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Monday 05.15.2017

The Federal Reserve Must Go

If you want to permanently fix America’s economy, there really is no other choice. Even before Ron Paul’s rallying cry of “End The Fed” shook America during the peak of the Tea Party movement, I was a huge advocate of shutting down the Federal Reserve. Because no matter how hard we try to patch it up otherwise, the truth is that our debt-based financial system has been fundamentally flawed from the very beginning, and the Federal Reserve is the very heart of that system. The following is a free preview of an upcoming book that I am working on about how to turn this country is a more positive direction…

As the publisher of The Economic Collapse Blog, there have been times when I have been criticized for focusing too much on our economic problems and not enough on the solutions. But I believe that in order to be willing to accept the solutions that are necessary, people need to have a full understanding of the true severity of our problems. It isn’t by accident that we ended up 20 trillion dollars in debt. In 1913, a bill was rushed through Congress right before Christmas that was based on a plan that had been secretly developed by very powerful Wall Street bankers. G. Edward Griffin did an amazing job of documenting the development of this plan in his groundbreaking book “The Creature from Jekyll Island: A Second Look at the Federal Reserve”. At that time, most Americans had no idea what a central bank does or what one would mean for the U.S. economy. Sadly, even though more than a century has passed since that time, most Americans still do not understand the Federal Reserve.

The Federal Reserve was designed to create debt, and of course the Wall Street bankers were very excited about such a system because it would make them even wealthier. Since the Fed was created in 1913, the U.S. national debt has gotten more than 5000 times larger and the value of the U.S. dollar has declined by about 98 percent. So the Federal Reserve is doing what it was originally designed to do. In fact, it has probably worked better than the original designers ever dreamed possible.

There is often a lot of confusion about the Federal Reserve, because a lot of people think that it is simply an agency of the federal government. But of course that is not true at all. In fact, as Ron Paul likes to say, the Federal Reserve is about as “federal” as Federal Express is.

North Korea fires missile that lands in sea near Russia

North Korea, defying calls to rein in its weapons program, fired a ballistic missile that landed in the sea near Russia on Sunday, days after a new leader came to power in South Korea pledging to engage Pyongyang in dialogue.

The U.S. military's Pacific Command said it was assessing the type of missile that was fired but it was "not consistent with an intercontinental ballistic missile". The U.S. threat assessment has not changed from a national security standpoint, a U.S. official said.

Japanese Defense Minister Tomomi Inada said the missile could be a new type. It flew for 30 minutes before dropping into the sea between North Korea's east coast and Japan. North Korea has consistently test-fired missiles in that direction.

A U.S. official, speaking on condition of anonymity, said the missile landed 97 km (60 miles) south of Russia's Vladivostok region. U.S. Ambassador to the United Nations Nikki Haley called the launch a message by Pyongyang to South Korea after the election of President Moon Jae-in, who took office on Wednesday.

Total Number Of Bogus Wells Fargo Accounts Could Be As High As 3.5 Million

When Wells Fargo finally acknowledged what some had been alleging for years — that bank employees may have opened up fake, unauthorized accounts in customers’ names — it estimated the total number of bogus accounts at around 2.1 million. However, recently filed court documents contend that there could be as many as 1.4 million additional bogus accounts.

Wells Fargo is currently hashing out the details of a class-action settlement that it hopes will resolve the dozen or so pending federal lawsuits brought by customers in recent years. The settlement — originally valued at $110 million, before swelling to $142 million a month later — involves a lawsuit brought by a Wells Fargo customer in 2015, more than a year before the bank revealed that employees may have been creating these fraudulent accounts to game the Wells Fargo system of sales quotas and incentives.

The revelation of the potential higher number of fake accounts actually comes from a memorandum filed by plaintiffs’ attorneys in support of the settlement. “Based on public information, negotiations, and confirmatory discovery, the parties estimate the number of unauthorized accounts for the period 2002-2017 is approximately 3.5 million,” explains the document.

Wells claims that this figure of 3.5 million accounts is “based on a hypothetical scenario and [has] not been verified,” and even the plaintiffs’ attorney caution that “This number may well be over-inclusive.”

