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The war on cash is escalating. A big driver isn’t central banks who want to be able to inflict negative interest rates on savers, or Treasuries who see cash transactions as hiding revenues from their tax collectors, but the payment networks that want to kill cash (and checks!) as competitors to their oh so terrific (and fee-gouging) credit and debit cards.

However, one bit of good news is there doesn’t appear to be much enthusiasm on the buyer, as in merchant, end.

First, the overview from the Wall Street Journal:

Visa Inc. has a new offer for small merchants: take thousands of dollars from the card giant to upgrade their payment technology. In return, the businesses must stop accepting cash.

The company unveiled the initiative on Wednesday as part of a broader effort to steer Americans away from using old-fashioned paper money. Visa says it is planning to give $10,000 apiece to up to 50 restaurants and food vendors to pay for their technology and marketing costs, as long as the businesses pledge to start what Visa executive Jack Forestell calls a “journey to cashless.”

There are good reasons to think this initiative won’t get far.

Customer resistance. Food vendors, and in particular restaurants, are low margin businesses with fickle customers who have little to no loyalty. Why risk driving business away?

Aside from the fact that some customers prefer cash, a related issue is that using cards and smartphones often seem to be a tax on time. I really hate using chip cards. Mag cards were often faster than cash, since you swiped and could stuff the card back in your wallet while the transaction was being approved.

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

What’s Wrong With The U.S. Oil Export Boom

June 20, 2017

What’s Wrong With The U.S. Oil Export Boom

The lead editorial in Friday’s Wall Street Journal was pure energy nonsense.’

“Lessons of the Energy Export Boom” proclaimed that the United States is becoming the oil and gas superpower of the world. This despite the uncomfortable fact that it is also the world’s biggest importer of crude oil.

The piece includes the standard claptrap about how the fracking revolution has pushed break-even prices to absurdly low levels. But another article in the same newspaper on the same day described how producers are losing $0.33 on every dollar in the red hot Permian basin shale plays. Oops.

The main point of the editorial, however, is to celebrate a surge in U.S. oil exports to almost 1 million barrels per day in recent weeks. The Journal calls lifting the crude oil export ban that made this possible “a policy triumph.” What the editorial fails to mention is that exports actually fell after the ban was lifted, and only increased because of Nigerian production outages (Figure 1).

(Click to enlarge)

Figure 1. U.S. Oil Exports Have Increased As Nigerian Production Has Fallen. Source: EIA and Labyrinth Consulting Services, Inc.

Tight oil is ultra-light and can only be used in special refineries, most of which are in the U.S. It must be deeply discounted in order to be processed overseas in the relatively few niche refineries designed for light oil. That’s why Brent price is higher than WTI.

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

Buy the Dip?

April 17, 2017

Buy the Dip?

The military frolics of spring have distracted the nation’s attention from the economic and financial dynamics that pose the ultimate mortal threat to business as usual. Note the distinction between economic and financial. The first represents real activity in this Land of the Deal: people doing and making. The second, finance, used to be a minor branch — only about five percent — of all the doing in the days of America’s putative bigliest greatitude. The task of finance then was limited and straightforward: to manage the allocation of capital for more doing and making. The profit in that enabled bankers to drive Cadillacs instead of Chevrolets, but not much more.

These days, finance is closer to 40 percent of all the doing in America, and it is not about making anything, but getting more than its share of “money” — whatever that is now — and what “money” mostly is is whatever the people engaged in finance say it is, for instance, Fannie Mae bonds representing millions of sketchy loans for houses of vinyl and strand-board built in places with no future… or stock issued by the Tesla corporation… or the sovereign IOUs of the US Treasury.

The list of things that pretend to be “money” these days would be long and shocking and the sheer churn of these instruments among the banks and markets “produces” the fabled “revenue streams” beloved of The Wall Street Journal. What happens when the world discovers that these instruments (securities and their derivatives) represent falsely? Why, bigly trouble.

And this is the season we’re moving into as the dogwoods blaze: the season of the re-discovery of actual value. For those of you gloating over last week’s demonstrations of US Big Stick-ism, be warned that our military shenanigans have given China and Russia every reason to discipline this country by undermining the international standing of the dollar.

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

Bankers, Always the Last to Know

April 17, 2017

Bankers, Always the Last to Know

Commercial real estate is starting to cool, with deal volume last year dropping 10% from 2015 to $493.7 billion, while, as Peter Grant reports for the Wall Street Journal and Grant’s Interest Rate Observer, “the early stages of 2017 have delivered even weaker results: $50.3 billion in transaction value through March 1 compared to $80.1 billion in the like period in 2015 (a 37.2% yearly drop).”

