Social Issues – Page 3739 – The Burning Platform

Defend Your Life

By Dennis Miller

It’s all too easy to get lost in the misinformation and politicking surrounding Obamacare. Dr. Vliet, an independent physician and the past director of the Association of American Physicians and Surgeons (whom I had the good fortune to meet when she spoke at the last Casey Summit) graciously agreed to sit down and clear the fog shrouding the new healthcare law for us. A warm thank you to Dr. Vliet for carving out time in her busy schedule to chat with us today.

Dennis Miller: Thank you for speaking with us today. I’ve been fielding reader questions on Obamacare, and, as with all topics, I strive to give straightforward answers.

Betsy McCaughey, Ph.D., former Lt. Governor of New York, has written a book titled Beating Obamacare: Your Handbook for the New Healthcare Law. According to her research, seniors will be hit the hardest. McCaughey recommends that seniors get hip and knee replacements and cataract surgeries done before January 1, 2014, as these procedures will become particularly hard to get.

I want to set cost concerns aside for a moment and focus on care. There’s no point in worrying about money if medical care is unavailable or inaccessible. Can you expand on the issue of care being denied, particularly for seniors?

Dr. Vliet: The goal of the new healthcare law—AKA Obamacare—has been to reduce expenditures for medical services to seniors and shift those funds into the Medicaid expansion providing medical care for younger people. Ezekiel Emanuel, Rahm Emanuel’s brother and Obama’s initial White House Health Policy Advisor, has described this fundamental transformation of American medical care in detail. He wrote a number of medical papers describing his “Complete Lives System,” in which he outlined two major goals for the delivery of medical services in the United States:

Medical care is to be “attenuated” (i.e., rationed) for those older than 45 and younger than age 15, so that medical resources can be concentrated on those whom bureaucrats deem most “valuable” to society.
Doctors should be taught to do away with the Oath of Hippocrates and its focus on the individual patient. Doctors should instead be taught to make medical decisions aimed at what is good for the “collective,” or society as a whole.

Emanuel’s views underpin the philosophy behind the Obamacare law. They are the primary reason that over $700 billion was cut from Medicare (source: the Congressional Budget Office) and shifted into the Medicaid expansion for medical services for younger people. The older (and “less valuable” to society) one is, the harder it will be to have medical care approved.

Many people have been satisfied with Medicare as delivered in the past. However, Medicare as we have known it ended with the 2010 passage of the new healthcare law.

Keep in mind: You simply cannot have today’s level of medical services going forward when over $716 billion have been cut from the Medicare budget over the next decade. These Medicare cuts reduce hospital, skilled nursing care, home health, hospice, and other services for seniors that have been covered by Medicare in the past. The priorities in the 2010 healthcare law were very clear: seniors have already lived their lives, so healthcare dollars are being shifted to medical care for younger people.

And that doesn’t just include the surgical procedures Betsy McCaughey mentioned. It is also medications, treatments, and procedures for cancer, cardiovascular, neurological, and many other conditions. For many years, patients in the UK and Canada have been denied the latest drugs for breast, prostate, lung, and stomach cancers. They do not have access to the same medications for early treatment of macular degeneration, MS, rheumatoid arthritis, or Alzheimer’s disease that American patients currently have. Nor do Canadian nor UK patients, under the National Health Service government-controlled approvals, have the early and frequent screenings for breast and prostate cancer currently available to American patients. Consequently, survival rates with these common cancers are much better in the US than in either Canada or the UK.

Dennis: If Medicare or our insurance companies say they will not pay for the treatment, can we just go ahead and pay for the treatment out of pocket?

Dr. Vliet: The rules and regulations are different for patients using Medicare (i.e., over age 65), Medicaid (i.e., under age 65), and for those using non-Medicare, non-Medicaid, ACA-compliant health insurance policies. For Medicare patients, payment regulations under federal law vary depending on whether the patient sees a Medicare-contracted doctor, a doctor who has legally opted out of Medicare under the federal rules for doing so, or is seeing a doctor who simply hasn’t enrolled in Medicare.

Each situation is different, so there is no easy answer—and of course, that in turn makes it difficult for patients to plan for medical expenses that a particular policy does not cover. It’s likely to become very frustrating and more costly for patients.

In some situations, like lab tests and imaging studies (MRI, CT scans, etc.), it is possible for patients to sign an Advance Beneficiary Notice, or ABN, in which patients agree to pay for tests that Medicare doesn’t cover. If Medicare does not cover a test and the patient does not want to pay for tests, it is more difficult for a doctor to make an accurate diagnosis. Patients sometimes think they can pay cash to get in to see a doctor who has stopped taking Medicare patients, but doctors are not allowed to use the ABN forms for services like office appointments that Medicare does cover just to allow patients to pay cash or a higher fee to be seen by that doctor. The details of these complex rules are beyond the scope of this interview.

