The Financial Markets Now Control Everything

The entire economic and political structure is now dependent in one way or another on the continued expansion of financial markets.

 

The financial markets don't just dominate the economy--they now control everything. In 1999, the BBC broadcast a 4-part documentary by Adam Curtis, The Mayfair Set ( Episode 1: "Who Pays Wins" 58 minutes), that explored the way financial markets have come to dominate not just the economy but the political process and society.

 

In effect, politicians now look to the markets for policy guidance, and any market turbulence now causes governments to quickly amend their policies to "rescue" the all-important markets from instability.

 

This is a global trend that has gathered momentum since the program was broadcast in 1999, as The Global Financial Meltdown of 2008-09 greatly reinforced the dominance of markets.

 

It's not just banks that have become too big to fail; the markets themselves are now too influential and big to fail.

 

Curtis focuses considerable attention on the way in which seemingly "good" financial entities such as pension funds actively enabled the "bad" corporate raiders of the 1980s by purchasing the high-yield junk bonds the raiders used to finance their asset-stripping ventures.

 

This increasing dependence of "good" entities on players making risky bets and manipulating markets has created perverse incentives to keep the financial bubble-blowing going with government backstops and changing the rules to mask systemic leverage and risk.

 

The government must prop up markets, not just to insure the cash keeps flowing into political campaign coffers, but to save pension funds and the "wealth effect" that is now the sole driver of "growth" (expanding consumption) other than debt.

 

To maintain the illusion of growth and rising wealth, the financial markets must continually reach greater extremes: extremes of debt, leverage, obscurity and valuations. These extremes destabilize markets, first beneath the surface and then all too visibly.

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Goldman Paid Bill Clinton $200K Before Lobbying Hillary On Export-Import Bank

As documented here on several occasions of late, there are new questions surrounding charitable contributions to the Clinton Foundation. Most notably, a Reuters investigation revealed that the Clinton family charities may have suffered what we called a “Geithner moment” when they failed to report tens of millions in contributions from foreign governments on tax documents. The foundation will now refile five years worth of returns and hasn’t ruled out the possibility that it may need to amend returns dating back some 15 years. 

This prompted acting CEO Maura Pally to pen a lengthy blog post in which she explains the “mistakes” and attempts to reassure the public that the Clinton Foundation is taking special care to guard against “conflicts of interest” as Hillary begins her run for The White House. Pally also notes that similar measures were taken when Clinton was Secretary of State although, as we noted, the charity accepted donations from the likes of Kuwait, Qatar and Oman while she was the nation’s top diplomat. 

Now there are new questions as IBTimes suggests there may be a connection between a $200,000 payment made to Bill Clinton by Goldman Sachs in 2011, and the bank’s efforts to lobby the State Department ahead of legislation involving the Export-Import Bank which was set to provide a loan that would end up financing the purchase of millions of dollars in aircraft from a company partially owned by Goldman. Here’s more: 

Goldman Sachs paid former President Bill Clinton $200,000 to deliver a speech in the spring of 2011, several months before the investment banking giant began lobbying the State Department, then headed by Hillary Clinton, federal records reviewed by International Business Times show.

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The 23 Count Indictment of the TPP

To really appreciate what a travesty the TPP is, and the scandal of the failure of our Congress to reject it, and the “Fast Track Authority“ sought for it, out of hand, I’m going to list 23 negative consequences that would likely follow from it. Any one of these, would, by itself be sufficient for any representative of the people, Senator or Congressperson, to vote to kill it. I’ll offer this list in the form of stanzas appropriate for a chant, except for the starting point in the list.

The tune of the chant that might be used is the tune used for Dayenu, the passover seder chant in which Dayenu means “It would have been sufficient,” where the reference is to all the things the almighty is purported to have done for the Israelites on their way out of Egypt and during their wanderings in the Sinai. I’m sure the President is familiar with this chant since he has had seders at the White House more than once. I’m also sure that he never envisioned using Dayenu to highlight the horrors of one of his favorite projects, the passage of “Fast Track Authority,” the TPP, and other “free trade” agreements such as the TTIP, and the TISA, all of which would get “Fast Track Authority” if the present bill passes.

The Stanzas of the Anti-TPP Chant

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Boston Fed Admits There Is No Exit, Suggests QE Become "Normal Monetary Policy"

Perhaps it was inevitable. After all, the term “QEfinity” entered the financial lexicon long ago and there were already quite a few commentators out there suggesting that it may now be too late to remove the punchbowl, meaning an “exit” will not only prove difficult, but may well be impossible. 

