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Friday 07.15.2016

Fmr. Fed Chair Greenspan: Inflation is Starting to Rise

Former Federal Reserve Chairman Alan Greenspan is forecasting a long over-due inflation uptick.

“I think we are on the edge now of a significant change in the global outlook. And it’s a very slow and very turgent but very persistent move from deflation to inflation. We’re seeing the very early signs of a process of inflation rising,” Greenspan told the FOX Business Network’s Maria Bartiromo.

One of the data points Greenspan is tracking is the growth of money supply, which in just the last six to eight weeks has seen a noticeable pick-up, he said.

Low inflation has been a thorn in the side of the Federal Reserve for many months running under 2%.

Two More Fed Officials Play Down Brexit Impact on U.S. Growth

Brexit was a dark cloud on the horizon for the Federal Reserve. With the storm passing, a number of officials have said that repercussions from Britain’s vote to quit the European Union probably won’t derail the U.S. economy, or stop them from raising interest rates.

Comments Thursday from the presidents of the Federal Reserve Banks of Kansas City and Atlanta chimed with other remarks from U.S. central bankers playing down the likely fallout from the U.K. referendum as they prepare for a policy meeting later this month.

“I have no basis -- statistical or anecdotal -- for assuming any significant change in economic momentum,” since the June 23 U.K. referendum, Atlanta Fed chief Dennis Lockhart told an audience in Victor, Idaho. “To summarize my view of Brexit effects: negligible near-term effect; a risk factor over the medium term; higher uncertainty that could amount to a persistent economic headwind.”

Fed Chair Janet Yellen has not publicly weighed in on the debate and has no appearances scheduled between now and the July 26-27 meeting of the Federal Open Market Committee, which will not be followed by a press conference. Nor has there been any signal from other senior Fed officials to counter the perception that they’ll stand pat this month to await more information before raising rates again.

Majority in U.S. Still Hopeful for Solution to Race Problems

Speaking at the services of five slain Dallas police officers on Tuesday, President Barack Obama said the recent violence makes Americans wonder "if the divides of race in America can ever be bridged," but he urged them to "reject such despair." The majority of Americans, at least from a long-term perspective, share the president's optimism. Fifty-seven percent of Americans in June said that a solution to relations between whites and blacks "will eventually be worked out," while 40% said that black-white relations "will always be a problem."

The latest results are from Gallup's June 7-July 1 Minority Rights and Relations poll, conducted before the events of the past two weeks in Louisiana, Minnesota and Texas -- the latter the occasion for Obama's speech in Dallas.

Americans' optimism about black-white relations in the long term has held steady over the past three years, even with a number of incidents involving black men being killed in encounters with white police officers that sparked nationwide protests and, ultimately, the Black Lives Matter movement.

In 1963, the independent research organization NORC at the University of Chicago asked Americans about the long-term prospects for race relations in the U.S., and 55% said that a solution would eventually be worked out. Gallup started updating the trend on this question in the 1990s and found Americans' optimism by that point had dropped significantly. They were most negative after the verdict in the O.J. Simpson murder trial in October 1995, when an all-time low of 29% said a solution would eventually be worked out. The public grew more positive in the 2000s, and, across 13 different surveys conducted since 2002, at least half of Americans have said a solution to black-white relations will eventually be worked out. Americans were most optimistic in November 2008, just after Obama's election as the nation's first black president.

At Least 80 Dead in Terror Attack: French Interior Min.

The middle class vacation squeeze

Sara Williams, 30, has not taken a vacation of one week or longer in more than five years. She's among those who participated in the Marketplace-Edison Research poll. She's a military veteran married to a veteran; they both attended Colorado State University on the G-I bill. They have since settled down in Fort Collins — a cozy college town at the foothills of the Colorado Rockies. They both found jobs after graduating: she is an office administrator, he is a software engineer.

“We’ve never taken a trip just the two of us, anywhere,” said Williams. After their wedding, the couple couldn’t afford a honeymoon; then they bought a house—paying more than they originally budgeted. Next, their car broke down and they had to buy a new one.

“I think in a few years, once we get our student loans paid off and our car paid off, we’ll be able to start putting money towards that,” Williams said."But there’s really not any extra to take vacation. We wouldn’t really be able to go anywhere.”

According to the Marketplace-Edison Research Poll, though, a lot of Americans in the middle-income bracket are not getting away on vacation very frequently, if at all. The poll found that 24 percent of households reported not taking a vacation of one week or longer in more than five years.

Americans are failing in financial literacy: What can we do?

One would assume that the financial crisis in 2008 would lead to better financial practices in 2016, but a new report by FINRA Investor Education Foundation indicates that Americans are not saving for the long-run, even though they are on a better financial footing six years after the Great Recession, which began when a housing bubble burst in 2007 and led to years of decreased consumer spending.

