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Every Bubble Eventually Finds its Pin

Every Bubble Eventually Finds its Pin

The transfer of wealth from workers and savers to governments and big banks continued this week with Swiss-like precision.  The process is both mechanical and subtle.  Here in the USA the automated elegance of this ongoing operation receives little attention.

NFL football.  EBT card acceptance at Del Taco.  Adam Schiff’s impeachment extravaganza.  You name it.  Bread and circuses like these – and many others – offer the American populace countless opportunities for chasing the wild goose.

All the while, and with little fanfare, debts pile up like deadwood in Sequoia National Forest.  These debts, both public and private, stand little chance of ever being honestly repaid.  According to the IMF, global debt –  both public and private – has reached an all-time high of $188 trillion.  That comes to about 230 percent of world output.

Certainly, some of the private debt will be defaulted on during the next credit crisis and depression.  But when it comes to the public debt, governments do everything they can to prevent an outright default.  Central banks crank up the printing press and attempt to inflate it away.

After Nixon temporarily suspended the Bretton Woods Agreement in 1971, the money supply could be expanded without technical limitations.  This includes issuing new debt to pay for government spending above and beyond tax receipts.  Hence, since 1971, government directed money supply inflation has been the standard operating procedure in the U.S. and much of the world.

Downright Disgraceful

Expanding the money supply has the effect of dissipating wealth from the currency.  The process allows governments, which are first in line to spend this newly created money, a back door into your bank account.  Without levying taxes, they get access to your wealth and future earnings and leave you with money of diminished value.

…click on the above link to read the rest of the article…

“The Fed Hasn’t Expanded Its Balance Sheet At This Speed Since The Financial Crisis”

“The Fed Hasn’t Expanded Its Balance Sheet At This Speed Since The Financial Crisis”


The Fed’s balance sheet is expanding at a faster rate than during QE1, QE2 or QE3.


* * *

Submitted by Howard Wang of Convoy Investments

Has QE4 begun? The $1.2 trillion per month hole in the repo market.

In the two months since the repo market blow up, the Fed has been making repo open market operation purchases at a rate of $1.2 trillion per month.

Below is the monthly rate of Fed open market purchases since 2000. In the era of QE and ample reserves, the Fed has not touched open market operations for more than 10 years before 2019. Prior to that, the highest rate of open market operations we saw in history was roughly $300 billion/month briefly after the September 11 attacks, with long‐term averages of around $50 billion/month. To say the current rate of $1.2 trillion/month is unprecedented would be an understatement

The planned QE unwinding has hit a brick wall and the Fed balance sheet is now expanding at a rate matched only briefly by QE1, and faster than QE2 or QE3.

Is this a temporary rescue of the repo market or the start of a sustained QE4? To answer that question, we must look at how monetary policy has evolved since the Financial Crisis.

1. Pre‐2008, scarce reserves regime:

  • Total reserves: small (<$50 billion)
  • Excess reserves: none
  • Interest on excess reserves: 0%
  • Managing interest rates: to increase rates, Fed sells securities on the open market and reduces supply of reserves, vice versa to decrease rates.
  • Banks: regulations are lax and risk tolerance is high
  • Treasury department: carefully manages its cash flows to not impact the total reserve levels.

2. 2008‐2019, ample reserves regime:

  • Total reserves: large ($trillions)
  • Excess reserves: large ($trillions)
  • Interest on excess reserves: positive at around Fed funds rate

…click on the above link to read the rest of the article…

Is Inflation Really Under Control

Is Inflation Really Under Control

Recently, analysts have been discussing the pros and cons of using negative interest rates to keep the U.S. economy growing.  Despite this, Fed Chairman Jerome Powell has said that he does not anticipate the Federal Reserve will implement a policy of negative interest rates as it may be detrimental to the economy.  One argument against negative interest rates is that they would squeeze bank margins and create more financial uncertainty. However, upon examining the actual rate of inflation we are likely already in a ‘de facto’ negative ­­interest rate environment. Multiple inflation data sources show that actual inflation maybe 5%. With the ten year Treasury bond at 1.75%, there is an interest rate gap of – 3.25%. Let’s look at multiple inflation data points to understand why there is such a divergence between the Fed assumptions that inflation is under control versus the much higher rate of price hikes consumers experience.