Take Makoto Utsumi, who oversaw foreign-exchange policy at the Japanese Ministry of Finance from 1989-1991, for example. Utsumi recently said a BoJ QE exit was out of the question “for the foreseeable future” and went on to note that “even the thought of an exit is a nightmare.” Meanwhile, it’s virtually impossible to say what effect Fed tightening will have in both the Treasury and corporate bond markets given the lack of liquidity in both and then there’s EM where carnage unfolded in 2013 after a certain bearded bureaucrat said the wrong thing about the direction of Fed policy. 

Given all of this, we’re not surprised to learn that in a new paper entitled “Let’s Talk About It: What Policy Tools Should The Fed ‘Normally’ Use?”, the Boston Fed is now suggesting that QE become a permanent tool at the disposal of the Fed. After all, “financial stability” depends on it…

During the onset of a very severe financial and economic crisis in 2008, the federal funds rate reached the zero lower bound (ZLB). With this primary monetary policy tool therefore rendered ineffective, in November 2008 the Federal Reserve started to use its balance sheet as an alternative policy tool when it began the large-scale asset purchases. Now attention is turning to how the Fed should transition back to a more conventional monetary policy stance. Largely missing from these discussions about the Fed's "exit strategy" is a consideration that perhaps it should retain, not discard, the balance sheet tools. 

Yes, oddly missing from the Fed’s exit strategy is the idea that there should be no exit. 

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11 Signs That We Are Entering The Next Phase Of The Global Economic Crisis

Well, the Nasdaq finally did it.  It has climbed all the way back to where it was at the peak of the dotcom bubble.  Back in March 2000, the Nasdaq set an all-time record high of 5,048.62.  On Thursday, after all these years, that all-time record was finally eclipsed.  The Nasdaq closed at 5056.06, and Wall Street greatly rejoiced.  So if you invested in the Nasdaq at the peak of the dotcom bubble, you are just finally breaking even 15 years later.  Unfortunately, the truth is that stocks have not been soaring because the U.S. economy is fundamentally strong.  Just like the last two times, what we are witnessing is an irrational financial bubble.  Sometimes these irrational bubbles can last for a surprisingly long time, but in the end they always burst.  And even now there are signs of economic trouble bubbling to the surface all around us.  The following are 11 signs that we are entering the next phase of the global economic crisis…

So what is going on?

Well, I believe that what we are experiencing right now is the proverbial “calm before the storm”.  There is all sorts of turmoil brewing just beneath the surface, but for the moment things seem like they are running along just fine to most people.  Unfortunately, this period of quiet is not going to last much longer.

And those that are “in the know” are already moving their money in anticipation of what is coming.  For example, consider the words of  Snapchat founder and CEO Evan Spiegel…

Fed has created abnormal market conditions by printing money and keeping interest rates low. Investors are looking for growth anywhere they can find it and tech companies are good targets – at these values, however, all tech stocks are expensive – even looking at 5+ years of revenue growth down the road. This means that most value-driven investors have left the market and the remaining 5-10%+ increase in market value will be driven by momentum investors. At some point there won’t be any momentum investors left buying at higher prices, and the market begins to tumble. May be 10-20% correction or something more significant, especially in tech stocks.

It may not happen next week, or even next month, but big financial trouble is coming.
And when it finally arrives, it is going to shock the world, even though anyone with any sense can see the coming crisis approaching from a mile away.

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More Craven Arguments Used to Sell TPP and Fast Track to Congress, With Mixed Results

I don’t know what’s occurring more rapidly, Congressional votes on Trade Promotion Authority (aka fast track) or the parade of half-truths and outright falsehoods being promoted to sell it. Committees in the House and Senate held meetings Wednesday on the bill. The Senate Finance Committee markup got off to a slow start when Bernie Sanders used an obscure Senate maneuver to delay the markup:

Early Wednesday, Sanders forced the Senate Finance Committee to abandon a legislative hearing on a bill that would grant Obama so-called fast-track authority on trade agreements. Sanders invoked an arcane procedural maneuver, objecting to a rule that allows committees to meet during legislative sessions. By doing so, Sanders has prevented the Finance Committee from dealing with the trade bill until at least 4:00 p.m.