In America, 18 percent are spending more than their household income; 21 percent have overdue medical bills; 32 percent are paying the minimum amount on their credit card; and 63 percent failed FINRA’s financial literacy test. What’s worse is that many Americans don’t realize how much they don't know.

“The very people who give themselves the highest scores are engaging in behaviors that don’t reflect their perception of their ability to manage their behavior,” Gerri Walsh, president of FINRA Investor Education Foundation tells The Christian Science Monitor in a phone interview.

“Eighty-one percent of people said that they handle their finances very well,” giving themselves a five, six, or seven out of 10, says Ms. Walsh. “But that sense of satisfaction with personal financial circumstances may well derive from an improving economy and an improving job market."

Bubbles In Bond Land——It’s A Mania!

Sometimes an apt juxtaposition is worth a thousand words, and one from this morning’s news is surely that. Last year Japan lost another 272,000 of its population as it marches resolutely toward its destiny as the world’s first bankrupt old age colony. At the same time, the return on Japan’s 40-year bond during the last six months has been an astonishing 48%. That’s right!

We aren’t talking Tesla, the biotech index or the FANGs. To the contrary, like the rest of the JGB yield curve, this bond has no yield and no prospect of repayment.

But that doesn’t matter because its not really a sovereign bond, anyway. It has actually morphed into a risk free gambling chip. Leveraged front-runners are scooping up whatever odds and sots of JGB’s that remain on the market and are selling them to the BOJ at higher, and higher and higher prices.

At the same time, these punters face virtually no risk. That’s because the BOJ already own 426 trillion yen of JGB’s, which is nearly half of the outstandings. And it is scarfing up the rest at a rate of 80 trillion yen per year under current policy, while giving every indication of sharply stepping-up its purchase rate as it segues to outright helicopter money.

Online prices are showing signs of deflation

Government data puts inflation at about 1 percent, and even that anemic number may overstate the true level of price growth.

Billions of online transactions are tracked on a daily basis by Adobe and show that deflation is rampant across several consumer categories. Prices are falling fast in the Adobe Digital Price Index, which measures 80 percent of all online transactions from the top 100 U.S. retailers.

The consumer price index is calculated on a monthly basis by surveying the costs of about 80,000 items, while the DPI tracks 2.2 million products every day. Online commerce makes up almost 8 percent of all retail sales, according to the Census Bureau.

Deflation in the DPI in June was stronger for discretionary spending categories like electronics and sporting goods than essentials like groceries and medical supplies, said Mickey Mericle, vice president of marketing and customer insights at Adobe. That could be a sign of reduced spending on nonessentials by cash-strapped Americans.

Keiser Report: Gold & World’s Debt Problems

The Fundamental Reason The Silver Price Will Explode Much Higher Than Gold

Investors need to understand an important fundamental reason why the silver price will explode much higher than gold. While many analysts state several reasons why silver will outperform going forward, I believe one vital fundamental factor is overlooked.

This critical factor is based upon a certain supply versus demand component of the gold and silver markets. Actually, I came across this data while working on the research for a completely different article. However, the more I compared the figures, the more surprised I was by the results.

While most investors realize that gold and silver scrap supply are used to help supplement the market, very few understand the huge disconnect between these two precious metals when it comes to recycled jewelry scrap.

According to the Metals Focus: Silver Scrap Report, the world recycled approximately 551 metric tons (mt) of silver jewelry in 2015. This may seem like a substantial amount until we compare it to total world silver jewelry demand of 7,045 mt.

Stocks Will Crash – and Crush (California’s) Pension Funds & Taxpayers: Report

The California Policy Center published an interesting study – “interesting” in all kinds of ways, including its outline of the doom-and-gloom future of California’s state and local pension plans if stocks turn down sharply, preceded by its prediction that stocks will turn down sharply because valuations are totally unsustainable.

The huge, simultaneous, Fed-engineered rallies in stocks, bonds, and real estate – typically the three biggest holdings of state and local pension funds in the US – have inflated the balance sheets of these funds, thus elegantly, if only partially, papering over their fundamental problems. Most of these funds have a similar doom-and-gloom future when the asset bubbles get pulled out from under them. Plenty of pension funds don’t even need a market correction: they’re already in serious trouble despite the asset bubble

So what happens when these asset bubbles burst, or when, to be merciful, just one of them bursts?

Ed Ring, president of the California Policy Center and author of the evocatively titled study, “How a Major Market Correction Will Affect Pension Systems, and How to Cope,” uses a long-range cash-flow model with a number of variables to simulate different scenarios for California’s state and local pension funds.

100,000 oil jobs could be coming back

Good news laid-off oil workers: U.S. energy companies could soon face a serious worker shortage. Goldman Sachs believes the American oil industry is about to stage a big comeback from the painful downturn and big job losses caused by oversupply.

