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Monday 01.16.2017

Cutting Cash Would Be a Boon for the Worlds Poor

Getting rid of much of the cash in circulation might be an effective way to reduce inequality.

The worlds poor stand to be among the biggest beneficiaries of the changes that would follow should cash become almost obsolete, according to Kenneth Rogoff, a Harvard economy professor and the author of The Curse of Cash. Benefits include less crime and a reduction in the kind of off-the-books labor that hurts societys weakest members.

But weaning societies off cash requires the right infrastructure, and here theres inspiration to be found in Scandinavia, a region that Rogoff says is at the cutting edge of the cashless experiment. The Nordic nations all rank among the least corrupt and most transparent in the world. Cash accounts for less than 5 percent of the money in circulation, making them the least cash-reliant group of countries on the planet.

If you do financial inclusion the way youve done it in Denmark for example, where you give everyone free debit cards, it would help a lot of problems, Rogoff said in an interview in Copenhagen on Thursday, after speaking at a Skagen Funds conference. I think the poor would be among the biggest beneficiaries.

This professor says it's time to kill your 401(k)

Experts, including some pioneers of the 401(k) savings plans, worry that the current retirement system is not working for many Americans. More than half of workers roughly 55 million don't have access to a retirement plan on the job and 29 percent of households with members age 55 and older don't have a nest egg or a traditional pension plan.

Perhaps a guaranteed mandate would work better, according to an odd couple of retirement system reformers. Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School, and Hamilton "Tony" James, president and chief operating officer of asset manager Blackstone Group, have proposed replacing 401(k) plans with a guaranteed retirement account run by the federal government and managed by investment firms.

Ghilarducci said she has shared their proposal with officials from President-elect Donald Trump's transaction team and said she thinks the plan offers a public-private solution that could gain bipartisan support.

"The number one priority for many of Trump's voters is retirement security," Ghilarducci said. "This could be a Nixon-goes-to-China moment for Trump."

Wells Fargo is closing over 400 bank branches

Wells Fargo announced plans on Friday to shut down more than 400 bank branches by the end of 2018. That's on top of the 84 locations it pulled the plug on in 2016.

The acceleration of branch closures at Wells Fargo is a reflection of Americans' preference for online and mobile banking these days. Unlike Wells Fargo, its chief rivals Bank of America (BAC) and JPMorgan Chase (JPM) have been a lot more aggressive in shutting branches in recent years.

Wells Fargo (WFC) said the new branch closures haven't been fueled by the bank's fake account scandal. However, Wall Street analysts do see a link. Not only does Wells Fargo face rising legal and compliance costs to clean up the mess, but its branches aren't likely to be the profit engines they once were.

Wells Fargo has eliminated the unrealistic sales goals that led to the bad behavior and its account openings have declined dramatically in recent months. UBS analyst Saul Martinez wrote in a report published Friday that he had long expected the "scandal was likely to be a catalyst for a more aggressive focus on expenses."

Driverless cars are coming, but will they kill jobs?

Americas Choices: Stable Entitlements, More Cronyism or More Inflation

Heres the problem with central banks seeking higher inflation: costs go up but wages dont. Its easy to quantify the annual cost of Social Security/Medicare, and not so easy to calculate the cost of Cartel Cronyism and Central Bank-created inflation. Cartel cronyism is a hidden tax on the entire economy, as is Central Bank-created inflation.

This matters because the number one cause of the high cost of living is artificial scarcity created and maintained by monopolies, cartels, and the government that serves their interests. Artificial scarcity imposed by cartels and a servile state is the primary cause of soaring costs in a variety of sectors.

There are many factors that generate artificial scarcity: regulatory capture/ regulatory moats designed to protect cartels and monopolies from competition, a lack of affordable capital available to small enterprises, thickets of regulations that dont really serve the public interest, educational institutions that dont teach the fundamentals of entrepreneurism and how to start and operate a small business, and so on.