In October, the Bureau of Labor Statistics (BLS) reported that the core consumer price index (CPI) grew by 2.2% year over year.  The core CPI rate is the change in the price of goods and services minus energy and food.  Energy and food are not included because they are commodities and trade with a high level of volatility.  However, the Median CPI shows a ten year high at 2.96% and upward trend as we would expect, though it starts at a lower level than other inflation indicators. The Median CPI excludes items with small and large price changes. 

Source: Gavekal Data/Macrobond, The Wall Street Journal, The Daily Shot – 11-29-19

Excluding key items that have small and large price changes is not what a consumer buying experience is like. Consumers buy based on immediate needs. When a consumer drives up to a gas pump, they buy at the price listed on the pump that day. 

Costs Are Spiraling Out of Control

Costs Are Spiraling Out of Control

And how do we pay for these spiraling out of control costs? By borrowing more, of course. 

If we had to choose one “big picture” reason why the vast majority of households are losing ground, it would be: the costs of essentials are spiraling out of control. I’ve often covered the dynamics of stagnating income for the bottom 90%, and real-world inflation, i.e. a decline in purchasing power. 

But neither of these dynamics fully describes the relentless upward spiral of the cost basis of our economy, that is, the cost of big-ticket essentials: housing, education and healthcare.

The costs of education are spiraling out of control, stripping households of income as an entire generation is transformed into debt-serfs by student loan debt. The soaring costs of healthcare are a core driver of higher costs in the education complex (and government in general), and to cover these higher costs, counties raise property taxes, which add additional cost burdens to households and enterprises as rents rise. 

Rising rents push the cost structure of almost every enterprise and agency higher.

Then there’s the asset inflation created by central bank ZIRP (zero interest rate policy) which has inflated a second echo-bubble in housing that has pushed home ownership out of reach of many, adding demand for rental housing that has pushed rents into the stratosphere in Left and Right Coast cities.

The increasing dominance of monopolies and cartels has eliminated competition in sector after sector. Monopolies and cartels skim immense profits even as the value, quality and quantity of their products and services decline: The U.S. Only Pretends to Have Free Markets From plane tickets to cellphone bills, monopoly power costs American consumers billions of dollars a year.

Thanks to their political influence, monopolies and cartels have legalized looting, raising prices and evading anti-trust regulations because they can pay whatever it takes in our pay-to-play political system.

…click on the above link to read the rest of the article…

France Grinds to a Halt in Massive Strike

France Grinds to a Halt in Massive Strike

Hundreds of thousands of lawyers, teachers, students and air-traffic controllers protest pension Macron’s pension reform

Cities Paralyzed

French president Emmanuel macron is back in the hot seat over reform proposals. Over 800,000 protesters have taken to the streets in a Massive Strike that has paralyzed cities.

Cities across France were paralyzed by a massive public transport strike against a planned overhaul of France’s pensions system, in a test of President Emmanuel Macron’s resolve to modernize the economy.

Trains, including the high-speed line between Paris and London, subways and buses were severely curtailed if not halted altogether. Hundreds of flights were canceled. Many schools, and nurseries remained closed, while several museums, including the Louvre, said parts of their collections might not open. Even the Eiffel Tower was closed.

About 806,000 protesters—including lawyers, teachers, students and air-traffic controllers—hit the streets across the country, according to the French interior ministry. Unions warned the strike could last days and become one of the biggest in France in over two decades.

Mr. Macron wants to extend the number of years that people are required to work before collecting their pensions—now set at 43 years—rather than raising the age of retirement of 62 years old for all workers. That retirement age remains lower than in most other OECD group of rich nations. Under the plan, some people retiring before 64 could receive a lower pension.

Mr. Macron also wants to consolidate France’s 42 different retirement plans—and their special benefits—into one universal system that he says would be more fair. Civil servants, in particular, fear they may lose advantages they have compared to private sector employees.