That’s significant because Senate Democrats, including Sherrod Brown (D-Ohio), have prepared dozens of amendments to the fast-track bill, which will take several hours to address in committee. If the panel can’t finish its work Wednesday, or just decides to call it a day early and resume its business tomorrow, Sanders can raise the same objection again, potentially delaying the process for several days.

It turned out to be more symbolic than significant. Chairman Orrin Hatch vowed the committee would work deep into the night to get to a final vote, and they eventually came away advancing it by 20-6. Only Richard Burr voted no among the Republicans, while Democrats split: 7 yes (Wyden, Cantwell, Nelson, Carper, Cardin, Bennet, Warner), five no (Schumer, Stabenow, Menendez, Brown, Casey). Sherrod Brown had introduced 88 amendments, but most of them never got a vote.

Ron Wyden, the Administration’s stalking horse on the bill, was the only Democrat to vote with all Republicans to cut Trade Adjustment Assistance, basically a cash payoff for workers affected by trade bills. Wyden said specifically that he was acting with the support of the Administration on that.

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ECB Prepares To Sacrifice Greek Banks With 50% Collateral Haircut

In what seems like a coincidental retaliation for Greece's pivot to Russia (and following Greece's initiation of capital controls), the supposedly independent European Central Bank has decided suddenly that - after dishing out €74 billion of emergency liquidity to the Greek National Bank to fund its banks - as The NY Times reports, the value of the collateral that Greek banks post at their own central bank to secure these loans be reduced by as much as 50%, and the haircut should increase if negotiations with Europe remain at an impasse. As we detailed earlier, this is about as worst-case-scenario for Greece as is 'diplomatically' possible currently, and highlights an increasingly hard line by The ECB toward The Greeks as the move will leave banks hard-pressed to survive.

As we laid out earlier, according to Bloomberg, the ECB staff proposal lays out three options to reduce central-bank risk: "the scenarios envisage returning haircuts to the level before late last year, when the ECB eased its collateral requirements for Greece; to set them at 75 percent; or to set them at 90 percent. The latter two options could be applied if Greece is in an “orderly default” under a formal ECB program or a “disorderly default,” CNBC said, without further elaborating on those terms."

Any reduction in ELA availability would be devastating to Greece, where depositors continue to pull cash from banks accounts to the tune of several hundred million euro every week, and the central bank "seeks to match the outflow with ELA. The Bank of Greece keeps a buffer of around 3 billion euros of ELA allowance in reserve, to give it time to react to a possible bank run, one of the officials said."

Any reduction in this buffer would lead to a self-fulfilling bank run prophecy and accelerate the deposit flight to the point where the local banks are forced to halt operations, and Greece is forced to replace the "soft" capital controls already rolled out with "hard" ones.

To restrict or veto ELA funding, which is provided at the Greek central bank’s own risk with consent from Frankfurt, a two-thirds majority of the Governing Council is necessary. A growing minority is opposed to continuing to provide the assistance indefinitely, one of the people said.

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Trans-Pacific Partnership is Not About Free Trade

The TPP covers a bewildering range of topics. In addition to conventional trade issues like tariff rates, it includes language on labor rights, environmental laws, copyright and patent protections, e-commerce, state-owned enterprises, corruption, and government procurement.

Trade deals like the TPP have grown so complex because the global trade community has figured out how to solve a problem that has bedeviled philosophers and political leaders for centuries: how to craft international agreements with teeth. The WTO's dispute-settlement process, which serves as a model for the TPP, puts pressure on countries to actually keep the promises they make in trade deals. That's why everyone with an agenda — wealthy investors, drug companies, labor unions, environmental groups, and so on — is scrambling to get on the bandwagon.

But the complex, secretive, and anti-democratic way the TPP is being crafted rubs a lot of people the wrong way. The agreement will have profound and long-lasting effects on countries that sign on, yet voters in those countries won't even be allowed to see the text until negotiations are over and it's too late to make changes. No wonder so many groups — the AFL-CIO, civil liberties groups like the Electronic Frontier Foundation, and even the free traders at the Cato Institute — have been raising concerns about it. – Vox.com, April 17, 2015 
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How the Federal Reserve Is Destroying Your Economic Future

When it comes to what goes on in the marble corridors of the Federal Reserve, Americans tend to be suspicious. For different reasons, both the right and the left have challenged Fed policies aimed at bolstering the economy in the wake of the Great Recession. In two papers for the Institute of New Economic Thinking’s Working Group on the Political Economy of Distribution, “Have Large Scale Asset Purchases Increased Bank Profits?” and the forthcoming “The Impact of ‘Quantitative Easing’ on Expected Profits: Explaining the Rise and Fall of the Fed’s QE Policy,” economist Gerald Epstein and his colleague Juan Antonio Montecino sought to find out who in the economy tends to benefit from the Fed’s actions. They conclude that Wall Street and wealthy Americans are the big winners from policies like quantitative easing, while the rest see little improvement in their economic lives. End result? Inequality is getting worse.

