Tuesday, April 30, 2019

Musical Interlude: Sting, "Fields of Gold"

Sting, "Fields of Gold"

"PM Economic Market Snapshot 4/30/19"

Gregory Mannarino, 
“Watching A Sitting US President Beg Is A National Embarrassment”
MarketWatch Market Summary
CNN Market Data:

CNN Fear And Greed Index:
"How We “Earn” Today…"
by David Stockman

"At that time, you had no idea at all of trade; whilst I could not think of any man whose spirit was, or needed to be, more enlarged than the spirit of a genuine merchant. What a thing it is to see the order which prevails throughout his business! By means of this he can at any time survey the general whole, without needing to perplex himself in the details. What advantages does he derive from the system of book-keeping by double entry? It is among the finest inventions of the human mind; every prudent master of a house should introduce it into his economy."
– Johann Wolfgang von Goethe, 
"Wilhelm Meister’s Apprenticeship" (1795-96)

"Once upon a time, the stock market reflected the real-world economy and the profits businesses extracted from it. In the era of Bubble Finance, that’s no longer the case. At the end of the first quarter of 2012, the S&P 500 Index read 1,408.47. Pre-tax corporate profits for the three months ended March 31, 2012, came in at an annualized “run rate” of $2.20 trillion.

At about 2:15 p.m. ET yesterday, the S&P 500 hit 2,949.52. That’s a new all-time intraday high. And it’s nearly 110% above where it was seven years ago. Note, however, the pre-tax corporate profit run-rate for the fourth quarter of 2018. It was $2.18 trillion – below what it was seven years ago. That dismal number was down nearly 6% from a peak of $2.32 trillion posted for the third quarter of 2014.

Oh, this vaunted bull market looks to be going higher. But it ain’t on the up and up. Those “booming” profits behind these soaring stock averages didn’t arise from activity on Main Street. They’re the product of “ex-items” accounting games, one-time tax-law changes, massive share buybacks, and the structural shift of corporate profits to the S&P sector from smaller, unlisted companies.
“Peak Trump” is all smoke and mirrors.
[Click to Enlarge]

Let’s break down “reported” earnings for the S&P 500 – the kind based on Generally Accepted Accounting Principles (GAAP) that must be certified to the Securities and Exchange Commission by CEOs and CFOs on penalty of prison time…

This group reported trailing-12-month earnings for the first quarter of 2012 of $88.54 per share. Based on the S&P 500’s reading at the close on March 30, 2012, stocks were priced at 15.9 times earnings. Over the next six years, S&P 500 reported profits rose to $132.39 per share. At Monday’s new high, stocks were priced at 22.3 times earnings. That’s serious multiple expansion on aggregate profit growth of 49.5%.

And we need to qualify both “profit” and “growth.” Indeed, December 2018 trailing-12-month earnings were flattered by a fresh 21% corporate tax rate to the tune of about $10 per share. Accounting for that one-time boost takes us to $122 and makes the aggregate profit growth 38.2%.

Now, let’s talk about “per share.” S&P 500 companies have been buying back their shares at a furious pace. The Donald’s corporate tax cut kicked that process up a couple notches, with nearly $800 billion of buybacks in 2018 setting an annual record. That’s a massive flow-back to Wall Street. And it also takes a big chunk out of share “float.”
Click to Enlarge

The “float” of outstanding S&P 500 shares shrunk by nearly 7% between 2012 and 2018. Again, adjusting to the real world, December 2018 trailing-12-month earnings would amount to $113.75 per share. That’s cumulative growth of 28.5%. Removing one-time tax effects and accounting for share buybacks yields an apples-to-apples price-to-earnings multiple for today’s S&P 500 earnings and index reading of 25.9 times.

And we still don’t have an accurate reflection of conditions on Main Street. That’s because structural changes in the U.S. economy have had the effect of migrating corporate profits to the S&P 500 companies from the Russell 2000 and from private companies not valued on the stock exchanges at all.

That’s part of the massive mergers-and-acquisitions boom fostered, like share buybacks, by the Federal Reserve’s easy money. During the 2012-to-2018 period, nearly 85,000 M&A deals with an aggregate valuation of $13 trillion were completed in North America. That migration of companies and profits to the index that wears the big boy pants involved real economics. But it was a transfer, not growth, in the aggregate economy.

It’s just more sign that Main Street and Wall Street are on separate, diverging paths. And they have been for more than 30 years.

Musical Interlude: Juzzie Smith, “Bluesberry Jam”

Juzzie Smith, “Bluesberry Jam”

"A Look to the Heavens"

“This huge ball of stars predates our Sun. Long before humankind evolved, before dinosaurs roamed, and even before our Earth existed, ancient globs of stars condensed and orbited a young Milky Way Galaxy. Of the 200 or so globular clusters that survive today, Omega Centauri is the largest, containing over ten million stars. Omega Centauri is also the brightest globular cluster, at apparent visual magnitude 3.9 it is visible to southern observers with the unaided eye. 
Click image for larger size.
Cataloged as NGC 5139, Omega Centauri is about 18,000 light-years away and 150 light-years in diameter. Unlike many other globular clusters, the stars in Omega Centauri show several different ages and trace chemical abundances, indicating that the globular star cluster has a complex history over its 12 billion year age.”

"Be What You Would Seem To Be..."