One would guess bankers would take notice and turn shy. However, Craig Bender of ING real estate, tells the Wall Street Journal: “The banks are hungry. The life insurance groups are hungry”.

It seems Lord Keynes had one thing right when he wrote, “Banks and bankers are by nature blind. They have not seen what was coming…. A ‘sound banker,’ alas! is not one who foresees danger and avoids it, but one who, when he is ruined, is ruined in a conventional and orthodox way along with his fellows, so that no one can really blame him.”

In America’s hottest commercial market, New York, a veritable magnet for hot, cheap, and foreign funds, the first quarter of 2017 was a bust. Large office property sales (those with over 50,000 square feet) that closed in Q1 2017 plunged 63% year-over-year, from $5.54 billion in Q1 2016 to $2.1 billion. It was the lowest transaction amount in any quarter since Q1 2013, writes Wolf Richter.

Not only did the amount of square footage sold nosedive, but the price per square foot fell as well. Richter points out the commercial property bubble has been inflating unabated since 2009. “The big freeze in New York City may be another sign that this bubble too can only go so far, and that peak craziness has been reached,” he writes. “The Fed is now specifically fretting about this commercial real estate bubble, and how to contain it before it takes down the financial system.”

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

Superhero Snowden Trashed In Absurd WSJ Op-Ed

January 2, 2017

Superhero Snowden Trashed In Absurd WSJ Op-Ed

Edward Jay Epstein has an op-ed in the Wall Street journal promoting his new book “How America Lost Its Secrets: Edward Snowden, the Man and the Theft”.

Epstein discusses the Fable of Edward Snowden

At the forefront of Epstein’s claims is the fact that Snowden lied. “As he seeks a pardon, the NSA thief has told multiple lies about what he stole and his dealings with Russian intelligence,” says Epstein.

Of all the lies that Edward Snowden has told since his massive theft of secrets from the National Security Agency and his journey to Russia via Hong Kong in 2013, none is more provocative than the claim that he never intended to engage in espionage, and was only a “whistleblower” seeking to expose the overreach of NSA’s information gathering. With the clock ticking on Mr. Snowden’s chance of a pardon, now is a good time to review what we have learned about his real mission.

Mr. Snowden’s theft of America’s most closely guarded communication secrets occurred in May 2013, according to the criminal complaint filed against him by federal prosecutors the following month. At the time Mr. Snowden was a 29-year-old technologist working as an analyst-in-training for the consulting firm of Booz Allen Hamilton at the regional base of the National Security Agency (NSA) in Oahu, Hawaii. On May 20, only some six weeks after his job there began, he failed to show up for work, emailing his supervisor that he was at the hospital being tested for epilepsy.

This excuse was untrue. Mr. Snowden was not even in Hawaii. He was in Hong Kong. He had flown there with a cache of secret data that he had stolen from the NSA.

Well la-de-friggin da. The idiocy of those opening paragraphs is obvious to the world.

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

Stop the Fed Before it Kills Again

September 10, 2016

Stop the Fed Before it Kills Again

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Why has the Fed created incentives for US corporations to loot their companies and drive them deeper into debt?

Despite four consecutive quarters of negative earnings, weak demand and anemic sales, US corporations continue to load up on debt, buy back their own shares and hand out cash to their shareholders that greatly exceeds the amount of profits they are currently taking in. According to the Wall Street Journal: “SandP 500 companies through the first two quarters of the year collectively returned 112% of their earnings through buybacks and dividends.”

You read that right, US corporations are presently giving back more than they are taking in, which is the moral equivalent of devouring one’s offspring.

These companies have all but abandoned the traditional practice of recycling earnings into factories, productivity or research and development. Instead, they’re engaged in a protracted liquidation process where the creditworthiness of their companies is used to borrow as much money as possible from the bond market which is then divvied up among insatiable CEOs and their shareholders. This destructive behavior can be traced back to the perennial low rates and easy money that the Fed has created to enhance capital accumulation during a period when the economy is still mired in stagnation. The widening chasm that has emerged between the uber-wealthy and everyone else since the end of the financial crisis in 2008, attests to the fact that the Fed’s plan has succeeded beyond anyone’s wildest imagination. The rich continue to get richer while the middle class drowns in an ocean of red ink. This is from CNBC:

“Corporate debt is projected to swell over the next several years, thanks to cheap money from global central banks, according to a report Wednesday that warns of a potential crisis from all that new, borrowed cash floating around.