As the Medicare budget cuts continue, I fear the list of non-covered services will quickly grow and we will see fewer doctors participating in Medicare, making it harder for patients to find doctors. In fact, that is already happening.

On the non-Medicare or “private” insurance side of the coin, most polices have clauses called “enrollee hold harmless” clauses that prevent patients from paying cash for medical care that a plan reviewer has deemed “medically unnecessary” based on age or condition. Frank Lobb covers the details of this hidden problem in depth in his book The Great Healthcare Fraud.

Patients don’t have an easy way to find out about these obstacles to paying cash. These clauses are not found in patients’ contracts with their carriers, they are only in the contracts between doctors and insurance companies or between hospitals and insurance companies. When hit with this situation, a patient’s only option is to seek the medical treatment they need from a hospital or doctor independent from that particular insurance plan.

Dennis: Who makes these arbitrary decisions, and how can we appeal them?

Dr. Vliet: The Center for Medicare and Medicaid (CMS) and the newly expanded Department of Health and Human Services (HHS) are the ones who write these rules. Even the people who work for Medicare and HHS can’t keep up with the complexity of it! No wonder patients are confused and bewildered.

What I find really frustrating is I get different answers from Medicare offices in the different states in which I practice medicine. If I cannot get a straight answer, then I can’t very well explain it to a patient. So I legally opted out of Medicare in 1997. I answer only to my Oath to serve the patient “to the best of my ability and judgment.”

Private insurance plans have always had appeals processes, and most physicians use those regularly to help patients get medical services that might be denied coverage the first time around. But once the Independent Payment Advisory Board (IPAB) goes into effect in 2015, there is no appeal to decisions made by IPAB: that’s why they are called “independent”— not even Congress nor the Supreme Court is allowed to override the IPAB decisions.

Betsy McCaughey writes that the law says IPAB “recommends,” but what isn’t addressed is their “recommendations” automatically become law unless Congress passes a different plan to achieve the same cost reductions as IPAB recommended, and Congress must pass this plan with a three-fifths supermajority vote during a two-week window in 2017. That’s unlike anything we have ever had before. McCaughey points out that the IPAB is an unelected group of political appointees essentially making law and usurping the role of Congress, yet isn’t accountable to anyone except the president.

Dennis: Wow! Let’s discuss cost for a moment. My friend Jeff White has voiced a concern shared by many. With no risk selection and underwriting permitted; with forced acceptance of people who clearly are not taking care of themselves or have costly medical conditions; with loss of cost controls in general, health insurance costs will have to go through the ceiling. What is your take on this?

Dr. Vliet: He is exactly right. We have not had “insurance” in the correct sense of the term for more than 40 years. What we really have is prepaid healthcare—but a perversion of this since we pay the premiums and they (government bureaucrats or insurance clerks) decide what they will “reimburse” to cover medical services our doctors think we need.

Most of us in the medical profession acknowledge medical care wasn’t the problem; it was our broken payment system. People in the individual (vs. employer-based) market were having a hard time getting individual coverage if they had significant medical issues. People also don’t realize two other fundamental problems in the health insurance market:

These problems were not a failure of the free-market system, but rather were due to government intervention and distortion of the free-market system, primarily government regulations that affected the cost and type of insurance available to consumers.
The 2010 healthcare law prohibits any private insurance company from offering a policy that does not comply with the Obamacare rules for coverage. That is why so many policies—for perhaps as many as 93 million Americans—are being canceled. It’s the healthcare law itself that is forcing insurance companies to cancel policies that do not comply with the expanded coverage requirements. When a government-required level of insurance requires the policy to cover almost all preventive services, plus medical/surgical and psychiatric treatment for the entire population, the cost is going to be exorbitantly expensive.

Dennis: As a capitalist, I can see there will be a need for health care that is denied by the system—maybe doctors banding together in clinics or small hospitals, for example. Can physicians and patients just opt out of the system?

Dr. Vliet: Obamacare regulations severely limit doctors from starting new doctor-owned hospitals in the US. Some enterprising groups are beginning to develop such clinics in Mexico and other countries, and it may be possible to set up clinics in “medical freedom zones” on the sovereign lands of Native American tribes that avoid Obamacare restrictions. Right now, however, such options are very limited and certainly cannot serve the huge number of people who will likely need them as medical care is further rationed (especially for older people).