Lynn Parramore: Complaining about the Fed is something of a national pastime. What is it about this institution that attracts so much criticism?

Gerald Epstein: People in America get really angry at the Federal Reserve and at the “money system” in general during economic crises. The Fed draws hostility because of its power, its insulation from democratic accountability, its lack of transparency, and because of its historical and structural connections to finance. It has a lot of power in the economy because it has a big impact on the supply and cost of credit, that is, interest rates. It also plays a key role in supervising banks and historically has seemed to take it easy on the banks when it shouldn’t have, such as in the lead up to the financial crisis. Bankers themselves govern the Fed to some extent, and then there’s the classic revolving door where Fed officials come from and then go back to the financial sector. Fed officials tend to believe that the institution should have a large measure of independence from democratic control, even though in law it is under the ostensible control of Congress.

So critics, often for good reason, are concerned that the Fed is wielding its vast powers in the interests of the banks and not in the interests of the people. After the financial crisis, Americans have perceived that the banks have been bailed out, but a significant proportion of the population is still in serious economic trouble.

LP: Many libertarians want to audit the Fed or just plain end it, while conservatives like Rick Perry label the Fed’s actions treasonous. On the other side of the political spectrum, members of the Occupy Movement and progressives like Bernie Sanders and Elizabeth Warren challenge the Fed’s ties to Wall Street. How do people with such vastly different ideologies end up distrusting the Fed?

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How Pending “Trade” Deals Would Undermine Zoning and Local Land Use Rules

A key principle of land use in the United States is that homeowners can often veto new buildings on nearby land that other people own. A trade agreement that’s currently in the works could have a huge impact on that long-established system of local control.

The Trans Pacific Partnership (TPP) is a trade pact that would change the rules for investments and trade among its signers. It’s currently in behind-closed-doors negotiation among 12 countries, including the United States, Australia, Canada, Japan, Mexico, and Singapore. Other countries could join later.

A recently leaked draft of the TPP gives investors from member nations the right to sue when a decision by a local government “interferes with distinct, reasonable investment-backed expectations.”

Panels of private lawyers chosen by the investors and the federal government will meet to decide the suits. If the investors win, the federal government must reimburse them for the loss of future profits.

Critics of the TPP argue that it could gut environmental and health regulation. They point to the past history of trade agreements to back up that concern. The TPP’s backers, on the other hand, assert that the treaty only bans arbitrary or discriminatory actions.

No matter who turns out to be right about that, the pact is likely to undermine local oversight of land use.

The TPP Goes Against the Spirit of American Land Use Law

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The Collapse Of The Petrodollar: Oil Exporters Are Dumping US Assets At A Record Pace

Back in November we chronicled the (quiet) death of the Petrodollar, the system that has buttressed USD hegemony for decades by ensuring that oil producers recycled their dollar proceeds into still more USD assets creating a very convenient (if your printing press mints dollars) self-fulfilling prophecy that has effectively underwritten the dollar’s reserve status in the post WWII era. Here’s what we said last year:

Two years ago, in hushed tones at first, then ever louder, the financial world began discussing that which shall never be discussed in polite company - the end of the system that according to many has framed and facilitated the US Dollar's reserve currency status: the Petrodollar, or the world in which oil export countries would recycle the dollars they received in exchange for their oil exports, by purchasing more USD-denominated assets, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one held US-denominated assets and printed US currency) loop...

Few would have believed that the Petrodollar did indeed quietly die, although ironically, without much input from either Russia or China, and paradoxically, mostly as a result of the actions of none other than the Fed itself, with its strong dollar policy, and to a lesser extent Saudi Arabia too, which by glutting the world with crude, first intended to crush Putin, and subsequently, to take out the US crude cost-curve, may have Plaxico'ed both itself, and its closest Petrodollar trading partner, the US of A.