That makes it easy for the financial-political Oligarchy to continue their skimming operations, because nobody says Cartel Cronyism cost us $1 trillion last year, and central bank skimming (inflation) cost us another $1 trillion. The stark reality is there are limits on what we as a nation can afford in the long term.

Eight guys own as much -- as half of all humans!

The gap between the super-rich and the poorest half of the global population is starker than previously thought, with just eight men, from Bill Gates to Michael Bloomberg, owning as much wealth as 3.6 billion people, according to an analysis by Oxfam released Monday.

Presenting its findings on the dawn of the annual gathering of the global political and business elites in the Swiss ski resort of Davos, anti-poverty organization Oxfam says the gap between the very rich and poor is far greater than just a year ago. It's urging leaders to do more than pay lip-service to the problem.

If not, it warns, public anger against this kind of inequality will continue to grow and lead to more seismic political changes akin to last year's election of Donald Trump as U.S. president and Britain's vote to leave the European Union.

"It is obscene for so much wealth to be held in the hands of so few when 1 in 10 people survive on less than $2 a day," said Winnie Byanyima, executive director of Oxfam International, who will be attending the meeting in Davos. "Inequality is trapping hundreds of millions in poverty; it is fracturing our societies and undermining democracy."

Price of Gold in 2017: Why It Could Bounce Higher

Gold managed to rebound slightly in 2016, rising 8% and making back a bit of the lost ground that it had suffered in previous years. Nevertheless, the year-end closing price of around $1,145 per ounce was still far below the levels at which it has traded in the past. Over the coming year, investors would like to see gold's modest upturn finally start to take hold and accelerate, producing gains for gold-tracking investments like the SPDR Gold Trust (NYSEMKT: GLD). Let's look at how the gold market has fared lately and what it means for gold prices in 2017 and beyond.

Many are uncertain about the direction for gold prices in 2017. Last year, gold managed to post strong gains early in the year, as fears about the plunge in the energy markets and a big decline in the Chinese stock market sent many investors to the perceive safe-haven status of the precious metal. Around mid-year, gold had risen to more than $1,350 per ounce, and the Brexit decision in the U.K. to leave the European Union created even more nervousness about the global macroeconomic environment.

Yet by the end of the year, many of the potential struggles for the financial markets had disappeared. That led many investors out of the gold market, leading to the more than $200 per ounce drop in the final few months of 2016. In addition, the election of President-elect Donald Trump was followed by a big increase in interest rates, which created the specter of rising financing costs for gold investors and made the bond market look more attractive for new capital.

As a result of this price action, many of those who follow the gold market expect significant volatility in the price of the yellow metal in 2017. Depending on what actually happens with other financial markets, gold could see violent moves in either direction during the year.

How a lack of trust in government explains Brexit vote

US deploys 3,500 soldiers in Poland

Polish authorities and ordinary Poles welcomed Saturday US troops who arrived this week as part of an unprecedented deployment to NATOs eastern flank aimed at deterring Russia.

Welcome to Poland, Prime Minister Beata Szydlo told US troops in Zagan, the Polish town on the German border where the brigade will be headquartered, adding we hope you feel at home.

The presence of American soldiers in Poland is another step in our strategy to ensure safety and security for Poland and the region, she added. Hailing from Fort Carson, Colorado, the so-called Iron Brigade comprising some 3,500 soldiers and heavy equipment will also be deployed in NATO partners Estonia, Latvia, Lithuania, Romania, Bulgaria and Hungary on a rotational basis.

It is part of the Pentagons Atlantic Resolve operation aimed at countering security concerns triggered on NATOs eastern flank by Russias 2014 annexation of Crimea from Ukraine.

JC Penney gears up for closures as department stores sales continue to deteriorate

It's starting to look like J.C. Penney will be the next department store chain to put its physical footprint under the shrink ray. Just one week after Macy's and Sears detailed the upcoming closures of a combined 218 stores, Cowen and Company analyst Oliver Chen said that Penney's could ultimately chop its count by some 30 percent. Such a move would leave the chain with roughly 700 locations, and free up cash to invest in its best stores.