Regarding physicians and patients opting out altogether: Patients who opt out and do not buy an ACA-compliant health insurance policy will have to pay the penalty (or tax) for not doing so. For now, physicians can opt out of Medicare, Medicaid, and even private insurance contracts and simply do “fee for service” agreements with patients, like lawyers and accountants already do. But if the US moves to the same model as Canada, doctors may be denied a license to practice medicine unless they are part of the government-controlled Medicare and Medicaid.

Dennis: I have Canadian friends who tell stories about family and friends needing eye surgery or heart bypass surgery and having to wait months for those procedures. So they come to the US for care instead. In many cases, had they not done so, they wouldn’t have lived long enough to keep their Canadian appointment. Is this where we are headed?

Dr. Vliet: Most certainly, that is exactly where we are headed. Long delays are the fundamental flaw in all government-run medical systems. It is only the free-market, voluntary delivery of medical services that has brought the price down and improved availability of services. Just look at Lasik eye surgery and lap band gastric surgery and note how competition and comparison shopping have brought prices way down over the last decade.

Dennis: I like to think of myself as a practical guy. What can we do to stay as healthy as possible and get affordable, quality health care on our terms?

Dr. Vliet: The most critical thing everyone can do is take responsibility for lifestyle choices. Our “bad choices” are the biggest cause of most of the diseases that hit us as we age and rob us of health and vitality. These are things we can all actually do that will help lower medical costs and keep ourselves healthier and better able to recover if we do have an illness.

These are things my grandmother taught me—they aren’t rocket science—and you will even save money if you do them. Eat less, eat a balanced diet, always eat breakfast, exercise more, maintain a healthy body weight, get enough rest, don’t smoke, don’t drink alcohol in excess, don’t overuse prescription medicines, don’t use street drugs, practice stress management, engage in a regular spiritual practice. While this advice sounds boring, these commonsense lifestyle choices have been shown in many research studies to prolong life, preserve quality of life and vitality, and to reduce medical costs.

In addition to these practical tips, for the last several years I have encouraged my patients to set up international health insurance policies to give them options later on. Not everyone has the money to pay cash for medical care, even when going to lower-cost countries. But you have to get international policies before you’re too old or too sick to qualify. Most companies do not offer these policies if you’re over 70, or in some cases 75. There are many companies offering such plans.

I also encourage my patients to set up international bank accounts so they’ll have money overseas in the event they need it for to pay for medical care that may be denied or delayed here at home. Call this account your “international health savings account.” Even if it won’t have the tax advantages of HSAs under US rules, at least the money will be there if you need overseas medical care. Overseas bank accounts are legal as long you comply with US reporting rules. This is a step to take before the US government further limits our ability to move money into other jurisdictions.

Dennis: Thank you for taking your time to fill in some of the blanks regarding Obamacare.

Dr. Vliet: Thanks, my pleasure!

Obamacare is just one of many subjects of particular importance to today’s retirees and soon-to-be retirees. If you want commentary like this on the news that is most important to you, sign up for the free weekly newsletter Miller’s Money Weekly.

OBAMA USING EXECUTIVE ORDER TO GIVE A 39% RAISE TO GOVERNMENT DRONES

According to the Washington Post, our Savior/President/Dictator will ignore Congress and give a 39% raise to government drones. He unilaterally wages war across the globe with his drone army. He unilaterally collects electronic data on every American. He unilaterally enforces or ignores the Obamacare law which Congress passed and he signed. He uses Executive Orders to bypass the other branches of government and disregards the will of the people. As he continues to unilaterally run this country, we inch ever closer to full dictatorship. We are one major crisis away from this sociopath declaring himself ruler for life.

Obama now decides the salaries of government drones based on nothing. His reasoning is beyond question. The wage should be $10.10. Not $9.50. Not $10.20. Obama knows the right salary for every American. Especially when it’s your tax dollars used to pay whatever he chooses.

“Hardworking Americans — including janitors and construction workers — working on new federal contracts will benefit from the Executive Order (EO),” the White House said in a statement. “Some examples of the hardworking people who would benefit from an EO include military base workers who wash dishes, serve food and do laundry.”

Fifteen senators wrote to Obama in the fall, saying that “profitable corporations that receive lucrative contracts from the federal government should pay all of their workers a decent wage.”

We all know that politicians know exactly what a decent wage is. Just like they know what a decent education is. Just like they know which Arab country to invade.