"Be what you would seem to be- or, if you'd like it put more simply- never imagine yourself not to be otherwise than what it might appear to others that what you were or might have been was not otherwise than what you had been would have appeared to them to be otherwise."
- Lewis Carroll,
"Alice In Wonderland"

The Poet: Frances Dana Gage, “Dare To Stand Alone”

“Dare To Stand Alone”

“Be firm, be bold, be strong, be true, 
And "dare to stand alone;"
Strive for the right whate'er ye do,
Though helpers there be none.

Nay, bend not to the swelling surge
Of popular sneer and wrong;
'Twill bear thee on to ruin's verge,
With current wild and strong.

Stand for the Right! Humanity 
Implores, with groans and tears,
Thine aid to break the fest'ring links
That bind her toiling years.

Stand for the Right!- proclaim it loud-
Thou'lt find an answering tone
In honest hearts, and thou no more
Be downed to stand alone!” 

- Frances Dana Gage, 1869

The Daily "Near You?"

Oakes, N. Dakota, USA. Thanks for stopping by!

"A Dreamer..."

And why does it make you sad to see how everything hangs by such thin and whimsical threads? Because you're a dreamer, an incredible dreamer, with a tiny spark hidden somewhere inside you which cannot die, which even you cannot kill or quench and which tortures you horribly because all the odds are against its continual burning. In the midst of the foulest decay and putrid savagery, this spark speaks to you of beauty, of human warmth and kindness, of goodness, of greatness, of heroism, of martyrdom, and it speaks to you of love."
- Eldridge Cleaver

"What's He To Do Then?"

"You've seed how things goes in the world o' men. You've knowed men to be low-down and mean. You've seed ol' Death at his tricks... Ever' man wants life to be a fine thing, and a easy. 'Tis fine, boy, powerful fine, but 'tain't easy. Life knocks a man down and he gits up and it knocks him down agin. I've been uneasy all my life... I've wanted life to be easy for you. Easier'n 'twas for me. A man's heart aches, seein' his young uns face the world. Knowin' they got to get their guts tore out, the way his was tore. I wanted to spare you, long as I could. I wanted you to frolic with your yearlin'. I knowed the lonesomeness he eased for you. But ever' man's lonesome. What's he to do then? What's he to do when he gits knocked down? Why, take it for his share and go on.”
- Marjorie Kinnan Rawlings

"Whenever I hear somebody sigh, 'Life is hard,' 
I am always tempted to ask, 'Compared to what?'" 
- Sydney J. Harris 

"All That’s Missing Is a Black Swan"

"All That’s Missing Is a Black Swan"
by Jeff Thomas

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
– Ludwig von Mises
Click image for larger size.
"The Federal Reserve chart above only goes back to 1970, but its message is clear, nevertheless. The velocity of money has dropped below that which was necessary to maintain a productive economy in 2009 and has never recovered. The velocity of money can be defined as, “the rate at which money circulates or is exchanged in an economy in a given period.” It’s generally measured as a ratio of gross national product (GNP) to a country’s total money supply. No money turnover… no economy.

But, if that’s so – if the chart is correct and the money turnover is by far the lowest since 1970 – why did the economy recover after 2010 and why are we in a bull market? Surely, the quantitative easing program initiated by the Fed corrected the problem and happy days are here again. Well, actually, neither of those commonly-held assumptions is correct. Quantitative easing didn’t pump money back into the failing economy and, more to the point, it wasn’t intended to. Most of the money that was created through quantitative easing never actually hit the streets.

To back up a bit, in 1999, the Fed, then under Alan Greenspan, convinced the US government, then under President Bill Clinton, to repeal the Glass Steagall Act, an act created in 1933 to assure that banks would never again recklessly create loans to the public that could never be repaid. Mr. Greenspan argued that the Great Depression was long over and there would not be a reoccurrence but that, if the Clinton Administration would repeal Glass Steagall, it would usher in an era of investment of borrowed money that would create the greatest surge in business since World War II.

And he was correct in his argument. The repeal ushered in a period of reckless loans that accomplished two things – it allowed the Clinton Administration to end on a positive note – one in which the economy appeared to be vibrant. However, it also created a mammoth debt bubble. As is always true, the creation of massive debt is like a shot of economic heroin in an economy. The euphoria is very real. Unfortunately, so is the withdrawal. This withdrawal kicked in with the real estate crash of 2007.

The Fed (which, if you remember, had created the bubble) recommended that, although the bankers had benefitted enormously through the creation of the debt, they were now in trouble. Rather than have them pay for their misdeeds, the Fed Chairman put forward the concept of quantitative easing (QE). Through QE, the government would pump money into the banks to bail them out. Therefore the banks benefitted hugely from the reckless loans, then benefitted hugely again, through the debt-funded QE.

The pretense was that QE would be used to pay off bad loans, re-energizing the economy. And, interestingly, enough money was pumped into the banks through QE1, 2 and 3 to literally write off every mortgage in the country. Had that been done, those cleared of debt would indeed have had the ability to re-invest in the economy.

But that isn’t what happened. Very little of the money that was created actually hit the street. It was simply gobbled up by the banks. A by-product of the crash is that it brought on the Greater Depression. Real income has not increased since 2007, but inflation has. Although the US government claims inflation to be at 1.52%, it’s actually far higher – over 5%.