When Central Banks Lose Control Bubbles Will Pop

Recessions Push People to Buy Cheap Things, Which Just Makes Everything Worse

The U.S. labor market is like an aging athlete; it is taking longer and longer to recover from recessions. It took two and a half years to regain the jobs lost during the 1990-92 recession. The next recession, which came in 2001, was short and mild (GDP barely fell), but it took four years for the job market to heal, prompting the Federal Reserve to administer the economy a long course of low interest rates. Then came the Great Recession. It took seven years for employment to return to its 2007 level. It is taking even longer for real wages to recover–they are still below their pre-recession trend.

What’s behind these “jobless recoveries”? In 2016, an influential study by Nir Jaimovich and Henry Siu showed that jobless recoveries occur because routine jobs are permanently eliminated during recessions. Firms strive to cut costs during downturns and in the past quarter century automation and outsourcing have made jobs a juicy target for cost-cutting. Unfortunately for workers, once a call center is automated or production is outsourced to China, those jobs don’t come back when the U.S. economy recovers.

But there’s more to it than that. In recent work, Nir Jaimovich, Arlene Wong, and I show that consumer behavior is contributing to deeper recessions and slower recoveries. During downturns, consumers “trade down” to economize; that is, they reduce the quality of the goods and services they consume. To wit: Fast foods restaurants like McDonalds and Chipotle and general merchandise stores like Target and Walmart gained market share during the Great Recession.

Trading down makes sense at an individual level but at a macro level it creates a trap because goods and services of lower quality are produced with less labor than those of higher quality. So, as consumers flock to lower quality goods, they reduce the demand for American labor, adding to the woes of the recession. In some cases, trading down persists after the recession ends (consumers are by and large creatures of habit) adding to the time it takes for the job market to recover.

Is the Oil Boom Restarting in North Dakota?

North Dakota had been strongly benefiting from the shale oil boom during the Obama years, in spite of the Obama administration’s hostility towards the energy sector. This came to an end with the great price crash of 2016. However, Donald Trump has given North Dakota just a little help:

More than two years after the state’s unprecedented oil bonanza fizzled to a lull, North Dakota – the nation’s No. 2 oil producer behind Texas – is experiencing a sort of boomlet that has pushed daily production back above 1 million barrels daily.

“There is a long-term optimism that was not here just a year ago,” said Williston Republican Sen. Brad Bekkedahl, whose western North Dakota district is in the epicenter of the state’s oil-producing region.

Industry officials and others say the uptick comes from a bump in crude prices, regulatory certainty with the more drill-friendly Trump administration, better technology, and the prospect of nearly half of the state’s crude coursing through the disputed Dakota Access Pipeline, which could open markets abroad where top prices are typically fetched.

Inflation Props Up Gold; Ontario’s Massive Debt Load

Here at the outset, I want to share with you an interesting observation we made this week of gold’s seasonal trading pattern. As you can see in the chart below, based on data provided by Moore Research Center, the five-year pattern, represented by the orange line, is diverging from the longer-term trends. Note that the index on the left measures the greatest tendency for the asset to make a seasonal high (100) or low (0) at a given time.

The data show that lows are now reached late in the year, not in January (according to the 15-year period, represented by the dark blue line) or August (according to the 30-year pattern, represented by the light blue line). Historically, September has seen the highest returns on gold as Indians make huge purchases in preparation for Diwali and the fourth-quarter wedding season, but lately we’ve seen changes. When we calculate the average monthly returns of the past five years, from January 2012 to December 2016, we find that January is the strongest month, returning 5.3 percent, following by August with 2.3 percent. September actually returns negative 1.3 percent.

There could be a number of reasons why this is, but it’s important to recognize that the five-year period captures the bear market that dragged gold from its high of $1,900 an ounce in August 2011 to a recent low of $1,050 in December 2015. The years 2013, 2014 and 2015 all saw negative returns, so it’s little wonder why the orange line trends down from February-March to December.