Yellow-Vest Movement

Recall that the yellow vest protests went on for months.

On December 10, 2018 I wrote Macron Attempts to Placate Yellow Vest Protesters With Free Money.

…click on the above link to read the rest of the article…

Inflation Is Coming: All the Trends That Were Deflationary Are Slowly Going in Reverse

Inflation Is Coming: All the Trends That Were Deflationary Are Slowly Going in Reverse

But of all potential economic outcomes, the one least anticipated and least priced in, is an uptick in inflation.

Investing is all about probabilities. If the perceived odds of an event are high, certain securities will be priced based on those expected probabilities. The corollary is that when an event is perceived as almost impossible, securities do not price in any chance of it occurring. If that event does occur, all sorts of securities need to re-price—often quite rapidly. I like to spend my time pondering what potential events the market completely ignores. Of all potential economic outcomes, the one that is least anticipated and least priced in, is an uptick in inflation.

It is said that generals always fight the last war. In terms of macro-portfolio wars, Japan’s experience with deflation colors all views. This seems odd to me because we have over two millennia of history showing inflation and currency debasements to be universal constants, with one outlier in Japan. The question is if Japan is the new normal or a true outlier?

Academics have studied the causes and effects of inflation ever since emperors and kings fixated on halting its effects. Despite a massive body of work, there is little agreement amongst experts on the causes of inflation. Since I tend to ignore “experts,” let me start by giving you the Kuppy definition of inflation. “Inflation is when too much of a certain currency chases a scarce resource and pushes its price higher when defined in terms of that currency.”

Using that definition, we’ve actually had rather dramatic inflation over the past decade—it just hasn’t shown up yet in the core consumer goods that central bankers are often concerned about.

…click on the above link to read the rest of the article…

Himalayan glaciers that supply water to a billion people are melting fast

Himalayan glaciers that supply water to a billion people are melting fast

Preface. The Himalayan glaciers that supply water to a billion people are melting fast, already 30% has been lost since 1975.

Adding to the crisis are the 400 dams under construction or planned for Himalayan rivers in India, Pakistan, Nepal, and Bhutan to generate electricity and for water storage.  The dams’ reservoirs and transmission lines will destroy biodiversity, thousands of houses, towns, villages, fields, 660 square miles of forests, and even parts of the highest highway of the world, the Karakoram highway. The dam projects are at risk of collapse from earthquakes in this seismically active region and of breach from flood bursts from glacial lakes upstream. Dams also threaten to intensify flooding downstream during intense downpours when reservoirs overflow (IR 2008, Amrith 2018).

Since the water flows to 16 nations, clearly these dams could cause turmoil and even war if river flows are cut off from downstream countries.  Three of these nations, India, Pakistan, and China, have nuclear weapons.

It’s already happening. After a terrorist attack that killed 40 Indian police officers in Kashmir, Indiadecided to retaliate by cutting off some river water that continues on to Pakistan, “adding an extra source of conflict between two nuclear-armed neighbors”. Pakistan is one of the most water-stressed countries in the world with seriously depleted underground aquifers and less storage behind their two largest dams due to silt (Johnson 2019).

***

Wu, K. 2019. Declassified spy images show Earth’s ‘Third Pole’ is melting fast.  Accelerating ice melt in the Himalayas may imperil up to a billion people in South Asia who rely on glacier runoff for drinking water and more. PBS.org

…click on the above link to read the rest of the article…

Fake News By Omission :  The Mass Media’s Cowardly Distortion Tool

Fake News By Omission :  The Mass Media’s Cowardly Distortion Tool

Western mass media have continued their conspiracy of silence on the OPCW scandal, making no significant mention yet this month of the leaks which have been emerging from the Organisation for the Prohibition of Chemical Weapons indicating that the US, France and UK bombed Syria last year in retaliation for a chemical weapons attack which probably never occurred, and that OPCW leadership helped cover it up.

If you haven’t been following the still-unfolding OPCW scandal, you can catch up quickly by watching this seven-minute video.