Likewise, unemployment is claimed to be at 3.8%, yet the real unemployment rate (as calculated by John Williams’ Shadowstats) is over 21%.

By any of these measures, the US is unquestionably in a depression.

But, hang on, what about the markets? The stock market is booming. Yes, quite so. It has become the norm for companies to buy back their own stocks. Although, this is economically dangerous, it does temporarily inflate the apparent value of the stocks and politicians do point to the stock market boom as proof of their sound fiscal management.

And, of course, there’s the bond market. It’s at an all-time high. But bonds are debt, plain and simple. And a bond is merely a promise to pay the lender back with interest on a future date. The more bonds in the market, the more debt. And so, we see a boom in markets that’s a false-reading. It was created entirely through debt and that debt is now in a bubble of historic proportions. All of the other indicators (if we use the correct figures, not the ones the government has helpfully ginned up) confirm that the US is decidedly in a depression.

But, if that’s so, why doesn’t it feel like a depression? Well, the answer to that is, once again, the economic heroin. At this point, the regular injections of heroin are massive enough to provide a euphoric high. The only problem is that, when the heroin runs out, the withdrawal will be one for the record books.

Global debt has reached $100 trillion, up from $13 trillion in 1990. Debt now represents 57% of global financial assets. At $22.4 trillion, the US has the largest treasury debt in the world, close to 40% of the total.

Oh-oh. What goes up must come down. And, if there remains any doubt as to whether, this time around, the Keynesian tooth fairies have some sort of pixie dust that will make the problem go away, we need only have a look at the chart above, which was produced by the Fed itself.

In the real world of Main Street, the velocity of money has declined dramatically since 2009 and has tanked in 2017, unable to recover. Conditions overall could not be worse for a crash more massive than any the US has ever seen in its 243 year history. At present, all that’s holding up the house of cards is the mistaken faith that the average citizen has that the false numbers are correct – that his country is bumping along nicely. When he figures out that that was a lie, it’s game over.

All that’s required to eliminate the notion and to send the economy into a tailspin is a black swan event. Will it be the dumping of treasuries back into the US system, as is now on the increase? Will it be the full implementation of CIPS, the Chinese interbank payment system? Will it be the elimination of the dollar as the petrodollar, as is now underway?

Any one of these and perhaps another dozen other black swans are waiting in the wings. All that’s needed is for one of the swans to walk onto the world stage."
The corrupt establishment will do anything to suppress sites like the Burning Platform from revealing the truth. The corporate media does this by demonetizing sites like mine by blackballing the site from advertising revenue. If you get value from this site, please keep it running with a donation. [Jim Quinn - PO Box 1520 Kulpsville, PA 19443] or Paypal at the website: https://www.theburningplatform.com/

"How It Really Is"

"Economic Market Snapshot AM 4/30/19 "

Gregory Mannarino, 
"Controlled Markets, A Managed Economy. Lies, and Liars."
MarketWatch Market Summary
CNN Market Data:

CNN Fear And Greed Index:

"The Erosion Of Everyday Life"

"The Erosion Of Everyday Life"
by Charles Hugh Smith 

"Volume One of Fernand Braudel's oft-recommended (by me) trilogy 'Civilization & Capitalism, 15th to 18th Century' is titled 'The Structures of Everyday Life.' The book describes how life slowly became better and freer as the roots of modern capitalism and liberty spread in western Europe, slowly destabilizing and obsoleting the sclerotic tyrannies of feudalism.

Today I want to discuss the erosion of everyday life as a manifestation of the endgame of the current version of state capitalism, more precisely neofeudal state-cartel financialization, which combines financial predation of the home (core) economy and global exploitation of the Periphery (a.k.a. neocolonialism.)

Unlike the era Braudel describes, our era is characterized by the decline of liberty and the distortion of capitalism to serve the few at the expense of the many. The over-used analogy of the boiled frog remains apt in understanding the erosion of everyday life: everyday life has become increasingly more difficult, more stressful, less rewarding financially, more deranging and less free for the past two generations. This erosion has gathered momentum in the 21st century as the status quo has ramped up its dysfunctional dynamics to keep the increasingly unequal distribution of wealth, power and liberty in place.

Consider the costs and capital flows of planned obsolescence. The consumer, who once was implicitly assured decades of reliable service from an American-made appliance, now gets an appliance that rarely lasts more than a decade, regardless of the brand or origin. In the relentless drive for higher profits, every component is outsourced to the lowest cost supplier. I can assure you nobody checks the electronic components for durability; the circuit boards that operate your dryer, washer, refrigerator, etc. are checked to make sure they function coming out of the factory (though even this step is slipshod), but that's it.

Since I've replaced defective boards in appliances, I can report that 1) the labor component of the repair is insanely expensive (which is why I did it myself, of course) 2) the boards are insanely expensive - $150 for what I estimate is $10 of commodity chips embedded in a $5 board, to more than $300, depending on the age and brand and 3) replacing the board is no guarantee the new board will last more than a few years, being made of the cheapest components in the lowest-quality factories.

This is the only profitable model of late-stage state-cartel corporate capitalism: force the consumer to upgrade their perfectly functional mobile phone, tablet, etc., every few years, or engineer the appliance/device to fail in a few years.