Consumer and producer prices rose in April compared to the same time last year, favoring gold prices going forward. Consumer goods climbed 2.2 percent, down slightly from March’s 2.4 percent. Wholesale goods, meanwhile, flew up 5.3 percent, higher than economists’ expectations and the strongest year-over-year increase in nearly six years.

Consumer Confidence: Americans Are Losing Faith In Government's Ability To Protect Consumers

Americans have grown more pessimistic in recent months as consumers, with new concerns about access to health care, data privacy and security and the government’s ability to regulate safety standards in the automotive industry, a survey conducted by Consumer Reports indicated.

Consumer Reports spoke to 1,007 American adults in April for its second Consumer Voices Survey. The respondents indicated their confidence as consumers had waned since the start of the year, dropping at least five percent in each category they were questioned about.

One number that stayed consistent since Consumer Reports ran its first survey in January, just prior to the inauguration of President Donald Trump, is the overall trust of the government to watch out for consumer interests. Sixty-five percent of those surveyed said they did not trust the government to put their interests first—the same percentage produced at the start of the year.

However, there were significant drops in consumer confidence in regards to specific industries. The greatest change came in regards to the government’s ability to regulate safety and transparency standards on the auto industry.

Death spiral for cars. By 2030, you probably won’t own one

A major new report predicts that by 2030, the overwhelming majority of consumers will no longer own a car – instead they will use on-demand electric autonomous vehicles.

By 2030, within 10 years of regulatory approval of autonomous electric vehicles (A-EVs), the report says, 95 per cent of all US passenger miles traveled will be served by on-demand, autonomous, electric vehicles that will be owned by fleets rather than individuals.

The provision of this service may come virtually free as part of another offering, or a corporate sponsorship. Imagine, for instance, paying a token sum for a ride into town after buying a latte for $4.50. Or getting a free ride because the local government has decided to make transport easier.

The report, by RethinkX, an independent think tank that focuses on technology-driven disruption and its implications across society, says this stunning and radical will be driven entirely by economics, and will overcome the current desire for individual car ownership, starting first in the big cities and then spreading to the suburbs and regional areas.

Can't Pay Your Student Loans? The Government May Come After Your House

On Adriene McNally's 49th birthday in January, she heard a knock on the door of her modest row-home in Northeast Philadelphia. She was being served. "They actually paid someone to come out and serve me papers on a Saturday afternoon," she says.

The papers were from a government lawsuit that represents something more than just an unwelcome birthday gift — it's an example of a program the federal government has brought to 19 cities around the country including Brooklyn, Detroit, Miami and Philadelphia: suing to recover unpaid student loans, like the ones McNally owes.

Every day, 3,000 people default on their federal student loans — and those lack of payments amount to an unpaid bill of $137 billion for the federal government. For decades, the government has tried to get borrowers to pay up by hiring debt collection agencies to call and send letters. But now the government is trying this new lawsuit strategy.

McNally filed for bankruptcy in 2006 and cleared out all her creditors — except for student loans, which are nearly impossible to get rid of in bankruptcy. As she and many others have found out, it's not easy escaping federal student loan debt. "Your whole body heats up with frustration," McNally says. "I'm so frustrated over all this. It's been so many years that they've been sending me mail and threatening me on the phone."

Wells Fargo closing 450 branches by 2019

Wells Fargo & Co. on Thursday laid out plans to close additional branches and offer more digital tools — all part of a push to trim $2 billion in costs while trying to keep customers and attract new ones. Speaking to investment analysts at the bank's investor day conference in San Francisco, executives said they plan to close 450 branches by the end of 2018 — 50 more than the bank had announced earlier this year — with the potential for more in 2019.

Wells Fargo has 14 area facilities in Rock Island, Moline, Davenport, Bettendorf, Geneseo, Atkinson and Woodhull. "We continue to evaluate our branch network, and base our physical distribution strategy on customer behavior, market factors, economic trends and competitor actions," said Staci Schiller, a spokesperson for Wells Fargo. "While branches continue to be important in serving our customers’ needs, our investment in digital capabilities has enabled us to seamlessly serve our customers across channels and provide choice in how they bank with us.

