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Thursday 12.01.2016

Get Ready for a “Cash Tax”

Another front opens in the war on cash… India’s already banned the popular 500- and 1,000-rupee notes. And as Jim Rickards explains, “Businesses ground to a halt as vendors refused to accept cash for needed inputs like fuel and raw materials. Food shortages broke out as fishermen and farmers could not get goods to market. Banks and ATMs shut down and money riots broke out in certain locations.”

But if you think the Indian example might have the elites thinking twice about the war on cash, have another guess… Larry Summers, former Treasury secretary, current Harvard economist and grandee in the war on cash, says let them eat cake: “On balance, nothing in the Indian experience gives us pause in recommending that no more large notes be created in the United States, Europe and around the world.”

But any proposal to ban cash outright in the U.S. would be greeted with pitchforks. How about a subtler way to keep you from your cash? When hawking the Affordable Care Act, Obama famously assured the American people, “If you like your health care plan, you can keep it.”

To sell the war on cash, the elites may soon be swearing, “If you like your cash, you can keep it.” And it’ll be just as hollow. Enter the tax on cash… To dissuade the use of cash, Greek banks are now proposing a special tax on all cash withdrawals. Banning cash outright would set off klaxons. Just make it a hassle. Impose a penalty for its use. “Sure, you can have your cash, peon. You just have to pay this tax.”

U.S. to Forgive at Least $108 Billion in Student Debt in Coming Years

The federal government is on track to forgive at least $108 billion in student debt in coming years, according to a report that for the first time projects the full cost of plans that tie borrowers’ payments to their earnings.

The report, released on Wednesday by the Government Accountability Office, shows the Obama administration’s main strategy for helping student-loan borrowers is proving far more costly than previously thought. The report also presents a scathing review of the Education Department’s accounting methods, which have understated the costs of its various debt-relief plans by tens of billions of dollars.

The overall government student loan portfolio—currently totaling $1.26 trillion of debt outstanding, including privately issued loans backed by the government—continues to generate a profit, though these projected revenues are dwindling as more people go into income-based repayment.

Senate Budget Committee Chairman Mike Enzi (R., Wyo.) ordered the report last year amid a sharp increase in enrollment in income-driven repayment plans, which the Obama administration has heavily promoted to help borrowers avoid default. The most generous version caps a borrower’s monthly payment at 10% of discretionary income, which is defined as any earnings above 150% of the poverty level.

FED: The economy continues to grow across much of America

The Federal Reserve says the economy continued to grow across most of the US, according to its Beige Book released on Wednesday.

The Beige Book is a compilation of anecdotes on the economies in the Fed's 12 districts.

This document has been prepared ahead of the Federal Open Markets Committee's December 13-14 meeting, when it is likely to vote for the only interest-rate hike of 2016. The Cleveland Fed prepared this edition.

Minutes of the pre-election meeting in November showed that the Fed thought it would be appropriate to raise rates "relatively soon." The minutes, however, did not account for the postelection surge in Treasury yields and inflation expectations. Meanwhile, traders are almost certain of the Fed's next move, pricing in a 100% chance of a hike in December, according to Bloomberg.

OPEC agrees to 1.2 million barrel production cut

Earthquake at Poland copper mine kills at least five

At least five people died and three others were unaccounted for in southwest Poland after an earthquake rattled a copper mine Wednesday, authorities said.

The quake, with a magnitude measured at 4.4 by the U.S. Geological Survey, caused a cave-in at the Rudna mine, officials said, which is one of the largest copper mines in Europe. Five miners were killed and three others were trapped, officials said.

"We will announce four days of mourning and will cancel some of events organised for Miners' Day on Sunday," mining executive Radoslaw Domagalski-Labedzki said. "A rescue operation is being carried out under very difficult conditions."

Initially, four people were reported killed but one of the missing miners was found dead, Polish media reported. Although the quake was moderate, it caused extensive damage in the mine because underground operations are particularly susceptible to seismic activity.

Fed's Mester: Rate hike now would help the economy

Raising interest rates now would help rather than hurt the economic recovery, Cleveland Fed President Loretta Mester said in a speech Wednesday.