The favored corporate exploitation/predation mechanism is the long-term maintenance plan: since consumer, distributor (Best Buy et al.) and manufacturer all know the product has been engineered to fail in a few years, consumers are blackmailed into buying incredibly costly long-term maintenance plans, which work for the blackmailers because:

1) many consumers will lose the paperwork or get confused by the claims process and give up
2) other consumers will just decide to buy a new product, having been conned by "new features" or the ease of buying new rather than being on hold for hours trying to get Corporate America to do anything remotely beneficial to customers and
3) if the consumer is especially obdurate and grinds through all the barriers Corporate America sets up to wear them down and gets a repair person to actually show up, the corporation pays its actual cost for the replacement part - $15 - not the $150 the consumer is charged should they fail to buy the long-term maintenance plan.

Here's a related issue: corporations have made it essentially impossible to repair or service their products unless you are willing to jump through numerous hoops. I have personally observed how auto manufacturers have covered the oil plug with extraneous shielding, using multiple connectors to make it even more difficult for owners to perform the once-simple core of changing the oil in their vehicle. I could go on, but those of you who actually maintain and repair stuff know there is no good engineering reason for the rising difficulty of performing basic maintenance and repair.

Traffic congestion. When did two-hour or even three-hour round-trip commutes become a standard feature of American life? When did subways and trains move from being occasionally comfortable to standing room only?

Workloads. When did the workloads expected of private sector workers become heavier (outside a few islands of state-funded torpor) as a matter of course?

Loss of purchasing power, a.k.a. inflation. While we're constantly assured by the federal government and the corporate media that inflation is 2%, real-world prices are leaping higher. (And yet somehow this bogus 2% inflation rate isn't "fake news"?) As the chart below illustrates, healthcare costs have been outpacing modest wage increases for years if not decades.

Loss of political agency: no matter who you vote for, the dysfunctional, grossly unequal status quo grinds on unchanged. No matter how many more bonds you pass, giving local governments billions of dollars to fix traffic congestion, homelessness, public education, crumbling infrastructure, rundown parks, etc., nothing ever actually gets better.

Financial insecurity: if you happen to master entering and exiting the asset bubble inflations and bursts just right, you can maintain some financial security - but don't make a single mistake in buying or selling the bubble du jour, or you'll be wiped out.

Nonsensical narratives: Here's a simple test to prove the derangement caused by the ceaseless hyping of nonsensical narratives: stop watching "the news" and indeed all social media and all corporate media - go cold turkey other than following your local college and high school sports. Do you feel less upset, less stressed, less deranged, less angry, less hopeless? Of course you do.
Click image for larger size.
I could go on, but you get the picture: everyday life is eroding, getting harder and less free for the bottom 95%. And even the top 5% has increasingly had enough: working hard and doing what you're told is no longer yielding the promised American Dream of security, agency and liberty."
Freely Download "Civilization And Capitalism", by Fernand Braudel, 3 vols.
1) Civilization and Capitalism, 15th-18th Century, Vol. I:
The Structure of Everyday Life
2) The Wheels of Commerce: Civilization and Capitalism:
15Th-18th Century -Vol. 2
3) The Perspective of the World:
Civilization and Capitalism 15Th-18th Century, Vol. 3

Monday, April 29, 2019

Musical Interlude: David Nevue, "While The Trees Sleep"

David Nevue, "While The Trees Sleep"

"A Look to the Heavens"

“How much mass do flocculent spirals hide? The featured true color image of flocculent spiral galaxy NGC 4414 was taken with the Hubble Space Telescope to help answer this question. The featured image was augmented with data from the Sloan Digital Sky Survey (SDSS).
Click image for larger size.
Flocculent spirals- galaxies without well-defined spiral arms- are a quite common form of galaxy, and NGC 4414 is one of the closest. Stars and gas near the visible edge of spiral galaxies orbit the center so fast that the gravity from a large amount of unseen dark matter must be present to hold them together. Understanding the matter and dark matter distribution of NGC 4414 helps humanity calibrate the rest of the galaxy and, by deduction, flocculent spirals in general. Further, calibrating the distance to NGC 4414 helps humanity calibrate the cosmological distance scale of the entire visible universe.”

"Why Is There So Much Pain and Suffering?"

"Why Is There So Much Pain and Suffering?"
By Fred Pauser

"Mother Teresa said, “Suffering is a gift of God.” Well, it may be true that suffering tends to build character, but it also sometimes builds bitterness and criminals. In any case, we would naturally prefer to do without it, especially the extreme forms of it.

We can derive much toward answering the question from a basic knowledge of the evolution of life. Ernst Mayr succinctly summed up the process of natural selection: “Natural selection is a two-step process: (1) variations produced, and (2) variations sorted, with the elimination of the less fit so that you end up with a ‘selection’ of the best." Fitness may involve cooperative abilities as well as competitive, and the ability to adjust to varying environmental conditions.

Variations between individuals are produced by means such as mutations or genetic drift. The individuals that are most able to deal with the circumstances provided within their environmental niche are likely to be most able to reproduce and pass on their genes.

Contributions to the process of natural selection are also made by cataclysmic events such as volcanic eruptions, earthquakes, meteors and asteroids, etc. It is commonly believed that most dinosaurs were destroyed by such an event. Consequently, niches were opened to species that were more fit in terms of surviving that particular environmental upheaval.