As Reuters reports, for the first time in almost two decades, energy-exporting countries are set to pull their "petrodollars" out of world markets this year.

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OPEC Going Broke, Dumping Dollars. Is That Good Or Bad?

When oil prices fell out of bed last winter there was much hand-wringing over the fate of the former beneficiaries of high-priced crude. Trillions of dollars of junk bonds issued by frackers, for instance, might default, oil field services companies could fail, and layoffs in the oil patch might swamp the nascent employment recovery.

Some of this has happened, though not on the apocalyptic scale the worst-case scenarios suggested. More might be coming, but right now it’s not headline news in North America.

For OPEC, however, the sudden 50% diminution in export revenue is a clear and present danger, and the response is noteworthy:

Oil-Rich Nations Are Selling Off Their Petrodollar Assets at Record Pace

Now that oil prices have dropped by half to $50 a barrel, Saudi Arabia and other commodity-rich nations are fast drawing down those “petrodollar” reserves.

The design-led revolution is a movement to reinvent how we work, create, and respond to our most pressing social and environmental challenges

In the heady days of the commodity boom, oil-rich nations accumulated billions of dollars in reserves they invested in U.S. debt and other securities. They also occasionally bought trophy assets, such as Manhattan skyscrapers, luxury homes in London or Paris Saint-Germain Football Club.

Now that oil prices have dropped by half to $50 a barrel, Saudi Arabia and other commodity-rich nations are fast drawing down those “petrodollar” reserves. Some nations, such as Angola, are burning through their savings at a record pace, removing a source of liquidity from global markets.

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The Six Too Big To Fail Banks In The U.S. Have 278 TRILLION Dollars Of Exposure To Derivatives

The very same people that caused the last economic crisis have created a 278 TRILLION dollar derivatives time bomb that could go off at any moment.  When this absolutely colossal bubble does implode, we are going to be faced with the worst economic crash in the history of the United States.  During the last financial crisis, our politicians promised us that they would make sure that “too big to fail” would never be a problem again.  Instead, as you will see below, those banks have actually gotten far larger since then.  So now we really can’t afford for them to fail.  The six banks that I am talking about are JPMorgan Chase, Citibank, Goldman Sachs, Bank of America, Morgan Stanley and Wells Fargo.  When you add up all of their exposure to derivatives, it comes to a grand total of more than 278 trillion dollars.  But when you add up all of the assets of all six banks combined, it only comes to a grand total of about 9.8 trillion dollars.  In other words, these “too big to fail” banks have exposure to derivatives that is more than 28 times greater than their total assets.  This is complete and utter insanity, and yet nobody seems too alarmed about it.  For the moment, those banks are still making lots of money and funding the campaigns of our most prominent politicians.  Right now there is no incentive for them to stop their incredibly reckless gambling so they are just going to keep on doing it.

So precisely what are “derivatives”?  Well, they can be immensely complicated, but I like to simplify things.  On a very basic level, a “derivative” is not an investment in anything.  When you buy a stock, you are purchasing an ownership interest in a company.  When you buy a bond, you are purchasing the debt of a company.  But a derivative is quite different.  In essence, most derivatives are simply bets about what will or will not happen in the future.  The big banks have transformed Wall Street into the biggest casino in the history of the planet, and when things are running smoothly they usually make a whole lot of money.

But there is a fundamental flaw in the system, and I described this in a previous article…

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California Urban Water Use Restricted While Regulators Give Oil Industry Two More Years To Operate Injection Wells In Protected Groundwater Aquifers

With snowpack levels at just 6% of their long-term average, the lowest they’ve ever been in recorded history, California Governor Jerry Brown has announced new regulations to cut urban water use 25%, the first ever mandatory water restrictions in the state.

California is in the fifth year of its historic, climate-exacerbated drought and, per a recent analysis by a senior water scientist at NASA, has only one year of water left in its reservoirs, while groundwater levels are at an all-time low.

The Golden State’s towns and cities only account for about 20% of all water used for human purposes, however (including residential, institutional, industrial and commercial uses). Agriculture uses the other 80%.

Half of the produce grown in America comes from California, yet 2015 is likely to be the second year in a row that California’s farmers get no water allocation from state reservoirs. In some parts of the state, agricultural operations have pumped so much groundwater that the land is starting to sink.

Governor Brown’s executive order has been criticized for not including restrictions on groundwater pumping by agricultural operations, but Brown defended the decision, saying that hundreds of thousands of acres of land were already lying fallow because of the state’s water crisis.