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

Italy Granted “Extraordinary ” €150BN Bank Bailout Program To Prevent “Panic, Run On Deposits”

June 30, 2016

Italy Granted “Extraordinary ” €150BN Bank Bailout Program To Prevent “Panic, Run On Deposits”

As we noted today, the rumors of an Italian bank bailout, which started on Monday morning, and were promptly shot down by Merkel the next day, got louder after a Reuters report that the Italian government is considering more creative ways to inject liquidity into Italy’s banks. However that was just an appetizer to a main course, which came later today when as the WSJ reported citing a spokeswoman for the European Union’s executive arm that the “European Commission has authorized Italy to use government guarantees to create a precautionary liquidity support program for their banks.”

How did this happen so quietly under the table and without Merkel’s blessing? WSJ says that the program was approved under the bloc’s “extraordinary crisis rules for state aid.”

And here we thought that Italy’s banks are actually doing so very well. Oh wait, no we didn’t.

As the WSJ notes, the proposed “crisis” plan is the “other leg of an intervention plan considered by the government” namely, the direct capital injection into Italian banks that would add up to €40 billion in capital to the banking sector”, the one we profiled previously. It is also the plan that Merkel supposedly shut down before it got off the ground. However, Europe had a Plan B up its sleeve.

What are the details of this latest “crisis” program?

According to an EU official, the liquidity support program includes up to €150 billion ($166 billion) in government guarantees. The WSJ adds that the commission spokeswoman declined to comment on the amount of guarantees that were authorized, but said that the budget requested by the Italian government had been found to be proportionate. The Italian economy ministry declined to comment.

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

Blackout California

June 26, 2016

Blackout California

The shutdown of the leaking Aliso Canyon underground gas storage facility has caused a loss of about 70bcf of stored gas that Southern California utilities have historically counted on to see them through the hot, high-demand summer months. The California Independent Service Operator (CAISO), which manages the California grid, estimates that as a result all customers should expect to be without power for a total of 14 days this summer. Some 21 million Southern Californians stand to be directly affected.

Are blackouts on such a scale likely? It seems they are. According to Business Insider

SoCalGas uses Aliso Canyon to provide gas to power generators that cannot be met with pipeline flows alone on about 10 days per month during the summer, according to state agencies. In the summer SoCalGas strives to completely fill 86.2-billion cubic feet (bcf) Aliso Canyon to prepare for the upcoming winter heating season when gas demand peaks. State regulators, however, ordered the company in January to reduce the amount of working gas in Aliso Canyon to just 15 bcf and use that fuel to reduce the risk of gas curtailments and power interruptions this summer. State regulators will not allow SoCalGas to inject fuel into the facility until the company inspects all of its 114 wells.

And from the Wall Street Journal

But the pipelines can only bring in about 3 billion cubic feet of working gas a day into Southern California, below the daily demand, which gets as high as 5.7 billion cubic feet.

Figure 1: Remedial work in progress at Aliso Canyon

Aliso Canyon has a capacity or 86bcf but presently contains only 15bcf, representing a shortfall of 71bcf. How much gas generation does this represent? According to the conversions given in the BP Statistical review it’s 7.7 TWh. And how much gas does Southern California consume in the summer, which will continue for about another three months?

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

The Cure is Worse than the Disease

May 7, 2016

The Cure is Worse than the Disease

A Week to Remember

Today we look back to the recent past with singleness of purpose. Context and edification for the present economy is what we’re after. We have questions…

How come the recovery has been so weak? Why is it that, nearly seven years after the official end of the Great Recession, the economy’s still mired in a soft muddy quagmire? Squinting, focusing, and refocusing, there’s one particular week that rises above all others.

Hank the scaremonger – in meetings behind closed doors, he threatened Congressmen with financial apocalypse and even martial law if they didn’t hand over $700 billion in tax payer money with essentially no oversight. This has been independently confirmed by several Congressmen. Griffin’s “The Creature from Jekyll Island” is often decried as “conspiracy theory” by establishment shills, but it inter alia contains an eerie prediction of practically everything that eventually happened in 2008.Photo credit: Talks at Google

On Saturday September 20, 2008, Treasury Secretary Hank Paulson delivered a draft of the Troubled Asset Relief Program (TARP) to Congress for review. If you recall, it had been another wild week. On Monday, September 15, after 158 years of operation, Lehman Brothers vanished from the face of the earth…Dick Fuld, “The Gorilla,” be damned.

All week the sky relentlessly fell on financial markets. Even money market funds were in full panic. In fact, a record $169.03 billion of capital had vacated money market funds in the week ended September 17.