As more oil fields come on line and America's oil boom gets back on track, there simply won't be enough people to do the required drilling, well completion and other logistical work. Cheap oil wiped out nearly 170,000 oil and gas jobs since late 2014 as desperate companies scrambled to cut costs and avoid bankruptcy.

That means just to keep up with the expected ramp-up in drilling activity, the oil and gas industry would need to add 80,000 to 100,000 jobs between now and the end of 2018, Goldman predicted in a recent report. The estimate is based on Goldman's forecast for U.S. oil production to resume growing next year after the recent drop to two-year lows. That growth would require some 700 oil rigs to be added -- and each one supports an average of 120 to 150 employees.

Jeff Bush, president of oil and gas recruiting firm CSI Recruiting, agrees that a "worker shortage" is coming. "When we get back to a reasonable level of activity, there's going to be a supply crisis of experienced personnel. I just don't see any way around that," said Bush.

Another reason rates are likely to be lower for longer

The Federal Reserve (Fed) has suggested it’s likely to remain on hold for the near future given Brexit-related uncertainty and tightening financial conditions.

A moderating global growth dynamic and very easy monetary policy abroad are also forces keeping the central bank from initiating more rate normalization. Perhaps more importantly, closer to home, there’s one more reason we should expect interest rates to be lower for longer: The strong pace of U.S. jobs growth seen over the past few years has moderated recently and is unlikely to be sustained at historically high levels, as reduced corporate profits and political.

But what about June’s strong jobs growth? I believe May’s poor jobs growth was an aberration as was June’s better-than-expected report, but the average of the two seems about right. The very poor headline data in May overstated labor market weakening and didn’t reflect that the U.S. economy is still doing reasonably well. Meanwhile, the June gain included the 35,000 boost from Verizon workers returning from their strike, and the inevitability of a bounce from the weak April and May releases, so the headline print may be a bit less meaningful after delving into the details.

In fact, despite the strong headline numbers, June’s report did bring some signs of a slowing big picture. April and May jobs numbers, when combined, were revised slightly downward by a total of 6,000 fewer jobs than previously reported. In addition, the most recent payrolls print brought the 3-month, 6-month and 12-month moving average payroll gains to 147,000, 172,000 and 204,000, respectively. While these levels are modestly higher than May, they still show a slowing trend.

Oil glut fears weigh on investors

Poor at 20, Poor for Life

A new study indicates that from the 1980s to the 2000s, it became less likely that a worker could move up the income ladder. It’s not an exaggeration: It really is getting harder to move up in America. Those who make very little money in their first jobs will probably still be making very little decades later, and those who start off making middle-class wages have similarly limited paths. Only those who start out at the top are likely to continue making good money throughout their working lives.

That’s the conclusion of a new paper by Michael D. Carr and Emily E. Wiemers, two economists at the University of Massachusetts in Boston. In the paper, Carr and Wiemers used earnings data to measure how fluidly people move up and down the income ladder over the course of their careers. “It is increasingly the case that no matter what your educational background is, where you start has become increasingly important for where you end,” Carr told me. “The general amount of movement around the distribution has decreased by a statistically significant amount.”

Carr and Wiemers used data from the Census Bureau’s Survey of Income and Program Participation, which tracks individual workers’ earnings, to examine how earnings mobility changed between 1981 and 2008. They ranked people into deciles, meaning that one group fell below the 10th percentile of earnings, another between the 10th and 20th, and so on; then they measured someone’s chances of moving from one decile to another.

But the researchers wanted to see not just the probability of moving to a different income bracket over the course of a career, but also how that probability has changed over time. So they measured a given worker’s chances of moving between deciles during two periods, one from 1981 to 1996 and another from 1993 to 2008.

Americans want presidential candidates talking about affordable housing

About 76% of Americans who are likely to vote in the 2016 presidential election say they are more likely to support candidates who make housing affordability a focus of their campaigns and a priority in government, according to a national public opinion poll by Make Room, a nationwide campaign giving voice to American renters.

Almost all Democrats, about 92%, say they would support a presidential candidate who make affordable housing a priority, and about 78% Independents said the same. While Republican numbers were much lower, still a majority at 55% said they would be more likely to vote for a candidate who made affordable housing a priority.

Likely voters not only want to see affordable housing on the candidates’ platforms, but also consider the issue to be an important factor in their voting decisions. About 60% of likely voters say that housing is a key issue to them in this voting season.

“The dual challenges of rising rents and stagnant wages do not discriminate: millions of Americans, regardless of political affiliations, are struggling to afford their homes and are living in fear of an unexpected expense or reduction in hours at work leading to eviction or homelessness,” Make Room Managing Director Angela Boyd said. “Candidates for public office and current elected officials must prioritize housing affordability and be clear with voters about their plans for addressing this issue as a significant barrier to families’ financial security and our country’s economic prosperity,” Boyd said.