Chen's comments come just a few days after Penney's CEO Marvin Ellison said the company is getting ready to downsize its fleet. Ellison made his remarks at a real estate conference in Dallas, and they were reported by The Dallas Morning News.

"While there are only four J.C. Penney stores that lose money, we do expect store closures to come out of J.C. Penney next year," Chen told investors, explaining that the chain has room to increase the portion of its sales that are generated online.

Ellison has been reluctant to shutter stores, closing just seven Penney's locations last year. On a call with analysts in August, the CEO explained that his stores typically get a lift in malls where a Sears has shut down. Meanwhile, he reiterated the company's commitment to physical stores, saying more than 50 percent of its online orders touch bricks and mortar in some way.

Federal Reserves John Williams: Were in a good place

John Williams go-to analogy is the Goldilocks fable, which makes perfect sense for a Federal Reserve Bank regional president who helps set interest rates for the worlds most powerful country. The economy, he says, should not be too hot nor too cold. It should be just right.

What exactly does just right look like? According to Williams, were about to find out. After the Great Recession ended eight years ago, the Federal Reserve helped rescue the economy by keeping interest rates near zero and buying trillions of dollars of government debt.

Recently, though, the central bank has pulled back. The Fed stopped bond purchases in 2014, and in December it raised short-term interest rates to a range between 0.5 percent and 0.75 percent. The bank also indicated that it will raise interest rates three times this year.

The stage is now set for Congress and the White House, not the Fed, to boost the economy, Williams says, through policies like tax reform and infrastructure spending. And since Republicans will soon control both institutions, the chance of an economic stimulus becoming law is quite high. Thats one reason the Dow Jones industrial average has jumped more than 8 percent since the election in November.

2017 Prediction-Whole Bottom Will Fall Out

Americans Can Soon Buy Groceries Online With Food Stamps

Last week, the U.S. Department of Agriculture announced an ambitious-sounding pilot program that will give participants in Supplemental Nutrition Assistance Program (SNAP)best known by the colloquial term food stampsa way to purchase their groceries online. The two-year trial, which will begin this summer, provides low-income Americans in seven states with a system to have eligible items delivered to their homes through retailers like FreshDirect, Amazon, Safeway, and ShopRite and to pay for them using federal benefits. "Online purchasing is a potential lifeline for SNAP participants living in urban neighborhoods and rural communities where access to healthy food choices can be limited," said USDA Secretary Tom Vilsack in a statement.

The initiative is actually a provision of the 2014 Farm Bill, which requires the USDA to test an online ordering program. If the pilot succeeds, it could expand nationally, which would theoretically provide more than 43 million Americans who receive SNAP assistance with a new way to access healthier food. But despite its clear benefits, particularly for those with disabilities, limited transportation, or the millions of low-income Americans in food deserts, the success of the program is anything but certain. A number of factors including existing consumer habits, associated costs, and internet access could dim the prospects for the idea, while external opposition from lobbyists could potentially could block its full-scale adoption.

In addition to good publicity, part of what lured seven retailers from Maryland to Iowa to Oregon to apply to participate in the USDA program was the chance to expand their customer bases, and increase revenue. Companies from Amazon down to Hy-Vee an Iowa-based grocery will collect delivery and service fees from these new transactions, fees that cannot be paid for with federal benefits.

The retail partners also offer a host of food items that are not eligible for SNAP funds. What this may ultimately beget is a dynamic in which the convenience of the pilot program is overshadowed by the extra costs and logistical complications associated with delivery, along with the need for multiple forms of payment SNAP users will need to complete an order.

Trump Raises Millions to Cover Inauguration's Steep Costs

The inauguration of a new president requires the recitation of a 35-word oath. That's it. Dress it up with some hoopla and glitz, though, and pretty soon you're talking real money. Donald Trump will have it to spend.

