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Daily Digest 2/27 - Fiscal Bloodbath Coming Soon, Don't Give Up Your Gold

Monday, February 27, 2017, 11:50 AM

Economy

Giant Fiscal Bloodbath Coming Soon: David Stockman (pinecarr)

Trump is inheriting a built-in deficit of $10 trillion over the next decade under current policies that are built in. Yet, he wants more defense spending, not less. He wants drastic sweeping tax cuts for corporations and individuals. He wants to spend more money on border security and law enforcement. He’s going to do more for the veterans. He wants this big trillion dollar infrastructure program. You put all that together and it’s madness.

Stockman: "After March 15 Everything Will Grind To A Halt" (drbost)

“I think what people are missing is this date, March 15th 2017. That’s the day that this debt ceiling holiday that Obama and Boehner put together right before the last election in October of 2015. That holiday expires. The debt ceiling will freeze in at $20 trillion. It will then be law. It will be a hard stop. The Treasury will have roughly $200 billion in cash. We are burning cash at a $75 billion a month rate. By summer, they will be out of cash. Then we will be in the mother of all debt ceiling crises. Everything will grind to a halt. I think we will have a government shutdown. There will not be Obamacare repeal and replace. There will be no tax cut. There will be no infrastructure stimulus. There will be just one giant fiscal bloodbath over a debt ceiling that has to be increased and no one wants to vote for.”

The Jobs Americans Do (jdargis)

In 1950, service work made up about 40 percent of working-class labor in the United States. By 2005, that share had climbed to 56 percent, according to data from a 2013 analysis by the economists David Autor at M.I.T. and David Dorn at the University of Zurich. The available evidence, Autor said, suggests that this trend has continued “very rapidly” over the last decade, increasing the share of American workers who work in the service industries.

The World’s Most Radical Experiment in Monetary Policy Isn’t Working (Adam)

During Japan’s go-go 1980s, Hiromi Shibata once blew a month’s salary on a cashmere coat, wore it a few times, then retired it. Today, her daughter’s idea of a shopping spree is scrounging through her mom’s closet in Shizuoka, a provincial capital.

Republicans’ ‘real-live experiment’ with Kansas’s economy survives a revolt from their own party (jdargis)

Brownback, a Republican who once called his tax policy a “real-live experiment” with conservative principles, had vetoed a bill that would have repealed the most important provisions of his overhaul. While the state House voted to override the veto earlier in the day, proponents of the bill came up three votes shy of the two-thirds majority needed in the Senate. Fifteen Republican senators voted to override the veto, while 16 voted to sustain it.

US Mint Releases New Fort Knox “Audit Documentation”. The First Critical Observations. (Ivo M.)

It should be clear that the US Treasury (owner of the gold), US Mint (main custodian), Federal Reserve Bank Of New York (second custodian), and the Office Inspector General of the US Treasury (head auditor), are reluctant to disclose information about the audits of the gold at the four largest depositories that store over 8,000 fine metric tonnes. Consider that the most seasoned gold analysts aren’t even aware this gold is audited.

Is The Renewable Transition Harming The U.S. Economy? (Michael K.)

Further details concerning 2016 show that renewable energy sources have also spiked. Last year, the U.S. created 22 gigawatts of new renewable-energy-generating capacity. 12.5 of these gigawatts were generated from the solar industry. The wind industry contributed 8.5 gigawatts, and the remainder was comprised of additions from hydropower, biomass, biogas and waste-to-energy.

Don't Give Up Your Gold (Tiffany D.)

However, when there is uncertainty in the market, shaky economic growth or geopolitical discord, gold shines as a safe haven in the storm. When stocks are getting hammered, investors will run to gold as a safe way to store some of their greenbacks rather than just converting it to cash and stuffing it under their mattresses.

Gold & Silver

Click to read the PM Daily Market Commentary: 2/24/17

Provided daily by the Peak Prosperity Gold & Silver Group

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

6 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4145
Taxes are on the table as push for California road funding inten

Shanshui Cement defaults as Chinese firms face rising repayment ...