Obama will blather for over an hour tonight about his vision of America during his State of Disunion address. The morons in Congress will act like trained chimps, applauding, giving standing ovations, and generally confirming the fact they are nothing more than corrupt idiots representing special interests. I will not watch one second of this kabuki theater. I’d learn more watching Honey Boo Boo or Duck Dynasty.

This will be the 6th time Obama has promised the economy will be getting better next year. It seems next year never comes, as we spiral downwards at an accelerating rate.

JUMP YOU F$#KERS

Too bad it wasn’t Jamie Dimon. Only a few thousand more bankers to go and we’ll be getting somewhere.

Man Jumps To His Death From JPMorgan London Headquarters

Submitted by Tyler Durden on 01/28/2014 07:48 -0500

Early this morning, at JPM’s 33 story high London Headquarters located at 25 Bank Street in Canary Wharf, a 39 year-old man jumped to his death after falling onto a 9th floor roof. The police, who were called to the scene at 8:02 this morning, said they are not treating the death as suspicious and no arrests have been made, suggesting the death was indeed a suicide. London Ambulance Service and London Air Ambulance attended but they could not save the man.

Bloomberg quotes Jennifer Zuccarelli, a spokeswoman for JPMorgan in London who said that “We are reviewing a very sad incident at 25 Bank Street this morning.” The building and the surrounding area is “currently secure,” she said.

From Bloomberg:

The 11-year-old skyscraper is 33 stories high, according to building-data provider Emporis. It was formerly the European headquarters of Lehman Brothers Holdings Inc., which filed for the largest bankruptcy in U.S. history in 2008.

The bank declined to identify the deceased person or say whether they worked for JPMorgan. The police are waiting for “formal identification,” they said in an e-mailed statement.

London24, which also notes that this is the second high profile banking death within just a few days after Deutsche bank announced its former executive William Broeksmit 58, was found dead in his home on Sunday,caught some tweets describing the incident:

Is this just the first of many banker suicides, if indeed this was a suicide?

Enjoy a little musical tribute to Jamie Dimon and his ilk.

Things That Make You Go Hmmm: That Was The Weak That Worked: Part 3

By Grant Williams

“What a year this has been for gold.

“The price of the yellow metal fell almost 30% from its peak at the end of August a year earlier, to bombed-out lows amidst a wall of selling which included several very sharp and somewhat counterintuitive selloffs, including violent plunges in both the April-May time frame and again into year-end.

“Throughout the year, the spectre of manipulation was never far from the minds of all those involved in the gold market, whether they were crying ‘foul’ or asserting that, of course, there was no manipulation whatsoever and that those who suggested there might be were nothing more than conspiracy theorists, kooks, and whackos.

“The main suspects at the heart of the conspiracy theories were, naturally, the bullion banks and the central banks.

“The bullion banks, of course, have the eternal motive: profit; but what possible reason could central banks have for suppressing the price? None whatsoever, of course. The gold market is too small and too inconsequential for them to take an interest.

“And yet, rumours abounded that the bullion banks were in dire trouble and that a rising gold price could send one or more of them over the edge and into insolvency as a scramble for physical metal exposed massive short positions that had grown out of a fractional-reserve-based lending system backed (if not explicitly, then certainly complicitly) by central banks…”

Now THAT, you may well have thought, was the heart-racking, pulse-pounding introduction to my year-end look at the gold market. No preamble, no carefully constructed narrative to entice you into my latest little web, just BOOM! Straight into it.

And every word of the above makes sense based upon what we’ve seen happen in the past twelve months in the topsy-turvy world of element 79, which holds down the spot in the periodic table just after platinum and just before mercury.

But of course, nothing is what it seems when we are discussing gold.

That quotation at the top is the intro to the year-end review of gold that I would have written in 1999 … had I been doing such things back then.

2013 was, in many ways, a case of been there, done that; and to understand what is happening today, it is extremely instructive to go back to 1999 and reexamine some very strange goings-on at the UK Treasury, AIG, Rothschild, Goldman Sachs, and Number 11 Downing Street.

(Cue dreamy harp music.)

The chart of the gold price between February 1996 and August 1999 will look eerily familiar to anybody who follows the gold market closely; and for those who don’t, just stick around and I’ll show you what you’ve been missing.

Source: Bloomberg

After a run-up to a spike-high of $415.50 on February 2, 1996, gold began to fall. It fell fairly quickly at first, losing 3% in six trading sessions; and then the decline steadied for a while but remained consistent — until, around the end of the calendar year, gold suddenly and inexplicably spiked straight down. By the end of 1996, it had lost 11% of its value.