As Teilhard de Chardin could see almost a century ago, evolution is directional. If we step back to see the big picture, nearly 4 billion years of life on earth is most notably characterized by overall increasing complexity and diversity of life, accompanied by greater capabilities, including the development of consciousness. Scientists are beginning to abandon Gould’s philosophy of non-directional evolution in favor of something more like de Chardin’s view.

Einstein said, “Everything that the human race has done and thought is concerned with the satisfaction of deeply felt needs and the assuagement of pain.” This is the pleasure/pain principle. It applies to virtually all life, albeit in very rudimentary form in single-celled creatures. It is fundamental.

Humans and other creatures born without the functional pain apparatus of their peers, do not live long. Clearly, without the capacity for pain and suffering, the evolution of life would not and could not happen. Certainly all higher life forms including humans would not have had even a remote chance of coming into existence.

Suppose there is a God, and s/he created the world pretty much as it is (as per the Christian fundamentalist view), except there was no pain and suffering, and all danger had been removed for all creatures. Wouldn’t it be a dull and boring place? Would there be any reason to strive for anything?

But we humans are acutely aware of our ability to experience pain, and we do what we can to avoid it, while simultaneously striving to maximize satisfaction. This more than enables us to survive. As products of evolution we mirror the directional progress of evolution of increasing capabilities. as human history indicates.

We possess a nearly unique ability among animals in that we can visualize all sorts of future possibilities, which bestows upon us the potential for a kind of pain that other creatures are capable of experiencing only minimally if at all: anxiety. Other animals probably, in general, suffer less than we humans assume they do, because we tend to anthropomorphize. Perhaps natural selection is not quite as cruel as it seems to us. Besides a minimal anxiety factor, consider that death in nature through predation is usually swift, and it often occurs before creatures can experience much of the sort of suffering we associate with old age and years of gradual loss of abilities.

The human propensity to suffer the pain of anxiety through the ability to imagine, has a plus side. It leads to a greater ability to experience empathy and sympathy (as compared to other animals). We are at a stage of development whereby our world is becoming one united economic entity. Human similarities across the world are becoming quite apparent. We are increasingly aware of our interdependence. We are coming to realize (some of us) that it is in our own self-interest to relieve suffering among our fellows. So our intellectual capabilities are being used via the pleasure and pain systems in us, to advance morally as well as technologically. The spiritual notion of profound interconnectedness and unity is becoming less abstract, more real. Ironically, none of this, including our very existence, would be possible without the billions of years of evolutionary struggle and strife that preceded us."

The Poet: Linda Pastan, "What We Want"

"What We Want"

"What we want
is never simple.
We move among the things
we thought we wanted:
a face, a room, an open book
and these things bear our names-
now they want us.
But what we want appears
in dreams, wearing disguises.
We fall past,
holding out our arms
and in the morning
our arms ache.
We don't remember the dream,
but the dream remembers us.
It is there all day
as an animal is there
under the table,
as the stars are there
even in full sun."

~ Linda Pastan, "Carnival Evening"

"Hang In There..."

"Using time, pressure and patience, the universe gradually changes caterpillars into butterflies, sand into pearls, and coal into diamonds. You're being worked on too, so hang in there. Just because something isn't apparent right now, doesn't mean it isn't happening. It's not until the end do you realize, sometimes your biggest blessings were disguised by pain and suffering. They were not placed there to break you, but to make you."
- "The Angel Affect"

"What the caterpillar calls the end of the world the master calls a butterfly."
- Richard Bach 


"A strange game. The only winning move is not to play." 
- Joshua, "War Games"

"There is a word, a concept, in Zen Buddhism that doesn't quite translate perfectly into the English language: Mu. Mu is the response given by a Zen monk to a question that cannot be meaningfully answered. It suggest that the question's premises are not real, that there is a state of emptiness that lies beyond yes and no, that the asker should unask the question - indeed, that anyone who would ask such a question in the first place might well to question his entire perspective on life.

Though the word was never uttered in the 1984's seminal teen-computer-hacker-political-thriller "War Games", the idea lies at the heart of the conflict that fuels the movie: a new Pentagon supercomputer that controls the nation's nuclear codes is caught up in a relentless war-game simulation trying to answer the question, "How can the United States win a nuclear war?" We all know it's a flawed question - the whole point of the Cold War arms-race theory of "mutual assured destruction" was that, in a world of opposing superpowers, the sheer volume of weaponry is meant to deter the use of any nukes at all. But back in 1984, when computer networks were new and exotic, it seemed entirely reasonable to worry that an artificial intelligence might start firing missiles based on the inhuman outcome of an algorithm. Of course, the computer finally found its Zen."

"What about you - can you tell when it's time to 
remove yourself from a defective board game?"
- Stephen H. Segal,
 "Geek Wisdom: The Sacred Teachings of Nerd Culture"

Bertrand Russell, "Three Passions"

"Three Passions" 

 "Three passions have governed my life:
The longings for love, the search for knowledge,
And unbearable pity for the suffering of humankind.

Love brings ecstasy and relieves loneliness.
In the union of love I have seen
In a mystic miniature the prefiguring vision
Of the heavens that saints and poets have imagined.