Nasdaq-3 hours ago
Over 5.5 trillion yuan of corporate debts are due in 2017, meaning Chinese companies are under immense repayment pressure, as tighter monetary policies ...

Devaluation becoming inevitable for falling yuan

Nikkei Asian Review-11 hours ago
TOKYO -- Henry Paulson, U.S. secretary of the treasury under President George W. Bush, frequently mentions Wang Qishan, China's anti-corruption czar and a ...

Coutts changes T&Cs to allow for negative interest rates

Citywire.co.uk-1 hour ago
Private bank Coutts has written to clients informing them of a change in terms and conditions to allow for negative interest rates on some of its accounts.

Lower House approves record ¥97.45 trillion budget

The Japan Times-6 hours ago
The Lower House on Monday approved a record ¥97.45 trillion budget for fiscal ... Excluding debt-servicing costs, a record ¥73.93 trillion is earmarked for policy ...

S. Korea's Household Dbt-to-GDP Ratio Reached 90% As of Last June

BusinessKorea-8 hours ago
South Korea's household debt-to-GDP ratio showed an increase of 7.7 ... credit balance increased 11.7% and reached 1,344.3 trillion won in South Korea.

Moody's: Rising Household Debt Nagative to S. Korea's Sovereign ...

KBS WORLD Radio News-7 hours ago
The Bank of Korea said last week that the country's household debt hit an all-time high of one-point-three quadrillion won last December, up 141 trillion won, ...

A disaster waiting to happen as speculators risk it all

The West Australian-15 hours ago
The catalyst for the sharp rebound in February 2016 was a $US1 trillion spike ... to fight serial asset-price bubbles and wean the country off debt-fuelled growth.

In Puerto Rico, pensions' decline pits retirees against lenders

Reuters-3 hours ago
... $70 billion in debt. Public pensions, which owe $45 billion in benefits, are also virtually insolvent after generations of lawmakers ignored growing funding gaps ...

Taxes are on the table as push for California road funding intensifies

Sacramento Bee-8 hours ago
Officials point to tens of billions of dollars in road maintenance and repair .... to shift the cost of paying Proposition 1B debt service away from the general fund.

Pennsylvania may urge state workers to retire early to cut cost

Philadelphia Business Journal-3 hours ago
... millions to the state's more than $60 billion in unfunded pension debts. ... The incentive would affect only employees who get their pensions through the State ...

 

Nate's picture
Nate
Status: Platinum Member (Offline)
Joined: May 6 2009
Posts: 590
Tech workers feel poor in Silicon Valley's wealth bubble

"I didn’t become a software engineer to be trying to make ends meet,” said a Twitter employee in his early 40s who earns a base salary of $160,000. It is, he added, a “pretty bad” income for raising a family in the Bay Area.

Silicon Valley’s latest tech boom has caused rents to soar over the last five years. The city’s rents, by one measure, are now the highest in the world.

The prohibitive costs have displaced teachers, city workers, firefighters and other members of the middle class, not to mention low-income residents.

Now techies, many of whom are among the highest 1% of earners, are complaining that they, too, are being priced out.

https://www.theguardian.com/technology/2017/feb/27/silicon-aa-cost-of-living-crisis-has-americas-highest-paid-feeling-poor

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 3072
HAM sandwich

As Adlevy wrote recently about the red-hot Toronto real estate market, it's all about the HAM (Hot Asian Money).

I was just back down in Palo Alto (the heart of Silicon Valley) on Saturday. The "reality distortion field" that area lives in is alive and well.

$160,000 was a challenging salary to support a family on when I lived down there 5 years ago. With home prices and rents even more stratospheric now -- the median 3-bedroom rental there is $5,900/mo -- I'm sure it has only gotten harder.