As 1996 turned into 1997 the price continued to fall; and the new year saw several inexplicable downdrafts of considerable size and alarming speed which, by the time the dust had settled at midnight on December 31st, 1997, had cut the value of an ounce of gold by almost a quarter.

Gold market watchers were baffled at the continued weakness in their beloved metal. They bemoaned their bad fortune and pleaded with the gods above, but neither activity made any difference — the price continued to fall. (Sound familiar?)

1998 was a fairly stable year, with the price moving little from January to December (though again, during the year there were several large falls in price that were hard to account for); and as the world entered the last year of the millennium, there was an air of stability around gold that gave hope to those battered by the consistent weakness in the gold price.

(To reiterate, I am talking about the late 1990s here, NOT the last couple of years — just in case there was any confusion.)

On the last day of 1998, gold closed at $288.25, down from $415.50 on February 2, 1996 — a fall of over 30% in three years.

You … yes, you with the glasses at the back…

(muffled question)

No, there is very little similarity to the 37% decline in the gold price from the August 2011 high to the close on December 31, 2013.

(muffled question)

What do I MEAN? Well, obviously, any similarity is completely coincidental because there were a number of strange things happening and rumours swirling back in 1998 about bullion banks being short gold in quantities that posed a risk to them and, of course, to “the system” — whatever THAT means — so those were once in a lifetime circumstances.

(muffled retort)

Well, yes, I suppose, now that you mention THAT, there MAY be some purely coincidental similarities between the two periods, but when you hear what happened next, you’ll realize that the time I’m talking about was nothing like today, because the following year (1999) a certain central bank did something quite bizarre that led directly to sharply lower gold prices and a dramatic increase in specula…

(muffled retort)

… oh look, stop it now. Keep your Bundesbank tale under your hat and we’ll discuss it when I’ve finished. We need to get back to the main story.

If I may? Thank you.

So, as I was saying before I was rudely interrupted by young Eric there, 1999 dawned with an awful lot of antipathy towards gold after three years of poor performance. The rumour mill was operating overtime as speculation about large shorts in physical metal moved towards a crescendo, and a group of central bankers either dismissed accusations of any involvement in price suppression or refused to discuss it at all.

The first five months of 1999 looked fairly familiar to anybody who happened to keep a watchful eye on the gold market.

Source: Bloomberg

After three poor years, gold was scratching around trying to find a bottom, and it looked like it was succeeding. The path of least resistance was clearly upward, and it looked for all the world as though a bounce was in the cards, since sellers had become exhausted.

The gold price saw several quick spikes — all of which were followed immediately by sharp selloffs; but the net result was that on May 6, 1999, the gold price stood a fraction above where it had entered the year.

It was at this point that things started to get screwy.

The next day, May 7, 1999, then-Chancellor of the UK Exchequer, Gordon Brown, announced that he would sell almost 400 tons of Britain’s gold reserves in a series of auctions over the subsequent three-year period. Dates of those auctions were to be set well in advance.

Tense?

No, I don’t mean “Are you on the edge of your seat?” The “tense” I am questioning is that used by Brown in his announcement — it was, in this case, the future progressive.

Ordinarily, when people like Brown make statements, they use a tense exclusively reserved for use by government officials and those heading up the world’s major central banks: the future promissory.

This tense is constructed by taking an intended possibility and removing the words we hope and pray from the beginning of the sentence and inserting the word will in the middle.

Let me give you an example. When using the future promissory tense, the phrase “We hope and pray interest rates remain low until at least 2016” becomes:

“Interest rates will remain low until 2016.”

Likewise, “We hope and pray we can unwind QE without any problems” becomes

“We will unwind QE without any problems.”

Try it yourselves.

Anyway, Brown’s use of the future progressive tense was particularly bizarre, because anybody who knows anything about finance, and particularly about the purchase and sale in large quantities of a price-sensitive commodity, knows that you do NOT telegraph to the market what your intentions are, because the market will then front-run you and sell that commodity short in order to generate themselves a nice healthy profit (with every dime of that profit coming directly out of the seller’s proceeds).

Now, I may have been a bit naive here, but for the longest time I thought the entire set of “central bankers & treasury officials'” was a subset contained within the set of “people who understand a little about finance.”

Thanks to John Venn, we can express the harsh reality rather simply:

Anyway, following Brown’s extraordinary statement, I’m sure all those of you who reside firmly in the left-hand circle of that diagram can guess what happened next:

Source: Bloomberg

Yup! As anybody with even a rudimentary grasp of market dynamics could have predicted, the gold price fell off a cliff … and kept on falling.