There’s another industry conspicuously exempt from California’s new water restrictions, though. “Fracking and toxic injection wells may not be the largest uses of water in California, but they are undoubtedly some of the stupidest,” Zack Malitz of the environmental group Credo says, according to Reuters.

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Why The BRICs Are Less Worried About The Next Crash

When even Jamie Dimon warns that "another crisis is coming", and points to the utter lack of market liquidity and the likelihood of another flash crash, it probably means that not only has he been reading this website, but that JPM's chief prop trading group, the Chief Investment Office, infamously long three years ago is already short and just waiting for the bottom to fall out of the market. One group, however, that is not be too worried about the next global financial crash - at least superficially - are the BRICs, because according to the Russian Prime Minister Dmitry Medvedev, "the creation of the BRICS reserve currencies pool worth $100 billion will allow member states to depend less on negative processes in the world economy and bypass market volatility."

"Along with the launch of the New Development Bank, it is one of the most important initiatives for countries entering into this association. The agreement establishing a pool of reserve currencies was signed last summer," said Medvedev at a government meeting Thursday.

"Each of the BRICS members may apply to any party to the treaty for loan,” Medvedev said, adding that key decisions will be taken by the Governing Council, which consists of either finance ministers or central bank governors. Russia will be represented by the head of the Central Bank of Russia Elvira Nabiullina.

"I hope [the agreement on establishing the pool] will not only strengthen our economic cooperation, but also provide the participants of the ‘five’ more independence from the current international financial situation and the problems existing in the international financial institutions," he said adding that it’s one of the most significant practical initiatives of BRICS.

Of course, stating that $100 billion (not USD denominated of course) in equity is a buffer against market or economic shocks in a world in which there is $600 trillion in notional derivatives, and which are one failed counterparty away from confirming (again, the first time being Lehman's bankruptcy) that net is indeed gross in a collateral chain that is only as strong as its weakest link, is supremely naive especially since the BRICs themselves are loaded to the gills with trillions in USD-denominated debt.

Unless, of course, what the Russian PM is suggesting is that the currency pool will provide the "fresh start" equity in a new, post-dollar world, in which any debt denominated in dollars is nullified once the crisis strikes. Of course, for that to happen, it would mean that the USD is no longer the world's reserve currency. Which is, of course, the unspoken message here (and one which would promptly explain China's ravenous gold buying in recent years).

On Wednesday the Government Commission on legislative activities approved the bill on the ratification of the agreement to establish the BRICS reserve currencies pool. The ratification of this agreement will help Russia advance its monetary cooperation strategy, particularly in the development of privileged relations with its partners from BRICS, said the Russian government.

Source

19 Signs That American Families Are Being Economically Destroyed

The systematic destruction of the American way of life is happening all around us, and yet most people have no idea what is happening.  Once upon a time in America, if you were responsible and hard working you could get a good paying job that could support a middle class lifestyle for an entire family even if you only had a high school education.  Things weren’t perfect, but generally almost everyone in the entire country was able to take care of themselves without government assistance.  We worked hard, we played hard, and our seemingly boundless prosperity was the envy of the entire planet.  But over the past several decades things have completely changed.  We consumed far more wealth than we produced, we shipped millions of good paying jobs overseas, we piled up the biggest mountain of debt in the history of the world, and we kept electing politicians that had absolutely no concern for the long-term future of this nation whatsoever.  So now good jobs are in very short supply, we are drowning in an ocean of red ink, the middle class is rapidly shrinking and dependence on the government is at an all-time high.  Even as we stand at the precipice of the next great economic crisis, we continue to make the same mistakes.  In the end, all of us are going to pay a very great price for decades of incredibly foolish decisions.  Of course a tremendous amount of damage has already been done.  The numbers that I am about to share with you are staggering.  The following are 19 signs that American families are being economically destroyed…

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Iceland Considers Stripping Power to Create Currency From Banks

Still reeling from the economic catastrophe that struck in 2008, Iceland and its Parliament are debating a plan that would dramatically restructure the tiny nation’s monetary system by stripping commercial banks of the legal ability to create currency out of thin air — and handing that power exclusively to politicians and central bankers under what is being labelled a “sovereign money” system. The proposal to quash private bankers’ fractional-reserve system, where banks literally bring new currency into existence with government permission and then charge interest on it, is already making major waves. It is being described by analysts as everything from “radical” and “revolutionary” to a prescription for “an almost Soviet-style banking system.” Either way, the implications of the debate are enormous.