Mester has pushed her central bank colleagues to follow up on the December 2015 rate hike that was the first in more than nine years. However, the Federal Open Market Committee has stayed on the sidelines, keeping its overnight funds target in the 0.25 percent to 0.5 percent range.

Committee hawks believe the Fed is missing an opportunity to get ahead of the curve and is in turn risking that once inflation heats up, it will have to act in a way that could endanger growth.

"I view a small step up in interest rates as appropriate, not because I want to curtail the expansion, but because I believe it will help prolong the expansion," Mester said in remarks prepared for a speech to the African American Chamber of Commerce of Western Pennsylvania Annual Business Luncheon in Pittsburgh.

‘Flag Burning Challenge’ launches after Trump’s tweet

Things are getting heated after Donald Trump’s message to flag burners. First amendment advocates are taking part in a Flag Burning Challenge in response to Trump’s tweet on Tuesday that people who set U.S. flags on fire should be punished.

“Nobody should be allowed to burn the American flag — if they do, there must be consequences, perhaps loss of citizenship or year in jail!” Trump tweeted Tuesday morning.

His stance, which goes against a 1989 U.S. Supreme court decision, prompted some activists to call for the Flag Burning Challenge. Activists stood in front of the Trump International Hotel in New York City in a video posted on Wednesday night to burn two U.S. flags.

“Just burned US flag at Trump Hotel NYC. We REFUSE to Accept a Fascist America! Now your turn: #FlagBurningChallenge,” Sunsara Taylor tweeted.

Could Trump replicate his Carrier deal to help other factory workers, too?

Seemingly making good on his campaign promise to fight for the American factory worker, US President-elect Donald Trump announced late Tuesday that he had persuaded air conditioning manufacturer Carrier Corp. to keep jobs in Indiana, instead of moving them to Mexico as previously planned.

Details on the deal – which Mr. Trump is expected to unveil Thursday in Indianapolis, alongside company officials and Vice President-elect Mike Pence – remain unclear. And while the announcement could play favorably among Trump's political base of supporters, economic experts say this sort of case-by-case bargaining to save American jobs should not be seen as a viable fix for problems caused by larger-scale market forces.

"This is a spot solution," Mohan Tatikonda, a professor at Indiana University's Kelley School of Business, told The New York Times. "If it goes through it helps some Carrier employees for a period of time, but it doesn’t address the loss of manufacturing jobs to technological change, which will continue."

Carrier confirmed in a tweet that a deal had been reached, but it did not disclose precisely how Trump managed to negotiate the terms. Multiple news outlets have reported that state-level tax incentives were involved, with Mr. Pence (who remains governor of Indiana until Jan. 20) helping to finalize the details. Even the workers helped by Trump's dealing remain in the dark.

Why Trump’s victory is a win for coal miners

Trump Treasury pick: Fannie Mae and Freddie Mac will be privatized

After President-elect Donald Trump announced that he selected Steve Mnuchin, a former executive at Goldman Sachs and former chairman of OneWest Bank, to lead the Department of the Treasury, Mnuchin began making the media rounds with Wilbur Ross, Trump’s choice to lead the Department of Commerce.

One of Mnuchin and Ross’ first stops was with Fox Business, and during an interview with Maria Bartiromo, Mnuchin dropped a bombshell about the future of Fannie Mae and Freddie Mac.

Rather than be wound down, as some including another rumored choice to lead the Treasury, Rep. Jeb Hensarling, advocate for, Mnuchin said the government-sponsored enterprises will be taken out of “government ownership,” restructured, and privatized.

During the interview, Ross says that government is “not the right way to allocate capital,” and says that Fannie and Freddie are not “exactly role models” due to the two institutions being at the forefront of government influence after the financial crisis. Bartiromo then asks if Fannie and Freddie should be privatized. “Absolutely,” Mnuchin answers.

40% of Americans don’t know how their investments are allocated

Investing can be complex and difficult to understand, and most schools don’t teach the basics, like the importance of investing as early as possible and how compound interest works. And since many Americans are responsible for their own retirement savings, not knowing how and where to invest can be costly.