Thomas Pascoe of the UK Daily Telegraph took up the story (several years later, after a battle with the UK government over a series of Freedom of Information requests); and I have to say that for a mainstream media journalist, he did a damned fine job:

(UK Daily Telegraph, June 2012): One decision [of Brown’s] stands out as downright bizarre, however: the sale of the majority of Britain’s gold reserves for prices between $256 and $296 an ounce, only to watch it soar so far as $1,615 per ounce today.

When Brown decided to dispose of almost 400 tonnes of gold between 1999 and 2002, he did two distinctly odd things.

First, he broke with convention and announced the sale well in advance, giving the market notice that it was shortly to be flooded and forcing down the spot price. This was apparently done in the interests of “open government”, but had the effect of sending the spot price of gold to a 20-year low, as implied by basic supply and demand theory.

Second, the Treasury elected to sell its gold via auction. Again, this broke with the standard model.

The price of gold was usually determined at a morning and afternoon “fix” between representatives of big banks whose network of smaller bank clients and private orders allowed them to determine the exact price at which demand met with supply.

The auction system again frequently achieved a lower price than the equivalent fix price. The first auction saw an auction price of $10c less per ounce than was achieved at the morning fix. It also acted to depress the price of the afternoon fix which fell by nearly $4.

Then, Pascoe dropped the hammer:

It seemed almost as if the Treasury was trying to achieve the lowest price possible for the public’s gold. It was.

We’ll come back to Pascoe’s article a little later, but in the meantime it’s back to 1999 and the rumour mill…

There was consternation in the gold community and anguished cries that, as usual, there was a vast conspiracy in play here. Those rumours of large shorts held by a couple of big players in the bullion market just wouldn’t go away, but nobody could quite put their finger on what was going on — although a couple of slightly curious names were being whispered in the gold pits: AIG (remember them?) and NM Rothschild.

Brown’s series of auctions over the following three years emptied most of the UK’s gold from the Bank of England’s vaults, depressed the price to levels previously unthought of and, according to those of a more conspiratorial mindset, achieved something else. Something hidden, something unknown.

But what?

The probable answer wouldn’t begin to appear from amidst the fog until mid-2004, when, a couple of months apart, a couple of very quiet and matter-of-fact announcements were made, which we will get to shortly. In the meantime, if the UK Treasury was trying to achieve the lowest possible price for its gold, it was doing admirably — right up until September 26, 1999, when a backlash against Brown’s actions crystallized in Washington DC through the signing of the Washington Agreement on Gold.

(Wikipedia): Under the agreement, the European Central Bank (ECB), the 11 national central banks of nations then participating in the new European currency, plus those of Sweden, Switzerland and the United Kingdom, agreed that gold should remain an important element of global monetary reserves and to limit their sales to no more than 400 tonnes (12.9 million oz) annually over the five years September 1999 to September 2004, being 2,000 tonnes (64.5 million oz) in all.

The agreement came in response to concerns in the gold market after the United Kingdom treasury announced that it was proposing to sell 58% of UK gold reserves through Bank of England auctions, coupled with the prospect of significant sales by the Swiss National Bank and the possibility of on-going sales by Austria and the Netherlands, plus proposals of sales by the IMF.

The UK announcement, in particular, had greatly unsettled the market because, unlike most other European sales by central banks in recent years, it was announced in advance. Sales by such countries as Belgium and the Netherlands had always been discreet and announced after the event. So the Washington/European Agreement was at least perceived as putting a cap on European sales.

So that’s clear. What is interesting are the criticisms of the agreement, as posted on the same Wikipedia page:

•The agreement is not an international treaty, as defined and governed by international law.

•The agreement is a sui generis, gentlemen’s agreement among Central Bankers, of doubtful legality given the objectives and public law nature of Central Banks.

•The agreement resembles a cartel that materially affects the supply of gold in the global market. In this regard, the agreement stretches the borders of antitrust legislation.

•The agreement was negotiated behind closed doors. Information was not provided to the public and relevant stakeholders were not afforded the opportunity to comment.

•The agreement does not contain formal mechanisms for re-negotiation. Trends in international law regarding public participation and access to information should inform the re-negotiation process, scheduled for 2004.

Sounds pretty much par for the course, if you ask me; but that’s the world we’ve allowed to be created by the governments and central banks of the world while we watch American Idol.

Anyway, with Brown’s sales well and truly underway and the market price suitably depressed, the announcement from Washington caused a small problem. Limiting sales of a commodity has the opposite effect to the pre-announced sales by the UK Treasury, and the inevitable ensued.

