Daily Digest

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Daily Digest 4/2 - Financial Regulation In Disarray, How Mainstream Economic Theories Regularly Miss The Mark

Saturday, April 2, 2016, 9:03 AM


Too much of a good thing (richcabot)

The last year has seen a slight dip in aggregate profits because of the high dollar and the effect of the oil price on energy firms. But profits are at near-record highs relative to GDP (see chart 1) and free cash flow—the money firms generate after capital investment has been subtracted—has grown yet more strikingly. Return on capital is at near-record levels, too (adjusted for goodwill). The past two decades have seen most firms make more money than they used to. And more firms have become very profitable.

GAO Has Been Telling Congress that Financial Regulation Is in Disarray for 20 Years (richcabot)

And what did Congress do after the 2008 crash to fix the problem? It handed even greater oversight powers to the regulator that didn’t see the crash coming and that had defied Congress by secretly funneling over $13 trillion in below-market-rate loans to teetering Wall Street banks – including at least one that was insolvent at the time (Citigroup). We’re talking about the Federal Reserve – the agency that still has no Vice Chairman for Supervision of Wall Street banks as required under the homage-to-Wall-Street law known as Dodd-Frank, passed over five years ago.

Fraud Key Profit Center for Wall Street: William Black (pinecarr)

This means that when banks donate to top candidates in both parties, they are donating fraudulent banker profits. So, both the political system and the financial system are based on fraud. Can fraud destabilize the entire system? Dr. Black, who is also a professor of both economics and law at UMKC, says, “Obviously, it is the worst possible thing to do in terms of stability. The way you rig these things doesn’t just make you wealthy, it creates asset bubbles, massive asset bubbles, the biggest in history, and it’s not just in the United States. The biggest asset bubble right now has to be in China. The estimated loss for the United States over the course for ‘The Great Recession’ (or 2008 meltdown) is $24.3 trillion. This has been a catastrophe for much of the world.”

How Mainstream Economic Theories Regularly Miss The Mark (Taki T.)

And that is when things go horribly wrong. Applying blanket policies on heterogeneous groups, trying to force behaviours that contradict man’s evolutionary traits, positive or otherwise, enforcing one-size-fits-all rules to tame the inherent unpredictability of human nature, it’s all basically tantamount to hubris. As a direct result, we have seen the intended and unintended consequences of these grand designs wreak havoc with the lives of law abiding citizens, entire societies splinter apart and once-great nations razed to the ground. Toxic ideas, cultivated in this environment of delusional omniscience and absolute certainty, fostered by reckless arrogance, soon metastasised to politics and became the law of the land: Central planning, state monopolies, interventionism, they are all a thorny rose by any other name.

Gas Pipeline Uses 160 Eminent Domain Suits To Get Property In 3 States

Florida satisfies almost two-thirds of its power needs with natural gas. Coal is a distant second at around 22 percent, making gas the major source of power for the state. The numbers are not as high for Georgia and Alabama, but natural gas is a significant component of the energy source mix there as well.

Equal Weighting Is the Hardest Part (Tiffany D.)

When it comes to diversifying your entire investment portfolio, my friends Jeff Opdyke and Ted Bauman tell you to use gold and collectibles to go beyond financial investments. That’s good advice. Some of my money is in gold, and my collectibles portfolio includes gold coins. And then it’s a bit unconventional. I collect antique gadgets — telephones, cameras, typewriters, gramophones and radios from the early 1900s.

Obama-Backed Green Energy Company Goes Bankrupt — After Getting Billions From Taxpayers (Phil H.)

Abengoa, which Bloomberg has referred to as Spain’s “Teetering Sun King,” got $2.7 billion in DOE loan guarantees since 2010 for two solar energy projects and a massive cellulosic biofuels plant that has yet to announce production levels or sell any product it produces. These projects were financed with subsidized loans from the Treasury Department’s Federal Financing Bank (FFB).

A plan to hide humanity from hostile aliens (blackeagle)

“As a consequence, it might take us less than a human life span to find out whether or not there are extraterrestrial astronomers who have found the Earth,” MPS astronomer René Heller recently said. “They may have detected Earth’s biogenic atmosphere and started to contact whoever is home.”

However, a hostile race of aliens could use that information to realize Earth is in a Goldilocks-perfect position for liquid water. Assuming these creatures had much better space-faring technology than humanity, they could then jump in their starships and come capture the place for themselves.

Gold & Silver

Click to read the PM Daily Market Commentary: 4/1/16

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."


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Quote of the day on Social Security

Social Security Woes Deepen As Talk Of Fix Recedes

Nasdaq-15 hours ago
In 2029, the $2.8 trillion trust fund will hit zero. ... While the government spent those funds, it recorded a debt payable to Social Security -- with interest. Thus, the ...
"The trust fund represents the surplus tax revenues that Social Security collected from 1984 to 2009. While the government spent those funds, it recorded a debt payable to Social Security -- with interest."



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Re:Social Security Woes Deepen As Talk Of Fix Recedes

Its odd that the Treasure (Debt to the Penny) shows the debt in the SS fund continues to grow, yet SS outlays are larger than collections from the Payroll tax. I don't think Gov't Pension contribution is large enough to match the increases to the Intergov't fund.