With equal passion I have sought knowledge.
I have wished to understand the hearts of people.
I have wished to know why the stars shine.
Love and knowledge led upwards to the heavens,
But always pity brought me back to earth;
Cries of pain reverberated in my heart,
Of children in famine, of victims tortured,
And of old people left helpless.
I long to alleviate the evil, but I cannot,
And I too suffer.
This has been my life; I found it worth living."

- Bertrand Russell

The Daily "Near You?"

Port Moody, British Columbia, Canada. Thanks for stopping by!

"Why a Chernobyl-like Financial Disaster is Inescapable'

"Why a Chernobyl-like Financial Disaster is Inescapable'
 by MN Gordon

"In the early morning hours of April 26, 1986 – roughly 33 years ago – things went horribly wrong in the town of Pripyat, in northern Soviet Ukraine. Reactor No. 4 at the V. I. Lenin Nuclear Power Plant, also known as the Chernobyl Nuclear Power Plant, was overwhelmed by an uncontrolled reaction. There was no stopping it.
Click image for larger size.
Chernobyl after the explosion (left) and today (right),
 encased in a steel sarcophagus. [PT]

"Two initial explosions blew the top off the reactor. Once exposed, plumes of fission matter were wafted into the atmosphere by an open-air graphite fire. Before long, this radioactive material precipitated onto Western Europe and the Western USSR.

Nine days later the fire was finally contained. But not before an estimated 400 times more radioactive material was released than from the atomic bombing of Hiroshima and Nagasaki. * Twenty-eight firemen and operators died from acute radiation syndrome in the following days and months.

What exactly caused the Chernobyl disaster is still a matter of disagreement. The first official explanation of the accident was later acknowledged to be erroneous. But there is agreement on the fact that the nuclear disaster would not have happened when it did if the workers had played hooky and gone fishing. Instead, an ill-planned late-night safety test to simulate a power-failure set in motion the very chain reaction that led to the disaster. During the experiment, the emergency safety and power-regulating systems were both intentionally turned off. Then the operators attempted to boost the reactor output; a violation of the approved test procedure. Soon after, all control was lost…

A Moment of Silence: Most accounts we’ve come across assign equal blame to human error and reactor design flaws. The shortsighted engineers failed to idiot proof the nuclear power plant for the operators. The operators succeeded at being idiots. Should we expect anything different?

Here at the Economic Prism we’re zealot aficionados of disaster – especially the human induced variety. Hence, on the anniversary of the Chernobyl disaster, we take a moment of silence for disasters past, present, and future. We also scratch for an inkling of tutelage that we can squirrel away like a silver eagle for a time in need.

Murphy’s Law, for example, states: “Anything that can go wrong will go wrong.” Certainly, Murphy’s Law will always prevail over pant wearing human animals endeavoring to manage a complex system. The Chernobyl disaster validated Murphy’s Law in spades.

Another point clarified by the Chernobyl disaster is that humans are fallible. They’re prone to making big mistakes. Some of these mistakes are attributable to sloppiness. But many result from conceit and misperception of the limits of human control.

The Chernobyl operators thought they had a novel idea for how to boost reactor output. Yet to test their idea, they had to turn off the emergency safety and power regulating systems. They also had to attempt to operate the reactor in ways inconsistent with its design criteria. Without question, they should’ve known better. But, remember, these are humans we’re talking about. Even the most judicious among us will go mad from time to time… always with the best of intentions.

The main take-away from the Chernobyl disaster is that people frequently think they are better, smarter, and more capable than they are. Moreover, they often charge forward with little more than misplaced beliefs in unfounded theories and ideas. These adventures in madness nearly always end in disaster.

Indeed, a nuclear power plant is a complex system. Still, an economy is infinitely more complex. Actions and reactions throughout an economy take place in varying and unpredictable ways. They are subject to spontaneous moods and social phenomena, which change over time – often without rhyme or reason.

An economy cannot be designed and constructed like a nuclear power plant, or other physical systems. So, too, an economy is much too large and multifaceted to be planned and improved upon like a wedding planner arranging a large reception. But that doesn’t stop central planners from attempting to control and operate the economy and financial system like Chernobyl operators in the early morning hours of April 26, 1986.

The 2008-09 financial crisis and great recession were man-made failures. What’s more, the solutions that have been executed over the last decade have been guided by guesses derived from flimsy theories and wishful ideas.In other words, monetary policies, like the ill-fated Chernobyl test, have been a wild ass central banker experiment.

Ben Bernanke, the chief architect of it all, is a complete lunatic – what readers from our home state of California would call a 5150. His insane QE, ZIRP, Operation Twist, and NIRP, have taken us past the point of no return. QT and a neutral federal funds rate are unattainable. Similarly, fiscal policies have taken debts and deficits to a place of sheer insanity, where they can never honestly be paid off.
Click image for larger size.
US broad true money supply: up ~USD 8.15 trillion or 155% since early 2008´- 
the largest money supply inflation of the post WW2 era. This isn’t going to end well. [PT]

Yet unlike a nuclear reactor meltdown, the feedback loops from these monetary and fiscal experiments are indirect, can appear dormant for many years, and are impossible to fully understand and account for.  What is clear, however, is that the only way out of this predicament is a Chernobyl-like financial disaster; an economic meltdown and vaporization of the existing financial order. An uncontrolled reaction has been set in motion. There is no stopping it."
* Speaking of radiation... welcome to extinction.