In a parliamentary report released on March 31, commissioned by the prime minister about the monetary idea, Chairman Frosti Sigurjónsson on Parliament’s Committee for Economic Affairs and Trade suggested that a “fundamental reform” of Iceland’s monetary system was needed. “Iceland, being a sovereign state with an independent currency, is free to abandon the present unstable fractional reserves system and implement a better monetary system,” explained MP Frosti, who authored the report. “Such an initiative must however rest on further study of the alternatives and a widespread consensus on the urgency for reform.”

The explosive 110-page report, entitled “Monetary Reform: A Better Monetary System for Iceland,” offers a great deal of educational material on the inherent flaws of the current fractional-reserve banking system. In essence, with full government backing, the existing monetary system literally allows commercial banks to create fiat currency out of nothing, based on the amount of deposits held by the commercial bank. The banks then charge customers interest payments on the currency that they created out of nothing. Countless analysts have blasted the existing system as a scam and a fraud that serves mostly to loot the public.

Of course, The New American magazine has been attempting to raise awareness of this system for decades — along with the inherent instability it produces, as well as how it allows government-backed bankers to get rich at public expense. The Icelandic report, if nothing else, should serve as a valuable educational tool to create more widespread public understanding of the systemically flawed system now in place across virtually the entire globe. The parliamentary document itself acknowledges that education on the existing system is necessary if it is ever going to be seriously reformed.

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Time US leadership woke up to new economic era

This past month may be remembered as the moment the United States lost its role as the underwriter of the global economic system. True, there have been any number of periods of frustration for the US before, and times when American behaviour was hardly multilateralist, such as the 1971 Nixon shock, ending the convertibility of the dollar into gold. But I can think of no event since Bretton Woods comparable to the combination of China’s effort to establish a major new institution and the failure of the US to persuade dozens of its traditional allies, starting with Britain, to stay out of it.

This failure of strategy and tactics was a long time coming, and it should lead to a comprehensive review of the US approach to global economics. With China’s economic size rivalling America’s and emerging markets accounting for at least half of world output, the global economic architecture needs substantial adjustment. Political pressures from all sides in the US have rendered it increasingly dysfunctional.

Largely because of resistance from the right, the US stands alone in the world in failing to approve the International Monetary Fund governance reforms that Washington itself pushed for in 2009. By supplementing IMF resources, this change would have bolstered confidence in the global economy. More important, it would come closer to giving countries such as China and India a share of IMF votes commensurate with their new economic heft.

Meanwhile, pressures from the left have led to pervasive restrictions on infrastructure projects financed through existing development banks, which consequently have receded as funders, even as many developing countries now see infrastructure finance as their principle external funding need.

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The Real Risk Of A Coming Multi-Decade Global Depression

Richard Duncan, author of The Dollar Crisis and The New Depression: The Breakdown Of The Paper Money Economy, isn't mincing words about the risks he sees ahead for the world economy.

Essentially, he sees the past 50 years of economic prosperity fueled by globalization and easy credit in serious danger of being unwound, as the doomed monetary policies currently being pursued by the word's central banks result in a massive multi-decade depression that spans the globe.

The first version of The Dollar Crisis, the hardback, came out in 2003, so I wrote it in 2002. And at that time, the dollar against gold was $300. So the dollar has lost more than 75% of its value since The Dollar Crisis was written, and I don’t think it’s going to stop here. I expect it to continue to lose value over the years and decades ahead.

But what we’re seeing is that the real theme of The Dollar Crisis was that the post-Bretton Woods international monetary system was fundamentally flawed because it couldn’t prevent trade imbalances between countries. And the US had developed an enormous trade deficit with the rest of the world and this blew the trade surplus countries like Japan and China into bubbles. And then, the dollars boomeranged back into the United States and blew it into a bubble, as well. I didn’t know when the housing bubble was going to pop in the US but I knew it would. And I wrote in The Dollar Crisis that when it did, we would have a severe global economic recession/depression that would involve a systemic banking sector crisis in the United States and necessitate trillion-dollar budget deficits and unorthodox monetary policy to prevent a Great Depression from occurring.