Forty-two percent of investors don’t know how their assets are allocated in their portfolios, according to a recent Prudential Investments’ retirement preparedness survey of more than 1,500 Americans aged 21 and older. Nearly three-quarters (74%) of pre-retirees said they should be doing more for their accounts, while 40% of participants said they just don’t know how to prepare for retirement.

“For most Americans, logging into their typical 401(k) screen is a lot like reading a foreign language or math formula,” said Greg Smith, president of blooom, a website that analyzes the way 401(k) accounts are allocated.

America is in the middle of a retirement crisis. The median working-age American couple only has $5,000 saved for retirement, and those older and nearing retirement are no better, with only $17,000 in their 401(k) plans. Millennials may face their own crisis, since they view saving for retirement as essentially giving money a stranger.

OPEC Agrees to Cut Production in Drive to End Record Glut

OPEC confounded its doubters and sent crude oil prices soaring by agreeing to its first production cuts in eight years.

The deal, designed to drain record global oil inventories, overcame disagreements between the group’s three largest producers -- Saudi Arabia, Iran and Iraq -- and ended a flirtation with free markets that started in 2014. It was also broader than many had expected, extending beyond OPEC. Most strikingly, Russia agreed to unprecedented cuts to its own output.

The impact on the energy world was immediate: benchmark oil prices gained as much as 10 percent in New York and the share prices of energy companies around the globe jumped alongside the currencies of large exporters. Whether that’s sustained will depend on how strictly members of the Organization of Petroleum Exporting Countries stick to the agreement, something they haven’t always done in the past.

“This should be a wake-up call for skeptics who have argued the death of OPEC,” said Amrita Sen, chief oil analyst at Energy Aspects Ltd. “The group wants to push inventories down.”

Gold Has a Bad November, But Just a Passing Storm

First the War on Cash, then the War on Gold

The global elites are using negative interest rates and inflation to make your money disappear. The whole idea of the war on cash is to force savers into digital bank accounts so their money can be taken from them in the form of negative interest rates. One way to avoid negative interest rates is to go to physical cash.. They can’t impose negative interest rates on cash.

In order to prevent people from using that option, the elites have launched a war on cash, as recent events have borne out. The war on cash is old news, but it is escalating rapidly…

India’s decision to make 1,000- and 500-rupee notes worthless is having devastating ripple effects in the Indian economy and the market for gold. The consequences of the decision are both appalling and encouraging — appalling because they show governments’ ability to destroy wealth, and encouraging because they show the ingenuity of individuals operating under the thumb of an oppressive government.

One immediate consequence of the cash ban was that paper money began trading at a discount to face value. The entire banking system in India has been running out of cash and alternative forms of payment such as gold and barter have been emerging.

Japan Exchange Group unveils blockchain consortium

All three are part of Japan Exchange Group (JPX) and will continue to conduct proof-of-concept (PoC) testing based on past findings and discuss the possibility of applying blockchain or distributed ledger technology (DLT) to capital market infrastructure from technical and operational perspectives.

JPX set up an internal research group late last year to study the applicability of DLT to capital market infrastructure. It came up with the same results as everyone else, namely that DLT has “potential” but “further research and development is still needed”.

TSE will create a test environment for PoC using Hyperledger’s open source platform, in co-operation with IBM Japan. The testing will start in spring 2017. The consortium will do the same as all the others that clutter the fintech arena – such as “seek participation from a wide range of Japanese financial institutions” etc etc.

JPX says it will “consider a structure for efficient information sharing between the DLT engineer community and financial institutions through efforts such as training on DLT technology by DLT engineers and training on operational workflows by financial institutions”.

Thief With Impeccable Timing Grabs Bucket Of Gold Flakes Worth $1.6M From Armored Truck

He only had about 20 seconds of distraction, but that’s all it took for one thief to walk off with about $1.6 million worth of gold flakes on a busy New York City street.