A leaked email accuses the OPCW of doctoring a report to suit the US government’s justification for its illegal bombing of Syria in April 2018. I explain the scandal mainstream media is trying to supress:


Mass media’s silence on this hugely important story is noteworthy not just because it has far-reaching consequences for the future of the Syrian regime change agenda and for public trust in US-led war narratives, not just because the leaks have already been independently authenticated by the mainstream press, and not just because scandalous revelations about powerful entities are normally the sort of incendiary click fodder that makes a mainstream news editor hasten behind his desk to hide his arousal. It is also noteworthy because we’re being told by people in the know that even more leaks are coming.

“Much more to come about the censoring of the facts on Douma at the Poison Gas Watchdog OPCW,” tweeted journalist Peter Hitchens earlier today. “It really is time that the Grand Unpopular Press and the BBC, realised this is a major story. Are they too proud to admit they might have been wrong?”

…click on the above link to read the rest of the article…

China Will Use Millions Of Zimbabwe Citizens To Improve Facial Recognition Accuracy

China Will Use Millions Of Zimbabwe Citizens To Improve Facial Recognition Accuracy

As China spreads its economic footprints across multiple continents with The Belt and Road Initiative, and exercises more and more control over the lives of its subjects via a combination its Social Credit Score system and vast surveillance state, it appears Beijing’s Big Brother has run into an issue that needs to be addressed to achieve world domination… inaccuracy!

Facial recognition systems are becoming more and more mainstream and accepted by an increasing number of ‘average joes’ around the world as the cost of security (or just ease of life). The problem is, as we detailed previouslyfor some segments of society, it is wildly inaccurate.

Specifically, after Oakland and San Francisco voted against the use of facial recognition, Rep. Tashida Tlaib claimed that “the error rate among African-Americans, especially women,” was 60 percent.

During a test run by the ACLU of Northern California, facial recognition misidentified 26 members of the California legislature as people in a database of arrest photos.

Some tech firms have tried to ‘fix’ this extremely high-level of inaccuracy for certain cohorts by tricking black people into being scanned.

But China’s tech behemoths have taken the process of training their algos on non-white faces to a whole new level.

As The FT reportsa deal between Chinese facial recognition company CloudWalk and the government of Zimbabwe means the latter will send data on millions of African faces to the Chinese company to help train the technology.

African states tend to go along with what is being put forward by China and the ITU as they don’t have the resources to develop standards themselves,” said Richard Wingfield, head of legal at Global Partners Digital, a company working on human rights on the internet.

…click on the above link to read the rest of the article…

Shale’s Debt-Fueled Drilling Boom Is Coming To An End

Shale’s Debt-Fueled Drilling Boom Is Coming To An End

Marcellus shale

The financial struggles of the U.S. shale industry are becoming increasingly hard to ignore, but drillers in Appalachia are in particularly bad shape.

The Permian has recently seen job losses, and for the first time since 2016, the hottest shale basin in the world has seen job growth lag the broader Texas economy. The industry is cutting back amid heightened financial scrutiny from investors, as debt-fueled drilling has become increasingly hard to justify.

But E&P companies focused almost exclusively on gas, such as those in the Marcellus and Utica shales, are in even worse shape. An IEEFA analysis found that seven of the largest producers in Appalachia burned through about a half billion dollars in the third quarter.

Gas production continues to rise, but profits remain elusive. “Despite booming gas output, Appalachian oil and gas companies consistently failed to produce positive cash flow over the past five quarters,” the authors of the IEEFA report said.

Of the seven companies analyzed, five had negative cash flow, including Antero Resources, Chesapeake Energy, EQT, Range Resources, and Southwestern Energy. Only Cabot Oil & Gas and Gulfport Energy had positive cash flow in the third quarter.

The sector was weighed down but a sharp drop in natural gas prices, with Henry Hub off by 18 percent compared to a year earlier. But the losses are highly problematic. After all, we are more than a decade into the shale revolution and the industry is still not really able to post positive cash flow. Worse, these are not the laggards; these are the largest producers in the region.