That same day, the Wall Street Journal’s headline was, “U.S. to Take Over AIG in $85 Billion Bailout.” On top of that, the Primary Fund broke the buck – falling to $0.97 cents a share. The SEC also went so far as to impose a 10 trading-day ban on short sales of 799 financial stocks.

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

Why is the MSM Covering Up Recessionary Data?

April 14, 2016

WHY IS THE MSM COVERING UP RECESSIONARY DATA?

The Census Bureau put out their monthly retail sales report this morning. During good times, the MSM would be hailing the tremendous increases as proof the consumer was flush with cash and all was well with the economy. Considering 70% of our GDP is dependent upon consumer spending, you would think this data point would be pretty important in judging how well Americans are really doing.

It’s not perfect, because the issuance of debt to consumers to purchase autos, furniture, appliances and electronics can juice the retail sales numbers and create the false impression of strength. That’s what has been going on with auto sales for the last two years.

The retail sales figures have been propped up by the issuance of subprime auto loans to deadbeats, 7 year 0% interest loans to good credit customers, and an all-time high in leases (aka 3 year rentals). Despite this Fed induced auto loan scheme, retail sales have still been pitiful, as the average American has been left with stagnant wages, 0% interest on their minuscule savings, surging rent and home prices, and drastic increases in their healthcare costs due to Obamacare.

The retail sales for March, reported this morning, were disastrous and further confirmed a myriad of other economic indicators that the country is in recession. GDP for the first quarter will be negative. And this time they can’t blame it on snow in the winter. They have already doubly seasonally adjusted the figures, and they will still be negative. Retail sales in the first quarter were atrocious. It might make a critical thinking person question the establishment storyline of solid job growth being peddled by politicians and their MSM mouthpieces. If people had good paying jobs, they would be spending money.

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

Gold: Still Misunderstood

April 10, 2016

Gold: Still Misunderstood

Myths That Just Won’t Die

Gold just had its best quarter in 30 years. Not surprisingly, gold bears are coming out of the woodwork en masse in the mainstream media and the analyst community (see e.g. this recent write-up by Mish on the Goldman Sachs analyst who has been screaming “short gold” since right before it started rocketing higher in early February). Below we will discuss a specific assertion that tends to be repeated over and over again.

Gold had a very strong quarter, but skepticism over the durability of the advance remains quite pronounced – click to enlarge.

If there is anything in this world that definitely has more lives than a cat, it is bad economics. Just think about it: Here we are, nearly 300 years after John Law drove France and most of continental Europe into utter ruin, and our central bankers are still doing the exact same things Law did. The only difference between John Law and the trifecta of Draghi, Kuroda and Yellen is really the modern-day level of obfuscation and the fact that there is far more wealth that can be destroyed, so it is taking a lot longer.

In terms of economic principles and the goals allegedly achievable by their policies, the difference between Law and today’s central bankers is precisely zero. It is astonishing that after 300 years of supposed scientific progress, atrociously bad economics has shown such persistence in surviving. We were reminded of this agan when reading a recent comment on gold in the Wall Street Journal. No matter how often and how convincingly they are refuted, unsound economic ideas keep being resurrected with unwavering regularity, as if they were a horde of zombies.

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

Was There A Run On The Bank? JPM Caps Some ATM Withdrawals

April 4, 2016

Was There A Run On The Bank? JPM Caps Some ATM Withdrawals

Under the auspices of “protecting clients from criminal activity,” JPMorgan Chase has decided to impose capital controls on . As WSJ reports, following the bank’s ATM modification to enable $100-bills to be dispensed with no limit, some customers started pulling out tens of thousands of dollars at a time. This apparent bank run has prompted Jamie Dimon to cap ATM withdrawals at $1,000 per card daily for non-customers.

Most large U.S. banks, including Chase, Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. have been rolling out new ATMs, sometimes known as eATMs, which perform more services akin to tellers. That includes allowing customers to withdraw different dollar denominations than the usual $20, typically ranging from $1 to $100.

The efforts run counter to recent calls to phase out large bills such as the $100 bill or the €500 note ($569) to discourage corruption while putting up hurdles for tax evaders, terrorists, drug dealers and human traffickers.

The Wall Street Journal reported in February that the European Central Bank was considering eliminating its highest paper currency denomination, the €500 note. Former U.S. Treasury Secretary Lawrence H. Summers also has called for an agreement by monetary authorities to stop issuing notes worth more than $50 or $100.

This move appears to have backfired and created a ‘run’ of sorts on Chase…

A funny thing happened as J.P. Morgan Chase & Co. modified its ATMs to dispense hundred-dollar bills with no limit: Some customers started pulling out tens of thousands of dollars at a time.