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Warren Buffett is Everything That’s Wrong With America

I think I’ve never understood the American – and international – fascination with money, with gathering wealth as the no. 1 priority in one’s life. What looks even stranger to me is the idolization of people who have a lot of money. Like these people are per definition smarter or better than others. It seems obvious that most of them are probably just more ruthless, that they have less scruples, and that their conscience is less likely to get in the way of their money and power goals.

America may idolize no-one more than Warren Buffett, the man who has propelled his fund, Berkshire Hathaway, into riches once deemed unimaginable. For most people, Buffett symbolizes what is great about American society and its economic system. For me, he’s the symbol of everything that’s going wrong.

Last week, Buffett announced a plan to merge a number of ‘food’ companies in a deal he set up with Brazilian 3G Capital. For some reason, they all have German names (I’m not sure why that is or what it means, if anything): Heinz, Kraft, Oscar Mayer. Reuters last week summed up a few of the ‘foods’ involved:

His move on Wednesday to inject Velveeta cheese, Jell-O, Lunchables, Oscar Mayer wieners, and Kool-Aid into his portfolio, stuffs an already amply supplied larder. The additions came from the acquisition of Kraft Foods Group Inc by H.J. Heinz Co, which is controlled by 3G Capital and Buffett’s Berkshire Hathaway. His larder already included everything from Burger King’s Triple Whopper burgers, Coca-Cola soft drinks and Tim Horton donuts to See’s Candies and Dairy Queen ice cream Blizzards, as well as such Heinz brands as Tomato Ketchup, Ore-Ida fries, bagel bites and T.G.I. Friday’s mozzarella sticks.

Isn’t it curious to see that once people have more than enough to eat, they sort of make up for that by drastically lowering the quality of their food, like there’s some sort of balance that needs to be found? Give them more than plenty, and they’ll start using it to poison themselves.

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What Happens After A Mega Corporation Raises Its Workers' Wages

Earlier today, McDonalds announced that it would become the latest company to raise hourly pay for 90,000 workers by more than 10% and add benefits such as paid vacation for its restaurant workers. Specifically, starting in July, MCD will pay at least $1 per hour more than the local legal minimum wage for employees at the roughly 1,500 restaurants it owns in the U.S. The increase will lift the average hourly rate for its U.S. restaurant employees to $9.90 on July 1 and more than $10 by the end of 2016, from $9.01 currently. Finally, McDonald’s also will enable workers after a year of employment to accrue up to five days of paid time-off annually.

With this announcement, McDonalds joins the following companies which have likewise raised minimum wages in recent months:

• WalMart
• Aetna
• Gap
• Ikea
• Target
• TJ Maxx

Surely this is great news for the workers of these above companies, as some of the massive wealth accrued by corporate shareholders may be finally trickling down to the lowliest of employees, right? As it turns out, the answer is far from clear.

As the following WSJ story released overnight, here is what happens when mega-corporations such as WalMart and McDonalds, whose specialty are commoditized products and services and have razor thin margins, yet which try to give an appearance of doing the right thing, raise minimum wages. They start flexing their muscles, and in the process trample all over the companies that comprise their own cost overhead: their suppliers and vendors.

Take the case of WalMart: the world's biggest retailer "is increasing the pressure on suppliers to cut the cost of their products, in an effort to regain the mantle of low-price leader and turn around its sluggish U.S. sales."

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The Stock Market In 2015 Is Starting To Look Remarkably Similar To The Stock Market In 2008

Are we watching a replay of the last financial crisis?  Over the past six months, the price of oil has collapsed, the U.S. dollar has soared, and a whole bunch of other patterns that we witnessed just before the stock market crash of 2008 are repeating once again.  But what we have not seen yet is the actual stock market crash.  So will there be one this year?  In this article, I am going to compare the performance of the Dow Jones Industrial Average during the first three months of 2008 to the performance of the Dow Jones Industrial Average during the first three months of 2015.  As you will see, there are some striking similarities.  And without a doubt, we are overdue for a major market downturn.  The S&P 500 has risen for six years in a row, but it has never had seven up years consecutively.  In addition, there has not even been a 10 percent stock market “correction” is almost three and a half years.  So will stocks be able to continue to defy both gravity and the forces of economic reality?  Only time will tell.

Below is a chart that shows how the Dow Jones Industrial Average performed during the first three months of 2008.  It was a time of increased volatility, but the market pretty much went nowhere.  This is typical of what we see in the months leading up to a market crash.  The markets start getting really choppy with large ups and large downs…

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