…click on the above link to read the rest of the article…

Bill Gates Wants to Export India’s National ID System Around the Globe

Bill Gates Wants to Export India’s National ID System Around the Globe

It’s not just a social credit score system spreading around the world from China that threatens the free people of the world; India’s Aadhaar National ID program has the full support of Bill Gates and the World Bank as a model for other countries to follow.

Gates said in a 2018 CNBC interview that it was “too bad” if someone thought that Aadhaar was a privacy issue:

The Gates Foundation has pledged to fund the World Bank in an effort to take the ID program to other countries. 

Despite Gates plea that there are no privacy issues with Aadhaar, several court cases have gone to India’s supreme court on grounds of privacy violations. 

The ID system has had serious security breaches, with access to a billion identities being sold for less than $10 through WhatsApp.

One of the court filings (Mathew Thomas vs Union of India) details the rise of China’s social credit system, comparing the Indian Aadhaar initiative to the Chinese program.

Perhaps the most sensational angle to this story is that the same international tech company that provides the infrastructure to Aadhaar also makes drivers licenses in the United States.

Idemia (formerly Morpho), is a billion dollar multinational corporation. It is responsible for building a significant portion of the world’s biometric surveillance and security systems, operating in about 70 countries. Some American clients of the company include the Department of Defense, Homeland Security, and the FBI.

The company website says that Morpho has been “…building and managing databases of entire populations…” for many years.

In the United States, Idemia is involved in the making of state issued drivers licenses in 42 states.

…click on the above link to read the rest of the article…

The Masses Are Being Conditioned to Ignore the Economic Bubble

The Masses Are Being Conditioned to Ignore the Economic Bubble

economic crash trade war

In the second week of October, after the “partial” U.S.-China trade deal was announced to much fanfare, I made this prediction:

US and Chinese officials rarely waste an opportunity to use trade talk headlines to head-fake markets with false hope. Rumors of a “partial” or tentative trade deal are circulating today, with MORE trade talks in a month or two. In other words, “more trade talks” means there is no deal of any substance and there’s plenty of time for the whole thing to fall apart once again. I give it less than a month. In the meantime, there will be plenty of other distractions for the general public, including the impeachment circus, tariffs against Europe, tensions in Syria, the Brexit mess, etc, etc.

My estimate was incorrect; it took a little over one month for the whole thing to fall apart. That said, I think the primary point remains the same. The trade war is not going to end anytime soon and there is a very good reason why this is the case: It serves the globalist agenda as a perfect distraction for the collapse of the “Everything Bubble” and the launch of the global economic reset into a what the elites call a “new world order”.

But let’s go back for a moment to understand what just happened. A month ago, the trade deal was treated as essentially done. China had partially folded on most of Trump’s demands and Trump was going to pull off a major economic victory just in time for the 2020 election season. The Dow was going to rocket past 30,000 and Trump’s second term was now assured. This was the narrative in the majority of the alternative media, and I have to say, it is sad to see so many otherwise intelligent analysts make such a huge blunder.

…click on the above link to read the rest of the article…

Twitter Censorship: “Shadow Banning” Is Written Into the Platform’s New Terms

TWITTER CENSORSHIP: “SHADOW BANNING” IS WRITTEN INTO THE PLATFORM’S NEW TERMS

Twitter has written “shadow banning” aka, censorship, into their new terms.  The platform will now intentionally “limit the visibility” of some users. Expect those who dissent from the official narrative to be the ones censored.

Critics have accused Twitter of censorship for quite some time now.  But this time, it’s official. The company has admitted they will attempt to silence those critical of the ruling class. According to RT, the news terms will be taking effect in January of 2020. While the new terms don’t look like much to write home about, some tweaks to the language could have larger repercussions for users, limiting their reach behind the scenes without their knowledge.