Deutsche Bank Blames Central Bank Stimulus For Economic Woes

Has the “unprecedented scale and duration of monetary policy easing” by EU, US and Japanese central banks led to what is a historically slow recovery? Is quantitative stimulus really an addictive pain killer that is responsible for “Secular Stagnation?” Deutsche Bank asset management researchers have an answer and it sings from the same song-book as did their chief economist on Monday.

When Deutsche Bank Chief Economist David Folkerts-Landau was on CNBC, he doubled-down on claims that the European Central Bank had lost credibility and the economic situation around the region endangered the entire system. He advocated a bank bailout that would “break the rules” of the EU, recommending that such action be taken now and not in the middle of crisis.

The following day Deutsche Bank Asset Allocation researchers echoed this meme in an independent research report.

“Many of the premises underlying the view that lower rates represent stimulus do not hold up under closer scrutiny,” the July 12 research opined. In the report titled “Is Unprecedented Monetary Policy Easing Creating ‘Secular Stagnation’?” Deutsche Bank researchers answered their own question with a resounding “yes.”

‘Out of Business’ Sign For The Fed Says Keith Fitz-Gerald | Kitco News

Italy will likely be next EU member to face an economic collapse

And this is part of the reason why Great Britain wanted to leave the crumbling European Union (EU). The eurozone is facing a brand new crisis: the collapse of Italy.

Italy’s banks are going through trying times, and will likely become the block’s next big headache. Ostensibly, Italian banks are undergoing a series of tumultuous problems, including the build-up of bad debt, collapsing share prices and defaults from non-performing loans.

The Italian banking sector is now the most immediate and biggest threat to the fragile health of the eurozone. It’s estimated that the problem is worth about $525 billion, which is about one-quarter of Italy’s gross domestic product (GDP). This figure includes $290 billion worth of bad debts and roughly $200 billion in potential defaults.

Later this month, it will be clear just how much of a weak position Italian banks are in when the European Banking Authority (EBA) conducts a stress test. It’s believed that Banco Populare and Banca Monte dei Paschi di Siena will fail to meet the previous stress test levels. What will be interesting, however, is that the EBA will not be setting an official benchmark pass rate in order to avoid further damage to the banks.

For First Time in 50 Years, Federal Bill Seeks Limits on Debt Collection Seizures

For the first time in nearly 50 years, a new federal bill seeks to lower how much lenders and collectors can seize from debtors through the courts, revisiting caps set in 1968 by the landmark Consumer Credit Protection Act.

The Wage and Garnishment Equity (WAGE) Act of 2016, sponsored by Rep. Elijah Cummings, D-Md., and Sen. Jeff Merkley, D-Ore., would substantially reform protections for debtors by exempting many lower-income workers from garnishment and reducing what collectors can take from the paychecks and bank accounts of others.

As ProPublica has reported in a series of articles over the past three years, consumer debts such as medical or credit card bills result in millions of garnishments every year. But the scale of the seizures and their consequences for the poor have largely been ignored by lawmakers, in part because no one tracks how often they happen. In their press release announcing the legislation, Cummings and Merkley cited ProPublica and NPR’s reporting that 4 million workers had wages taken for consumer debts in 2013. The garnishments hit low-income workers most frequently: Nearly 5 percent of those earning between $25,000 and $40,000 per year had a portion of their wages diverted to pay down consumer debts in 2013.

Under current federal law, even workers below the federal poverty line can have up to a quarter of their after-tax wages taken. But there is no limit on what collectors can take from bank accounts, so if a paycheck is deposited, all of the money in the account can be grabbed to pay down the debt. “Every day, some Americans are having every penny in their paychecks garnished,” Cummings told ProPublica. “Congress should not sit on the sidelines and watch our constituents be kept in a cycle of poverty.”

How My ObamaCare Coverage Is Almost Worse Than No Coverage

For many people, like me, ObamaCare has become like a flat fee tax. Let me explain how.

It’s an amount that must be paid each month. Failure to do so will result in a fine from the government. It’s not a flat rate tax, which is meant to be the same percentage tax rate but which is still dependent on income. A ten percent tax on a $40,000 annual income is $4,000. But a 10% tax on $250,000 is $25,000. Same percentage rate but a different amount. It is neither a regressive or progressive tax.

Beyond a certain income level, which is relatively low, the net amount charged for ObamaCare coverage doesn’t change. Anyone with the same plan as I have (and who doesn’t receive a government subsidy) pays the same flat fee each month regardless of their income.

In that sense, it could be said to be partially regressive, in that the percentage of income it costs is higher for those earning just above the subsidy threshold versus those with even higher incomes. Strange, but true. A left-leaning administration has introduced something that amounts to a regressive tax.

NEWS to Disturb the Comfortable...

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