My understanding is that the Payroll tax will rise after the election. I believe its going to be increase by 2% (not sure if really 4% - 2% for workers + 2% for employers). The increase will help kick the can a bit further. Although a 4% tax increase is likely to send unemployment up.



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Rickards interview

Jim Puplava interviews Jim Rickards to discuss his new book: The New Case for Gold



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Wikileaks: IMF plan to threaten Greece,Europe with $ catastrophe

From Zerohedge, http://www.zerohedge.com/news/2016-04-02/wikileaks-reveals-imf-plan-cause-credit-event-greece-and-destabilize-europe

This morning we got another confirmation of how supernational organizations "plan" European crises in advance to further their goals, when Wikileaks published the transcript of a teleconference that took place on March 19, 2016 between the top two IMF officials in charge of managing the Greek debt crisis - Poul Thomsen, the head of the IMF's European Department, and Delia Velkouleskou, the IMF Mission Chief for Greece.

...In the transcript, the IMF staffers are caught on tape planning to tell Germany the organization would abandon the troika if the IMF and the commission fail to reach an agreement on Greek debt relief.

More to the point, the IMF officials say that a threat of an imminent financial catastrophe as the Guardian puts it, is needed to force other players into accepting its measures such as cutting Greek pensions and working conditions, or as Bloomberg puts it, "considering a plan to cause a credit event in Greece and destabilize Europe."

According to the leaked conversation, the IMF - which has been pushing for a debt haircut for Greece ever since last August's 3rd Greek bailout - believes a credit event as only thing that could trigger a Greek deal; the "event" is hinted as taking place some time around the June 23 Brexit referendum.

As noted by Bloomberg, the leak shows officials linking Greek issue with U.K. referendum risking general political destabilization in Europe.

The leaked transcript reveals how the IMF plans to use Greece as a pawn in its ongoing negotiation with Germany's chancelleor in order to achieve the desired Greek debt reduction which Germany has been pointedly against: in the leak we learn about the intention of IMF to threaten German Chancellor Angela Merkel to force her to accept the IMF's demands at a critical point.


thc0655's picture
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There you go again with those conspiracy theories

Or is it conspiracy FACTS!

Time2help's picture
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Quick question

Black Lives Matter Activist: "If Trump Wins We Will Incite Riots Everywhere" (ZH)

So after the synthetic RaceWarTM plays out, will we be issued brand new green and white license plates?

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Stan Druckenmiller: The Most Unsustainable Situation I Have Seen

From ZH*, "Stanley Druckenmiller: "This Is The Most Unsustainable Situation I Have Seen Ever In My Career", @ http://www.zerohedge.com/news/2016-04-03/stanley-druckenmiller-most-unsustainable-situation-i-have-seen-ever-my-career

For 25 years as a hedge fund manager, Druckenmiller compounded money at an annualized rate of return of 30%. Incredibly, he did it without a single down year.

Druckenmiller has a dire warning for all of us. One that requires action.

There is nothing for Druckenmiller to gain from providing this warning. He isn’t talking his book or trying to gain investor support — he isn’t promoting anything. He doesn’t even have a political agenda.

He is spending his own time and money to try to bring this issue to light because he believes it is crucial for the United States.

Druckenmiller simply believes that America is heading for a disaster, and he is trying to use his high-profile position to get people motivated to stop it.


The disaster that Druckenmiller sees coming for the United States is all about changing demographics and entitlement spending. They don’t add up to a sustainable situation.

In 1940, entitlement payments, which include everything from disability payments to Social Security to Medicare, amounted to just over 20% of annual government spending in the United States.

Today, entitlement spending has swelled to nearly 70% of the annual federal budget.

Things are about to get a whole lot more complicated. The 20-year baby boom that took place after World War II is now beginning to result in a retiree boom.

For context, Druckenmiller points out that in 2030, the average age of an American citizen will be older than the average age of a resident of Florida today.

This demographic trend is going to create an entitlement spending catastrophe.

The way the system works, the current workforce provides the tax revenue to support the current senior population. A huge rise in the retiree population relative to the number of people working results in a funding dilemma.

Since 1980, the number of working-age people the country has had has outnumbered those age 65 and over by a count of 5-to 1.

The country has had enough workers generating tax revenue to support the number of retirees.

By 2030, that ratio is going to drop to 2.5-to-1.

By 2029, there will be 11,000 new seniors arriving every day and only 2,000 new adults being added to the workforce to pay for them.

There is just no way that the workforce at that time is going to be able to fund the entitlements of these seniors.

* By Jody Chudley, originally posted on the Daily Reckoning

ejhr's picture
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His ideas are a mixture of facts and falsities.

I believe his idea that a major crash is coming is right.

His idea that the government [federal!] cannot pay pensions etc in future is false.

I think it is widely understood that the Fed can NEVER go broke in its dollars. The government can pay for pensions etc [even the military!] forever into the future. No saving  is required, nor borrowing necessary to fund its expenditures. No workforce will be called upon to fund entitlements. We pay a lot of entitlements today yet we are having no trouble paying them. There are already 10,000 seniors retiring today every day.

Taxes pay nothing towards expenditure. That's how the system works. It won't change anytime soon.

Tax simply withdraws your spending power from the economy. It's a cost. It's not a source of Federal money.

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