Last year, when I spoke to Twitter reps, they lied and gaslight us about their targeted manipulation of people’s tweets. Now it’s in their new TOS. https://www.xbiz.com/news/248768/twitters-new-terms-of-service-effective-january-reserves-right-to-shadowban … nu, @RubinReport, we’re waiting for an alternative


“We may also remove or refuse to distribute any Content on the Serviceslimit distribution or visibility of any Content on the service, suspend or terminate users, and reclaim usernames without liability to you,” the new terms state.

The social media giant is telling users that it reserves the right shadow ban or “throttle” or censor certain accounts. And it is not clear on what basis will it make those decisions, although we guess (based on their past which is rife with censorship) that accounts that aren’t parroting the government’s official narrative will be on the list.

CENSORSHIP INCREASES: Twitter Suspend More Conservatives

While Twitter has previously insisted point-blank “we do not shadow ban, in the pre-2020 terms the company split hairs between shadow banning and ranking” posts to determine their prominence on the site, and acknowledged deliberately down-ranking bad-faith actors” to limit their visibility.

…click on the above link to read the rest of the article…

How to Avoid Civil War: Decentralization, Nullification, Secession

How to Avoid Civil War: Decentralization, Nullification, Secession 

It’s becoming more and more apparent that the United States will not be going back to “business as usual” after Donald Trump leaves office, and it is easy to imagine that the anti-Trump parties will use their return to power as an opportunity to settle scores against the hated rubes and “deplorables” who dared attempt to oppose their betters in Washington, DC, California, and New York.

This ongoing conflict may manifest itself in the culture war through further attacks on people who take religious faith seriously, and on those who hold any social views unpopular among degreed people from major urban centers. The First Amendment will be imperiled like never before with both religious freedom and freedom of speech regarded as vehicles of “hate.” Certainly, the Second Amendment will hang by a thread.

But even more dangerous will be the deep state’s return to a vaunted position of enjoying a near-total absence of opposition from elected officials in the civilian government. The FBI and CIA will go to even greater lengths to ensure the voters are never again “allowed” to elect anyone who doesn’t receive the explicit imprimatur of the American intelligence “community.” The Fourth Amendment will be banished so that the NSA and its friends can spy on every American with impunity. The FBI and CIA will more freely combine the use of surveillance and media leaks to destroy adversaries.

Anyone who objects to the deep state’s wars on either Americans or on foreigners will be denounced as stooges of foreign powers.

These scenarios may seem overly dramatic, but the extremity of the situation is suggested by the fact that Trump — who is only a very mild opponent of the status quo — has received such hysterical opposition. After all, Trump has not dismantled the welfare state. He has not slashed — or even failed to increase — the military budget.

Economists and climate change: Building castles in the sky

Economists and climate change: Building castles in the sky

Economist John Kenneth Galbraith once said that “the only function of economic forecasting is to make astrology look respectable.” Unfortunately, when some economists turn their sights on the economics of climate change, their unreliable methods imperil not just the economic life of humankind but its very existence.

I have written previously about this phenomenon in 2007 about how economists underestimate the critical importance of small (by economic value) but critical parts of the economy such as agriculture, forestry, and energy and in 2012 about how unsuited our current infrastructure is to the unfolding climate.

The trouble is that against all evidence, some climate economists keep building castles in the sky. Nobel Prize winner William Nordhaus is among the most prominent economists working on climate change and its economic effects. In short, Nordhaus, who is mentioned both in my 2007 and 2012 pieces, tells us not to worry too much about climate change. It will be cheaper to adapt to it than to prevent it or slow it down.

The problem with Nordhaus’ thinking (and that of many others like him) is that he cannot conceive of abrupt discontinuities in the workings of the planet or the workings of human society. In short, he cannot conceive that climate change could alter our environment so thoroughly and disrupt our agriculture so completely that it would lead to catastrophic results.

It is for this failure of imagination that economist Steven Keen recently took Nordhaus to task, showing through a careful critique of Nordhaus’ equations, that even those equations demonstrate catastrophe ahead when provisioned with the proper numbers and understanding. When Keen adds in what we know about tipping points in the climate system, he finds that Nordhaus’ own equations reveal that “[a]t 3 degrees, damages are 8 times as high.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
In progress...

Olduvai II: Exodus
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