect, just in anticipation of the policy announcement. But the time it was actually announced, it was old news. There’s a German saying that anticipation is better than gratification.

    The alternative explanation is that investors saw QE as inflationary and backed away from bonds each time QE was announced.

    Either way, it’s clear that QE is messing with a yield curve that grows closer to signalling a US recession by the month. You’d think they’d manipulate it to signal otherwise.

    Earnings season in the US began last week, so we’ll be looking for more hints from company financial statements. So far, CNBC called the results “ominous”.

    Over in Europe, a few months of surprising growth are coming to a concerning end. The Financial Times reports how the fund manager Fulcrum Asset Management is concerned about the sudden change. Economic activity has tumbled since February.

    The details were provided in another FT article:

    A wide-ranging measure of eurozone industry unexpectedly fell in February, echoing surveys of businesses that suggest the bloc’s economic growth may have eased in the first quarter.

    Industrial production fell 0.8 per cent in February from January, marking the third straight monthly decline for the gauge. Economists had forecast a 0.1 per cent uptick, according to a Reuters survey. Falls were the most pronounced in capital and durable goods. The former fell 3.6 per cent, while the latter declined 2.1 per cent.

    Energy was a bright spot, up 6.8 per cent. Data from individual countries released previously suggested cold weather may have provided a boon to the energy sector.

    Industrial production was still up 2.9 per cent from February 2017, but the rate of growth slowed sharply from 3.7 per cent in January and 5.2 per cent in the final month of 2017.

    Citigroup’s Global Economic Surprise Index has turned negative and Reuters reports “Euro zone businesses rounded off the first quarter of 2018 with their slowest growth in over a year – and much weaker than expected – as new business took another hit from a stubbornly strong euro, a survey showed.”

    More concerning than the backward-looking indicators of the economy is the forward-looking stockmarket. If the February tumble in stocks around the world was a warning shot about economic change, we’re in for a sharp contraction. Perhaps the market knows something we don’t.

    The real question in all this is who is the weakest link. An economic slowdown is likely to bring about some sort of crisis. Probably a debt crisis. But where?

    Could it be the UK?

    According to Australia’s Business Insider, the UK was the only major economy where economic growth slowed last year. We’re weak going into this year. Still, the pound is up over 6% since September 2017 against the euro.

    Of course, the UK still grew faster than Italy. But that’s the odd thing about the eurozone. It’s a bundle of economies bunched together, so the economic statistics look a lot steadier overall. But when it comes to debts, the eurozone isn’t unified yet. It’s the divergence between the two that’s the worry. More on that in a second.

    If the story with Russia continues to escalate, could that be enough to cause trouble for the UK’s economy at a fragile time? It’s well known that the Germans are reliant on Russian gas, so they haven’t been joining in on the bullying effort.

    There happens to be a rather enormous opportunity to hedge against Russian- dominated energy markets. It involves a lot of hot air under Devon, if you know what I mean.

    Back to QE

    An economic slowdown now would reignite old debates about monetary policy.

    Interest rates can’t exactly be cut much around the world. The evidence for negative interest rates at central banks spurring growth is iffy.

    Fiscal policy is just as shaky. Debts and deficits have recovered about as much as central bank policy.

    That only leaves one button for policy makers to push if the economy turns down properly: “PRINT”.

    If QE is the only major policy left, it’ll be the policy used.

    The thing is, there’s one central bank in the world with legal restraints on its QE. It just happens to be the one ruling over the eurozone.

    One currency, one monetary policy, but no shared debts, and a limit to QE policies.

    Do you see the problem? I’ll lay it out.

    The eurozone’s currency and monetary policy exacerbate economic divergence between eurozone members by ensuring the exchange rate and interest rate applied is never the correct one for a particular nation. The ability for eurozone members to borrow, go broke and default independently makes this distinctly possible in the face of an interest rate and an exchange rate that aren’t helping. And any rescue attempt is hampered by European Central Bank rules.

    What could possibly go wrong? We’ll see.

    Until next time,

    Nick Hubble
    Capital & Conflict

    -Read more at www.capitalandconflict.com-

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  • Fake Wars Continue: the Real Motives Behind Airstrikes in Syria

    16.04.2018 • United StatesComments Off on Fake Wars Continue: the Real Motives Behind Airstrikes in Syria

    Bill Bonner – Bill Bonner’s Diary (United States) –

    A cigarette that bears a lipstick’s traces

    An airline ticket to romantic places

    – Billie Holiday, “These Foolish Things (Remind Me of You)”

    BALTIMORE – South Beach…

    Last week, we were sitting in the hotel restaurant in Miami Beach having breakfast…

    A man – about 30 – was leaning on the counter. His dirty pants were falling down. He wore a black t-shirt with a skeleton on it. He put his down on the counter… and said something incomprehensible.