"Economic Market Snapshot 4/29/19"

Gregory Mannarino, "Post Market Wrap Up 4/29/19"
MarketWatch Market Summary
CNN Market Data:

CNN Fear And Greed Index:
"The Latest Government Myth"
by Brian Maher

“Deep down, he's shallow,” said critic Peter DeVries of one author, famously revered. Today we submit the case that Friday’s GDP report - grand, gaudy and garish - is deeply shallow beneath the scintillated surface. That is, the deeper numbers tell a tale 180 degrees out of joint with appearance. And private-sector growth may actually peg along at the crawlingest rate in six years. Let us now peek within and beneath official data...

Friday’s official 3.2% trounced all reasonable estimate, all respected opinion. Even the Federal Reserve’s chronically cheerful Atlanta squad pegged Q1 GDP at 2.8%. But scratch the surface and what do we find? What accounts for the screaming headline number?

Inventories. Companies will often amass inventories to jump out ahead of expected tariffs. Inventories have been mounting for the past year and then some… rising some 8%. And data reveal American business piled up $32 billion of inventoried goods the first quarter - a $46.3 billion swelling over the previous quarter.

Government bean counters heap inventories into the column of business investment. Thus in the official telling, they add to the gross domestic product. Says the Bureau of Economic Analysis, Q1 rising inventory contributed 0.65 percentage points to real GDP. Rinse them out and we have Q1 growth of 2.55%... not 3.2%. 2.55% is still handsome. Most original Q1 estimates came in under 2%.

But Daily Reckoning affiliate Wolf Richter takes the longer view: "Rising inventories, which are considered an investment and add to GDP, are eventually followed by a decline in inventories when companies whittle them down again, and there is a price to pay for it...

Companies that sit on that inventory and have trouble selling it will at some point cut their orders to reduce their inventories. When this happens, sales drop all the way up the supply chain… when businesses whittle down their inventories by ordering less, it ripples through the economy, lowers GDP growth…"

Affirms a swarm of Morgan Stanley economists: “The buildup in inventories over the past several quarters points to a large reversal in the second quarter.” How about the third… and the fourth? Meantime, we are informed the false fireworks of government spending account for another portion of the final 3.2%.

But according to the ladies and gentlemen of Oxford Economics, one metric tells tell a far truer tale of GDP: Final sales to domestic purchasers. What if we run the blue pencil through Q1 inventory and government GDP contributions… and cleave to final sales alone? Q1 GDP increased not 3.2% or even 2.6% after subtracting government’s “addition” - but a wilting 1.3%. 1.3% is miles and miles and miles behind the official 3.2%.

Let us peek even deeper beneath the shimmering surface... Q1 consumer durable goods spending sank 5.3%... the steepest plunge in 10 years. Private-sector consumption and investment - the pounding pulse of a healthful economy - trickled to a semi-comatose 1.3%. That is the faintest increase in nearly six years.

Consumer spending overall increased a mere 1.2%... off from 2.5% the quarter previous. And from last quarter’s 5.4%, business investment halved - to 2.7%.

MarketWatch informs us that investments in factories, offices, stores and oil wells sank for the third-straight quarter. It further informs us that investments in equipment such as computers, aircraft and machinery overall scratched out a piddling 0.2% increase.

Is this the eight-cylinder roar of a throbbing economic engine? “On the outside, it looks like a shiny muscle car,” writes Bernard Baumohl of the Economic Outlook Group...  “Lift the hood, however, and you see a fragile one-cylinder engine.”

Former Obama economic adviser and present Harvard grandee Jason Furman takes his own disappointing glance under the hood: “First-quarter GDP is 3.2%, but the underlying data is much weaker and is consistent with a slowing economy.” 

The aforesaid Oxford Economics affirms the economy is “undeniably cooling.” Meantime, the Federal Reserve huddles at Washington this week.  What does Friday’s GDP report implicate for interest rates? Despite the dazzling headline number, the Federal Reserve’s “Open Market” Committee will hold rates steady. They will certainly not raise rates. Why are we so certain? Official inflation data.

The Federal Reserve’s preferred inflation gauge - which excludes more fluid food and energy prices - increased not a jot last month. And it has increased only 1.6% year over year.  So the Federal Reserve remains hopelessly asea, as far as ever from its infinitely elusive 2% target.  And it will cut rates before raising rates - depend on it.

But last week we explained why we expect inflation to menace within the foreseeable future. Below, Jim Rickards shows you how inflation, presently as tame as any tabby, could turn to raging tiger far quicker than you think. Read on."
"The Fed’s Dangerous Inflation Game"
By Jim Rickards

"By now you've heard that the U.S. economy expanded at an annualized rate of 3.2% in the first quarter of 2019. That was reported by the Commerce Department last Friday morning. That strong growth coming on top of 4.2% in Q2 2018 and 3.4% in Q3 2018 means that in the past twelve months, the U.S. economy has expanded at about a 3.25% annualized rate. That's a full point higher than the average growth rate since June 2009 when the expansion began and it's in line with the 3.22% growth rate of the average expansion since 1980. 

It looks as if the "new normal" is back to the old normal of 3% or higher trend growth. Or is it? The headline growth rate of 3.2% was certainly good news. But, the underlying data was much less encouraging. Most of the growth came from inventory accumulation and government spending (mostly on highway projects). But, business won't keep building inventories if final demand isn't there. That's where the 0.8% growth in personal consumption is troubling. 