"Through April of this year, we’ve closed 48 branches and are on pace to close 200 by year-end," she said. "Next year, we expect the pace of branch closures to increase to around 250.

"At this time, we cannot provide details on specific locations; however, many of the closures this year will be in close proximity to another branch," Ms. Schiller said. "Therefore, we don’t expect a significant revenue or team member impact."

Massive global cyberattack may become larger

Sears CEO's master plan to profit off the demise of his stores is taking a turn for the worst

A bustling San Diego mall that's home to high-end stores like Nordstrom, Tiffany, and Restoration Hardware is defying the decline of shopping centers across the US and undergoing a massive $700 million expansion. One store in the mall — Sears — won't survive long enough to reap the benefits of the redevelopment.

Desperate for cash, Sears Holdings sold the property in 2015, along with dozens of other prime locations, signing deals to rent the space from its new owner. Now the company that bought those outlets is pulling the plug on the San Diego store, which has been an anchor of the Westfield UTC shopping center for more than 40 years. Seritage Growth Properties, the real-estate owner, has already siphoned off a chunk of the store and leased it out to Williams-Sonoma and Pottery Barn Kids. This summer, it will take over the rest.

It's a lucrative move for Seritage. As Sears retreats from one of its most promising locations and fires dozens of employees, Seritage says it can triple the rent by turning the space over to the new high-end tenants.

This same scenario is playing out across the country, as Seritage picks up the pace of its takeovers of Sears stores. Seritage also reached new agreements in April to take over the entire Sears store at Aventura Mall in Miami, Florida — one of the most profitable malls in the country — and at malls in Dallas, Texas; Carson, California; and Charleston, South Carolina. It has already leased partial space in 123 Sears stores to other tenants, and it has completely taken over 24 stores.

June: The Trifecta For Policy Error?

In about 30 days the Federal Reserve will hold its scheduled June (13-14) meeting of the FOMC to either give a thumbs-up, or thumbs-down to increasing interest rates in earnest once again. The odds that the Fed. will indeed raise again now stands at about 99%. In other words – it’s all but a near certainty.

With that said, one can’t help but marvel at not only the “markets” sheer abandonment on volatility with such a near certainty on its doorstep. But rather, the only thing to rival it is the sheer arrogance being displayed by the Fed. itself that such another increase is warranted as every data point to a self-professed “data dependent” consortium is not just flashing, but screaming danger with every passing day. e.g., B.E.A. Q1 GDP 0.7%, Atlanta Fed. GDP Now™ 0.2%, JPM Cuts Q1 GDP to Just 0.3%, and more.

In days of yore (i.e., Ancient history circa 2016) whenever the odds of hiking approached anything like the levels they do now, the Fed. would take to the media in any manner possible and try to supplant soothing tones of, “Hush now little ones and not too worry…” as to make it evidently clear the Fed. had no such intentions going into their next meeting. After all, as history has shown time, and time again, just the “idea” that a rate hike could be imminent sent the markets reeling needing for an ever incessant response of one Fed. official after another to shout, “Don’t worry! We’re here with ever more potent QE should the need arise!” i.e., This is why we now have such a thing being worthy of its own moniker. e.g., “Bullard Bottom.”

Today, the exact opposite is the case. Not only are there not any soothing tones, but rather, there are tones emanating from what can only be described as an outwardly defiant, all seeing, ever proficient collection of “Hawks Are U.S.” for any and all questioning.

More Price Hikes Likely for Obamacare Insurance Markets

Early moves by insurers suggest that another round of price hikes and limited choices will greet insurance shoppers around the country when they start searching for next year's coverage on the public markets established by the Affordable Care Act.

Insurance companies are still making decisions about whether to offer coverage for individuals next year on these markets, and price increase requests are only just starting to be revealed by state regulators. But in recent weeks big insurers like Aetna and Humana have been dropping out of markets or saying that they aren't ready to commit. And regulators in Virginia and Maryland have reported early price hike requests ranging from just under 10 percent to more than 50 percent.