The ever-increasing costs are due to the supremacy of the current marginal buyer -- that's why I wrote The Marginal Buyer Holds The Pin That Pops Every Asset Bubble. Silicon Valley's marginal buyer is the foreign investor looking to move capital out of his/her home country and park it into a 'safe' US investment. These investors (primarily from Asia currently) put down all-cash offers on every home that hits the market, usually well in excess of the listing price.

It's nearly impossible to compete with these guys, which is why were at the stunning point where even the tech workers (the elite of Silicon Valley workers) are getting priced out.

The HAM buyers are an entirely different animal. They're typically individuals who have benefitted in their native countries from the huge amount of money printing the world's central banking cartel has conducted over the past 7 years. Now, they're beginning to worry that capital controls, austerity, confiscation, civil unrest, etc may indeed be in their future. So they're sending as much of their money as they can somewhere safer -- while they still can.

They're not doing this to get a nice annual return on their investment. They're doing it as an insurance policy. So they're extremely price-insensitive. So what if Palo Alto prices are at a bubble high now? If they ultimately drop in half, the HAM investors still has half of their money stashed in the US. That's a heck of a lot better than zero.

This crazy run-up is going to continue until the HAM money slows. Due to capital controls, Vancouver-style taxes on foreign buyers, a global market meltdown -- at this point, it could be any or all of these.

But one thing I can say with certainty. Those living in Palo Alto and the surrounding cities are still drinking the Kool-Ade heavily. To them, this is just the way the world works. They feel completely justified having made millions in paper gains by merely living in their houses over the past decade. The idea of a market correction to them is about as likely as an alien invasion. I spoke to several homeowners on Saturday and none of them -- not even the ones working in the financial industry -- feel any concern about lower prices being in their future.

 

Uncletommy's picture
Uncletommy
Status: Platinum Member (Offline)
Joined: May 4 2014
Posts: 569
The nose bleed section?

Thanks, Adam. Hot money always finds a cool place to land. Nice summary if us little schmucks really care! Foreign buyer tax has slowed things down a bit in Vancouver, but the smart money knows where to look even if Chinese is your first language. 

http://www.huffingtonpost.ca/2017/02/02/9-charts-canadian-housing-wtf_n_14441902.html

Wonder where the poor people and seniors go when they sell in Vancouver or other over-priced homes in Canadian cities? Great place if you ski and don't mind the occasional Grizzly bear.

http://www.cbc.ca/news/canada/calgary/bow-valley-real-estate-sales-good-year-1.3981762

Realtors say 2016 housing sales along the Bow Valley between Harvie Heights and Exshaw, showed some of the strongest numbers in more than a decade.

Christopher Vincent with Sotheby's International Realty says there were 589 sales listed on MLS last year in the area which includes Canmore. 

Most involved houses and condo under a million dollars.

"A lot of it is people getting ready to retire, so they've been in Calgary and Edmonton for years. That's the major centres that are feeding our purchases, and those people, they've probably had something smaller here for a number of years, they've now sold their home in the city," said Vincent.

"They're purchasing something bigger here and getting ready for their retirement years."

lambertad's picture
lambertad
Status: Silver Member (Offline)
Joined: Aug 31 2013
Posts: 179
Sizing up for retirement?

"They're purchasing something bigger here and getting ready for their retirement years."

Maybe they are planning for their children to move back in with them when SHTF..... just kidding. 

 

blackeagle's picture
blackeagle
Status: Silver Member (Offline)
Joined: May 16 2013
Posts: 223
Capital control

Something I learned yesterday.

One of our customers told me that capital control is a reality when you transfer USD. Not Euros. Here is the thing: imagine you have two USD accounts in Europe. When you move anything above 25000$ from one account to another, the bank immediately freezes the money and ask you for proof of "cleanliness". Once you provide copies of invoices and contract, the money is released in less than 10 minutes.

But when you do the same operation in Euros, you don't have this hassle.

This happens to him with Deutch Bank regularly as he is mostly paid in USD from his customers around the world. He is thinking asking to be paid in Euros instead of USD.

Is it something that is related to some agreement between the US government and DB? or something more generalized for the USD that all banks must follow?

 

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