The gold price, freed temporarily from the shackles of the huge overhang Brown had created, soared, as you can see from the chart below:

Source: Bloomberg

…and that — assuming the rumours were correct and there were a couple of entities short a lot of gold and looking to cover into a falling price — created another big problem.

The post-Washington Agreement spike would have caused severe problems for anybody short gold, and if those problems caused any kind of systemic risk, then they were problematic for central banks and governments, too.

Of course, all this was nothing more than conjecture … at the time.

BUT several years later a conversation surfaced that had involved Bank of England Governor Eddie George, shortly after the Washington agreement was signed in 1999. Whereupon many of the doubts surrounding the motives behind the strange doings in the gold markets disappeared like my buddy Whipper West 20 seconds before the bar tab is presented:

(Jesse’s Café Américain): In front of 3 witnesses, Bank of England Governor Eddie George spoke to Nicholas J. Morrell (CEO of Lonmin Plc) after the Washington Agreement gold price explosion in Sept/Oct 1999. Mr. George said “We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake.

Therefore at any price, at any cost, the central banks had to quell the gold price, manage it. It was very difficult to get the gold price under control but we have now succeeded. The US Fed was very active in getting the gold price down. So was the U.K.

You want to find a smoking gun at the crime scene? Well this one has fingerprints on it and the words “Eddie George, Governor of the Bank of England” carved into the butt.

Case closed. Except…

With none of this ever having been officially acknowledged, the whole business has juuuuust enough uncertainty surrounding it to enable those who don’t want to know to put their fingers in their ears and repeat “la-la-la-la-la.”

As you can see from the chart above, the following 18 months saw the gold price “managed” steadily lower, despite several large spikes in price as the natural forces of supply and demand threatened to overrun the Bank of England — and US Federal Reserve-led intervention.

Eventually, enough force was brought to bear to get the gold price back to its pre-Washington Agreement level. This was in large part due to the sales by Brown of the UK’s gold stash. When the smoke had cleared and the auctions were completed, Brown’s Treasury conducted an autopsy review of the process that would end up costing the UK taxpayer roughly ₤17 bn in lost profits at gold’s peak in 2011, and even in the immediate aftermath a cool ₤175 mn.

That review was bound to be scathing, right? Wrong:

(UK Daily Telegraph): Chancellor Gordon Brown and his Treasury officials have used an internal review to pat themselves on the back for selling more than half of Britain’s gold reserves, despite the fact the process lost the taxpayer around £175m.

Huh? Say what?

The news that one of the world’s major central banks was selling its reserves contributed to a collapse in the gold price which was a serious blow to the market.

However, the Treasury argues that the auction was a great success. Its review, which has been published on an obscure part of the Treasury website, claims: “The UK Government’s sales programme has clearly demonstrated that auctions provide a transparent and fair method for selling gold and similar types of asset.”

Oh come ON!! Really?!

I know government officials have a predilection for trying the Jedi Mind Trick on us, but this is utterly ridiculous.

Luckily, not everybody was fooled:

Peter Hambro, who runs the eponymous gold company, said: “The idea the auction was a success is completely ridiculous. The point is the Treasury called the bottom of the market with uncanny accuracy. They have forgotten that gold is meant for times of trouble.”

Amazingly (though this is government we are talking about here, so the bar over which one has to hurdle to be classified as “amazing” is lower than Kim Kardashian’s level of self-respect), despite the fact that the price fell to a 20-year low after the auction process was announced and then soared 30% after its conclusion, the Treasury claimed success based solely upon the fact that “on average, they achieved a price within 75 cents, or 0.3pc, of the market price.”

I’m sorry, but when you conduct sales like that, you SET the market price. Idiots.

The article continues:

The review states: “It is not apparent from the data that the market was systematically depressing the price of gold in the run-up to the auctions. Nor is there any evidence that the price of gold systematically rose following the auctions.”

Not apparent? To WHOM?? As for evidence that the price of gold systematically rose following the auctions, I would suggest looking at …… the price!

IDIOTS.

The Bank of England sold 395 tonnes of gold, raising about $3.5 billion. The money has since been invested in euros, yen and dollars as a way of diversifying risk.

The review concludes: “Above all, the programme successfully delivered a one-off and permanent reduction in risk on the net reserves as a result of the better diversification achieved.”

It’s just too painful to listen to sometimes.

To continue reading this article from Things That Make You Go Hmmm… – a free weekly newsletter by Grant Williams, a highly respected financial expert and current portfolio and strategy advisor at Vulpes Investment Management in Singapore – please click here .