The consumer didn't show up for the party in the first quarter. If they don't show up soon, that inventory number will fall off a cliff. Likewise, the government spending number looks like a one-time boost; you can't build the same highway twice. Early signs are that the second quarter is off to a weak start. 

Dig deeper and you can see that core PCE (the Fed's preferred inflation metric) cratered from 1.8% to 1.3%. That's strong disinflation and dangerously close to outright deflation, which is the Fed's worst nightmare. The data just show that the Fed is as far away as ever from its 2% target. But why should it even have 2% as its target?

Common sense says price stability should be zero inflation and zero deflation. A dollar five years from now should have the same purchasing power as a dollar today. Of course, this purchasing power would be “on average,” since some items are always going up or down in price for reasons that have nothing to do with the Fed.

And how you construct the price index matters also. It’s an inexact science, but zero inflation seems like the right target. But the Fed target is 2%, not zero. If that sounds low, it’s not. Inflation of 2% cuts the purchasing power of a dollar in half in 35 years and in half again in another 35 years. That means in an average lifetime of 70 years, 2% will cause the dollar to 75% of its purchasing power! Just 3% inflation will cut the purchasing power of a dollar by almost 90% in the same average lifetime.

So again, why does the Fed target 2% inflation instead of zero? The reason is that if a recession hits, the Fed needs to cut interest rates to get the economy out of the recession. If rates and inflation are already zero, there’s nothing to cut and we could be stuck in recession indefinitely.

That was the situation from 2008–2015. The Fed has gradually been raising rates since then so they can cut them in the next recession. But there’s a problem. The Fed can raise rates all they want, but they can’t produce inflation. Inflation depends on consumer psychology. We have not had much consumer price inflation, but we have had huge asset price inflation. The “inflation” is not in consumer prices; it’s in asset prices. The printed money has to go somewhere. Instead of chasing goods, investors have been chasing yield.

Yale scholar Stephen Roach has pointed out that between 2008 and 2017 the combined balance sheets of the central banks of the U.S., Japan and the eurozone expanded by over $8 trillion, while nominal GDP in those same economies expanded just over $2 trillion.

What happens when you print over $8 trillion in money and only get $2 trillion of growth? What happened to the extra $6 trillion of printed money? The answer is that it went into assets. Stocks, bonds and real estate have all been pumped up by central bank money printing. The Fed, first under Ben Bernanke and later under Janet Yellen - repeated Alan Greenspan’s blunder from 2005–06.

Greenspan left rates too low for too long and got a monstrous bubble in residential real estate that led the financial world to the brink of total collapse in 2008. Bernanke and Yellen also left rates too low for too long. They should have started rate and balance sheet normalization in 2010 at the early stages of the current expansion when the economy could have borne it. They didn’t. Bernanke and Yellen did not get a residential real estate bubble. Instead, they got an “everything bubble.” In the fullness of time, this will be viewed as the greatest blunder in the history of central banking.

The problem with asset prices is that they do not move in a smooth, linear way. Asset prices are prone to bubbles on the upside and panics on the downside. Small moves can cascade out of control (the technical name for this is “hypersynchronous”) and lead to a global liquidity crisis worse than 2008.

If the Fed raises rates without inflation, higher real rates can actually cause the recession and/or market crash the Fed has been preparing to cure. The systemic dangers are clear. The world is moving toward a sovereign debt crisis because of too much debt and not enough growth. Inflation would help diminish the real value of the debt, but central banks have obviously proved impotent at generating inflation. Now central banks face the prospect of recession and more deflation with few policy options to fight it.

So the Fed has been considering some radical ideas to get the inflation they desperately need. One idea is to abandon the 2% inflation target and just let inflation go as high as necessary to change expectations and give the Fed some dry powder for the next recession. There are other, more drastic solutions as well. 

I’ve discussed how Modern Monetary Theory (MMT) is becoming increasingly popular in Democratic circles, even though the Fed has disavowed it. But it can’t be ruled out if Democrats win the 2020 election. That means 3% or even 4% inflation could be coming sooner than the markets expect if they’re pursued.

But those who want higher inflation should be careful what they ask for. Once inflation expectations develop, they can take on lives of their own. Once they take root, inflation will likely strike with a vengeance. Double-digit inflation could quickly follow.

Double-digit inflation is a non-linear development. What I mean by that is, inflation doesn’t go simply from two percent, three percent, four, five, six. What happens is it’s really hard to get it from two to three, which is ultimately what the Fed wants. But it can jump rapidly from there. We could see a struggle to get from two to three percent, but then a quick bounce to six, and then a jump to nine or ten percent. The bottom line is, inflation can spin out of control very quickly.

If people believe inflation is coming, they will act accordingly en masse, the velocity of money will increase and soon enough the inflation will arrive unless money supply has been severely constricted. That’s how you get the rapid inflation increases I described above.

So is double-digit inflation rate within the next five years in the future? It’s possible. Just to be clear, I am not making a specific forecast here. But if it happens, it could happen very quickly. So the Fed is playing with fire if it thinks it can overshoot its inflation targets without consequences. It doesn’t seem like a problem now. But one day it might."

"How It Really Is"