While it was changing to newer ATM technology, J.P. Morgan found that some customers of banks in countries such as Russia and Ukraine had used Chase ATMs to withdraw tens of thousands of dollars in a single day, people familiar with the situation said. Chase had instances of people withdrawing $20,000 in one transaction, they added.

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

U.S. Troops on Russia’s Borders

March 31, 2016

U.S. Troops on Russia’s Borders

Official Washington’s hype about “Russian aggression” has cloaked a U.S. military buildup on Russia’s borders, possibly increasing risks of escalation and even world war, explains ex-CIA analyst Paul R. Pillar.

U.S. military deployments to Eastern Europe are being ramped up. The latest word as reported by the Wall Street Journal is that regular rotation of brigade-size forces, with the most modern equipment, will bring a de facto continuous U.S. military presence to the areas in question, which include the Baltic republics, Poland, Romania, and Bulgaria.

It is easy to see that the immediate motivation behind this measure, as Deputy Secretary of Defense Robert Work indicated to the Journal, is to calm nervousness among some of those states about what the Russian bear is up to. But there are other implications of any deployment of this nature; if there weren’t, then there would be no reason to expect the deployment to have the desired calming effect.

Russian President Vladimir Putin during a state visit to Austria on June 24, 2014. (Official Russian government photo)

We are entitled to be told, to a greater extent than we have been told so far, just what the strategy is behind this deployment. What exactly is the threat that we are trying to meet, in more specific terms than just “Russian aggression”? What sort of scenario do we have in mind? What would be the U.S. response to such a scenario, and what role would the newly deployed U.S. troops be playing?

There has been plenty of precedent and practice in thinking about such matters. Throughout the Cold War the conundrum of how to protect Western Europe from the feared scenario of being overrun by a huge Soviet conventional assault was never solved to a high degree of satisfaction, although the stationing of U.S. troops in Europe had a lot to do with trying to solve it.

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

How Stupid Do You Have To Be To Let This Happen?

March 28, 2016

How Stupid Do You Have To Be To Let This Happen?

So how do we explain this: After World War II most European countries set up generous entitlement systems including government pensions designed to offer dignified retirements to citizens who had worked hard and paid taxes and obeyed the rules for a lifetime. BUT they didn’t bother putting anything aside for the inevitable — and mathematically predictable — retirement of the immense baby boomer generation. Here’s an excerpt from a recent Wall Street Journal article outlining the problem:

Europe Faces Pension Predicament

State-funded pensions are at the heart of Europe’s social-welfare model, insulating people from extreme poverty in old age. Most European countries have set aside almost nothing to pay these benefits, simply funding them each year out of tax revenue. Now, European countries face a demographic tsunami, in the form of a growing mismatch between low birthrates and high longevity, for which few are prepared.Europe’s population of pensioners, already the largest in the world, continues to grow. Looking at Europeans 65 or older who aren’t working, there are 42 for every 100 workers, and this will rise to 65 per 100 by 2060, the European Union’s data agency says. By comparison, the U.S. has 24 nonworking people 65 or over per 100 workers.

“Western European governments are close to bankruptcy because of the pension time bomb,” said Roy Stockell, head of asset management at Ernst & Young. “We have so many baby boomers moving into retirement [with] the expectation that the government will provide.”

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

Wall Street Bankers and Lobbyists Move to Ensure Industry Continues to Regulate Itself

March 17, 2016

Wall Street Bankers and Lobbyists Move to Ensure Industry Continues to Regulate Itself

Not content with continued prosecutorial immunity and trillions in taxpayer bailouts and backstops, Wall Street banksters are making moves to ensure they regulate themselves.

In case you’re still wondering who the real owners of this country are…

The Wall Street Journal reports:

ORLANDO, Fla.—Wall Street’s top lobbying group wants a closer relationship with the policy makers that oversee its member firms.

John Rogers, chairman of the Securities Industry and Financial Markets Association and a top official at Goldman Sachs Group Inc., on Tuesday called for a standing body made up of bankers and regulators to discuss developments in policy, examination and enforcement. A key responsibility for the panel would also involve regularly providing guidance on postcrisis rules and other issues to financial firms.

Mr. Rogers said such a standing body isn’t novel, noting the Treasury Department operates such a group aimed at tackling money-laundering issues. That panel, he said, “can be extremely effective, providing regulators with valuable insight into the commercial viability and impact of their initiatives, and the industry with a greater sense of control over their destiny.”

Thanks for playin’ suckers.

Screen Shot 2016-03-16 at 2.00.55 PM

Wall Street’s definitely getting “ready for Hillary.”

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

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