    He got a cup of coffee… and staggered over to a chair and flopped down, talking to himself.

    After a few minutes, he got up. He clutched his pants, which were almost around his knees. He wobbled. He lurched. He ed for the door and disappeared out through it.

    Then, a woman… voluptuous… pretty… dressed in white jeans, with a very low-cut t-shirt came in the same door.

    She looked in our direction. She said something. We couldn’t make it out… Was she asking the time of day? Directions? We smiled.

    She came towards us and sat down next to us on the couch.

    She whispered…

    “Would you like a massage?”

    Two young men came in. Shorts. T-shirts. Almost identical outfits. But one wore his baseball cap backwards. They held hands. Smiled at each other. They got cappuccinos.

    They left.

    South Beach.

    Deceit and Delusion

    But now, we are back in Baltimore, visiting our new granddaughter. Then, we’ll be off again, back to Ireland.

    There was a time when we looked forward to traveling. Buying an airline ticket to a romantic place promised a thrill, an adventure… and a learning experience.

    Now, we’d rather stay home. But now, the cost of not traveling is higher than the benefit of staying home. We’re taking care of business, in other words. And as business has grown, so has the need to take care of it.

    But let’s turn to our familiar beat – the world of money. Or, more particularly, the world of deceit and delusion known as “economics.” Unromantic. Tawdry. But fascinating.

    Staged Revenge

    When we left off last week, we were looking at fake wars. As you know, these are wars that no one wants to win, since their real purpose is to shift wealth from the public to the war-fighting industries.

    Our point was that even fake wars sometimes spin out of control – when people forget what kind of war they’re fighting, for example.

    Early in the week, U.S. president Donald J. Trump was taking the trade war far too seriously. Then, his Deep State handlers must have straightened him out on that; before the week was over, he declared that he wanted to get back into the Trans-Pacific Partnership!

    Then, he went off message again… this time, on the war on terrorism. A gas attack against civilians in Syria had been alleged; the president wanted to retaliate.

    As you know, no sparrow can fall anywhere on the planet without inviting a U.S. counterattack against the starlings. Observers wondered why the president didn’t wait to find out who had actually perpetrated the attack… if anyone. But they failed to understand the nature of fake war.

    It didn’t really matter whether any atrocities had been committed… or who had committed them. As it turned out, the gas attack was most likely fake. Perfect; the U.S. could stage a fake revenge attack, too!

    Russia was notified in advance of where and when the U.S. would attack, allowing time for the “enemy” – whoever they are – to make themselves scarce.

    The Donald had an opportunity to show what a tough, decisive leader he is without doing any real harm. It was all for the benefit of the fans… and, of course, the Deep State.

    So far, so good.

    Deep State War

    Then, no sooner had we all relaxed when, on Sunday, a new war flared up – the war between Donald J. Trump and the Deep State itself.

    Many people think this war is real. Donald J. Trump, they believe, is fighting for “the people”… and the Deep State is trying to stop him. He really wants to drain the swamp, they say; it’s not his fault the water is getting deeper.

    Anything is possible.

    Mr. Trump’s instincts are clearly “populist” – he certainly understands the showbiz side much better than most politicians. But he is no fool.

    Hardly had the sun set on the polling stations in November 2016 when he invited the Wall Street insiders from Goldman Sachs… and a trio of retired generals… to join him in the White House.

    But there are many different factions in the Deep State. Like sows at a feeding trough, they bump into each other trying to get at the swill. And the winners are usually those that are most heavily armed.

    Leaping a, we notice that whenever there is a “populist” movement in politics, it almost always leads to the military wing of the Deep State taking control.

    Caesar, Lenin, Mao, Mussolini, Hitler, Perón, Castro – revolutions begun in the name of the “people” tend to degrade into military dictatorships.

    Why? Because government is always a way for the few to take advantage of the many… and the fraud is easier to pull off when you can invoke those atavistic “us versus them” emotions.

    The lumpen naturally rally ‘round the flag and support the military – no matter how absurd the situation.

    And if they don’t, you shoot them.

    Regards,

    signature

    Bill

    MARKET INSIGHT: VOLATILITY IS BACK

    By Joe Withrow, of Research, Bonner & Partners

    Volatility is back…

    That’s the story of today’s chart. It shows the number of one-day moves of 1% or more for the S&P 500 in 2017 and 2018.

    Chart

    As you can see, the S&P 500 only moved 1% or more on eight trading days in all of 2017.

    So far in 2018, the S&P 500 has moved more than 1% on 28 different trading days.

    For comparison, the S&P’s historical average by this point in the year is 13 days with a 1% move.

    – Joe Withrow

    -Read more at bonnerandpartners.com-

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