Surveillance video obtained by NBC 4 New York shows how the theft went down on a September afternoon in midtown Manhattan: the suspect is seen dilly-dallying near an armored truck while two guards bustle around it. One guard leaves to make a pickup, and the other goes toward the front seat of the vehicle to grab his phone.

In that moment, the suspect walks up to the 86-pound bucket of gold flakes, picks it up, and flees the scene — albeit slowly, as it’s clearly no easy thing to carry off such a heavy haul. Indeed, in the video, you can see as he scurries a few feet, then sets the bucket down to take a breather. He hoists it onto his shoulder, walks, and sets it down again.

Eventually, after shuffling along for an hour — taking a route that would normally be just a 10-minute walk — the suspect got into a van and drove off.

Caesars Cuts Free Parking at 8 Vegas Properties

Drivers looking for free parking along the Las Vegas Strip will have even fewer options soon after Caesars Entertainment Corp. announced plans to eliminate free parking at eight of their nine city resorts.

Starting next month, the Linq and Harrah’s will begin charging for valet services with an eye toward self-parking charges beginning as soon as new parking equipment is in place. Six more Caesars properties – Caesars, Paris, Bally’s, Planet Hollywood, Flamingo and the Cromwell – will also begin charging for all parking beginning next year.

The move comes in the wake of rival MGM Resorts’ decision to eliminate free parking at their facilities earlier this year. One Caesars property — the off-Strip Rio All-Suite Hotel & Casino — will remain free. The company said parking problems at the other resorts necessitated the change, a move that was unnecessary with Rio’s larger parking area.

“Guests who stay, game and shop at our resorts have said that parking spaces and valet services have become increasingly scarce,” president of hospitality at Caesars Entertainment Bob Morse said a written statement. “We believe that implementing a paid parking program while also investing in LED parking guidance systems will help address these issues.”

Dollar Should Be Reduced Already to the Level of Toilet Paper

The Prospects for Gold as Trump’s Agenda Kicks In

“If Trump wins, gold will go through the roof.” That was the popular narrative before the election and the first move right after it became clear that Donald Trump won the presidential election on Nov. 8.

However, what happened afterward befuddled many market observers. Despite the hype about the uncertainty and perceived recklessness of a Trump presidency—essentially positive for gold—the yellow metal tanked from $1,278 just before the election to $1,183 at the end of November.

Soon after it became clear that Trump would have a Republican Congress to approve his spending plans, and the first names for the post of Treasury Secretary started to make the rounds, the uncertainty gave way and analysts started to price in tax cuts and deregulation. Both of these elements of Trump’s economic agenda are good for companies, small and large, and should boost innovation and productivity. If productivity increases and the economy grows, stocks are a better bet than gold, so gold was sold off and stocks rallied.

Furthermore, Trump and Republicans have vowed to repeal the Dodd-Frank regulations, which severely limit the risks financial firms are allowed to take. If Dodd-Frank is repealed, banks and other financial companies will likely expand debt in the financial system through new lending or proprietary trading. This expansion of financial assets is usually bad for gold because it is a monetary, physical, and nonfinancial asset.

GoPro Cutting 15% of Workforce

GoPro Inc., struggling to get traction with its action-cameras and new drone, is eliminating about 15% of its workforce and shutting down the entertainment division to reduce costs.

The company, which isn’t profitable, will cut more than 200 full-time positions, according to a company statement Wednesday. Tony Bates, who joined as GoPro’s president in June 2014, is stepping down by the end of the year. He was previously an executive vice president at Microsoft Corp. and the chief executive officer of Skype Technologies SA.

The closing of the entertainment division is a signal that the company is finally narrowing its vision. Wall Street has long been skeptical about GoPro’s plans to build a media company around its action-packed GoPro videos online. The shares, which have lost about half their value this year, rose 4.17 percent to $10.24 at 9:41 a.m. in New York.

"They’re focusing on their core activities--and anything else that doesn’t make money, they can’t afford to continue," said Rob Stone, an analyst at Cowen & Co LLC. "The entertainment was part of the overall brand but doesn’t make money and isn’t core, so it’s gone."

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