Increases like that will probably will be seen in other states, too, as insurers set prices to account for uncertain support from a federal government led by a new president who wants to scrap and replace the law, said Sabrina Corlette, a research professor at Georgetown Health Policy Institute. "For the consumer, they're going to see big rate hikes," Corlette said.

Prices for this type of insurance are already being affected by evaporating competition. With the latest departures, more than 40 percent of U.S. counties would have only one insurer selling coverage on their marketplaces for next year, according to data compiled by The Associated Press and the consulting firm Avalere. That assumes no other insurers leave and none step in by the time customers start shopping for coverage in the fall.

Consumers Are Losing Confidence In Data Privacy, Health Care

Americans have grown more pessimistic in recent months as consumers, with new concerns about access to health care, data privacy and security and the government’s ability to regulate safety standards in the automotive industry, a survey conducted by Consumer Reports indicated.

Consumer Reports spoke to 1,007 American adults in April for its second Consumer Voices Survey. The respondents indicated their confidence as consumers had waned since the start of the year, dropping at least five percent in each category they were questioned about.

One number that stayed consistent since Consumer Reports ran its first survey in January, just prior to the inauguration of President Donald Trump, is the overall trust of the government to watch out for consumer interests. Sixty-five percent of those surveyed said they did not trust the government to put their interests first—the same percentage produced at the start of the year.

However, there were significant drops in consumer confidence in regards to specific industries. The greatest change came in regards to the government’s ability to regulate safety and transparency standards on the auto industry.

A healthcare expert reveals why you should fight costly medical bills

Chicago Will Short Teacher Pensions By $250 Million, Taxpayers To Pick Up Tab

The Chicago Public Schools is about to write the biggest check in the school district’s history. It owes the Chicago Teachers Pension Fund $715.9 million on June 30. That looming pension payment has been a main driver of the money problems the school district has been grappling with all year. You’ve almost certainly heard about them.

There’s been budget cut after budget cut. There have been threats of ending school early. There was an unsuccessful lawsuit. There’s still a $129 million hole in the budget. And the state is months behind in paying the school district hundreds of millions of dollars. The rhetoric continues to heat up in a last-minute scramble for money.

One thing is clear: the Chicago Teachers Pension Fund won’t be getting the full $715.9 million owed to it on June 30. CPS plans to subtract $250 million from that total. That’s because a new property tax levy will send $250 million straight to the pension fund. But the actual cash won’t come in until July or August, when Chicagoans pay their property taxes. So that’s when the pension fund will get its money.

“Are we OK with that? The statute says the payment’s due June 30,” said Chuck Burbridge, director of the Chicago Teachers Pension Fund. “So, I can’t tell you that I’m OK with it. I understand it. To say it’s OK is a little too much.” He said CPS has tried to persuade the pension fund that delaying receipt of $250 million is actually a very good deal.

Why don’t Republicans and Democrats see the same economy?

Ever since the election of US president Donald Trump, consumer surveyors have noticed a trend: A determining factor for Americans’ economic outlook is whether they are Democrats or Republicans.

Between June 2016 and December 2016—before and after the election—the University of Michigan’s consumer sentiment survey found [pdf] that Democratic consumer sentiment fell almost 13 percentage points on their index, while Republican sentiment rose 40 percentage points. Today, the latest data shows that the divergence “is still huge, but the gap between Democrats and Republicans narrowed slightly to 55 Index points from 65 three months ago.”

Though the new administration has yet to enact any significant economic policy, there is a logic to the shifting expectations: Republicans are more optimistic because they are expecting Trump’s administration to eventually pass what they see as pro-growth policies—tax cuts, for example—while Democrats become more pessimistic because they fear their unintended consequences.

That makes sense. What makes less sense is that while overall confidence is growing, this increase doesn’t seem to be translating to direct measures of economic activity. While the sentiment survey hit a 13-year high in January, the first three months of the year saw slowing economic growth and consumer spending.

NEWS to Disturb the Comfortable...

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