Trump's Presidential Inaugural Committee has raised a record $90 million-plus in private donations, far more than President Barack Obama's two inaugural committees. They collected $55 million in 2009 and $43 million in 2013, and had some left over on the first go-round.

But while Trump has raised more money for his inauguration than any president in history, he's aiming to do less with it. Lead inaugural planner Tom Barrack said this week the Trump team wants to avoid a "circus-like atmosphere" in favor of a more "back to work" mindset that surrounds Trump "with the soft sensuality of the place."

Trump's committee has declined to provide details on how it's aiming to spend its hefty bankroll. Steve Kerrigan, CEO for Obama's inaugural committee in 2013 and chief of staff in 2009, said the $90 million fundraising haul looks like overkill. "I can't imagine how they are going to spend that amount of money and why they would even keep raising money," he said. "We planned the two largest inaugurations in the history of our country and we never spent anywhere near that."

How the national debt could lead to another economic collapse

Much ink has been spilled by researchers, journalists, and analysts arguing over the factors that led to the Great Recession of 2008, but just about everyone agrees on at least one of the contributing problems: A significant economic bubble developed in the 2000s in the housing market because of risky lending practices, which led to home prices being artificially high.

While much has been done by regulatory agencies and financial institutions since the 2008 crash to prevent the problem from occurring again, data suggest a new and potentially more dangerous economic bubble is developing that could cause another recession, only this time, the stage is set for an even larger economic disaster.

Since 2009, to help alleviate the fears of investors, financial institutions, and consumers, the Federal Reserve System has lowered interest rates to near-zero levels to encourage lending and has pumped trillions of dollars into the economy, making money more available with the hope economic development would follow.

As part of a similar strategy, when President Obama took office amidst the economic chaos of 2009, he and Democrats in Congress, like the Fed, injected more money into the economy through a variety of programs, the largest of which were established by the American Recovery and Reinvestment Act, which cost more than $830 billion and funded numerous government infrastructure projects.

VW settles with U.S. for $4.3 billion

Change is Coming...

America will welcome a new president. On Jan. 20, the United States will host its 58th inauguration ceremony to swear in the countrys 45th president: Donald Trump. And if the months leading up the election werent enough to stomach, even the inauguration has been ripe with conflict and uncertainty, from who will attend to who will perform -- Canadian Prime Minister Justin Trudeau, who will be on a cross-Canada tour, will not be attending.

Who knows Canada might be next to see a television personality at the helm, with Kevin OLeary exploring a potential bid for the leadership of the Conservative Party of Canada.

And oh look! Was that French National Front leader Marine Le Pen spotted at Trump Tower drinking coffee outside the Trump Ice Parlor on Thursday? Yup. Gold is certainly enjoying all this political and financial volatility as we head into the historical week. February gold futures last traded at $1,196.2 an ounce, up almost 2% since last week and up 5.5% since the start of the year.

Looking ahead, Wall Street and Main Street alike look for gold to continue its recent rally, this according to the latest Kitco News gold survey. Sixty-six percent of participants expect the yellow metal to continue its rise into next Friday.

Trump stumps European Central Bank

European Central Bank (ECB) officials are growing increasingly worried Trumps victory in the US presidential race may harm the Eurozone by hurting trade with the US and fuelling populism.

Speaking publicly and behind the scenes, officials emphasise any US shift towards protectionism could hurt the already fragile Eurozone economy and pave the way for an even stronger backlash against globalisation and the euro project.

Trump gave little new policy information at a press conference on Wednesday, but his protectionist statements have kept many investors from adding to risky positions. The president-elect has threatened to impose retaliatory tariffs on China, build a wall along the Mexican border and tear up the North American Free Trade Agreement (NAFTA).

Recent data from the Eurozone suggests the blocs economy ended 2016 on solid footing, and last month the ECB surprised markets by saying it would trim its monthly bond purchases to 60 billion euros ($63.86 billion, Dh234 billion) starting in April. So none of the economists polled by Reuters this week expect any change at Thursdays meeting.

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