TAXMAN COMETH

(If you drive a car ), I’ll tax the street,
(If you try to sit ), I’ll tax your seat,
(If you get too cold ), I’ll tax the heat,
(If you take a walk ), I’ll tax your feet.
Taxman.

The Beatles

The desperate government drones are flailing about in their death throes, frantically trying to milk the taxpayer cow for every last drop before they die of thirst. These feckless politicians have wasted your money for decades on worthless programs and projects. The do gooders have pissed away your money on public education and the union government drones running the education system. The result has been millions of clueless dupes who can’t think for themselves.

Politicians have destroyed our major cities by taxing the citizens and businesses to the point that producers leave. They have made entitlement promises that can never be honored. Detroit was the 1st domino to fall. The idiots running the City of Philadelphia are too stupid to see they are on the exact same path as Detroit. The tax base is gone. They are left with hordes of free shit army privates. Rather than deal with reality and cut expenses, they try the same old solution – create new taxes, new regulations and new laws.

It seems the job of government drones is to crush entrepreneurial spirit, deter innovation, restrict freedom, and tax the shit out of anything the moves, breathes or helps others. Three young dudes, fresh out of college created an idea called Air Bed & Breakfast, now called Airbnb.com, in 2008. The idea was for individuals with spare rooms to be matched up with other individuals in need of a room. Two individual people coming to a mutually beneficial agreement and eliminating corporate hotels, ridiculous rules, regulations and taxes does not sit well with the oligarchs and politicians. They aren’t getting their slice of the pie. Of course, their slice would amount to nine-tenths of the pie.

These three entrepreneurs have grown their business to $2.5 billion in five years. It’s amazing what individuals with a great idea can accomplish without Obama subsidies, the government deciding winners and losers, and control freak do-gooders imposing rules, regulations and taxes to stop the business dead in its tracks.

Airbnb epitomizes the sharing economy, in which folks rent or swap all kinds of underused assets – spare rooms, cars, parking spots, lawnmowers, children’s clothes or their time.The new sector inspires almost messianic devotees who say it’s an engine of innovation that creates value out of thin air, conserves resources, empowers ordinary people to be entrepreneurs, and disrupts industries and corporations.

The slumlords, corporate hotel chains, and tax & spend politicians are outraged at this dreadful act of liberty and freedom by people across the country. And they are going to do something about it. Democratic councilman Bill Green of Philadelphia is going to stop these entrepreneurial terrorists before they make too many people satisfied. He is so impressed by their service he wants to tax and regulate the shit out of them.

“It’s a product that I use when I travel. And its something that’s clearly being used here, and we’re not enforcing the law. So we might as well figure out a way to create a registration process, and tax it, [so] that [it] works with our zoning code.”

“Right now, it’s underground, so we have to figure out how to make the sharing economy, whether its ride sharing, car sharing, Airbnb or other things like that that work with Philadelphia’s zoning code.”

What would we possibly do without politicians protecting us from ourselves and creating taxes to crush new businesses? We truly need to starve the beast. We need to expand the underground economy and starve these bastards of their taxes. Barter with people. Conduct as many transactions in cash as possible. The laws and tax regulations were written by the corporate fascists to benefit the corporate fascists. Their kingdom built on a foundation of lies and false promises is crumbling. Let’s give it a push by starving them of their tax and fee revenues.

Thoughts from the Frontline: Forecast 2014: The CAPEs of Hope

By John Mauldin

“Sooner or later everyone sits down to a banquet of consequences.”

– Robert Louis Stevenson

South Africa’s Cape of Good Hope is one of the most dangerous stretches of coastline anywhere in the world, where the warm Agulhas Current (also called the Mozambique Current), rushing down from the Indian Ocean, meets the cold Benguela Current, pushing up from Antarctica. The difference in water temperatures alone is a recipe for legendary storms, but the two opposing ocean currents just so happen to converge where the African Continental Shelf drops off into a deep abyss.

So not only do warm and cold pressure systems converge to create raging tempests, but the underwater topography – together with surging waves from the Indian and Atlantic Oceans and fierce winds from the west – frequently gives rise to rogue waves over 80 feet tall, capable of sinking even the largest supertankers and container ships.

Just imagine how terrifying it must have been for the first maritime explorers to brave such dark and dangerous waters. The mind truly boggles at the courage and daring it took.

In a day and age when superstition abounded, unknown and unmapped places were often said to hide the most terrifying beasts of myth and legend; but rounding the Cape must have been a particularly terrifying experience for any uneducated crew. Portuguese legend warned that the long-imprisoned Titan Adamaster, who was said to have been cast into the stone of Capetown’s Table Mountain, would never allow a captain and crew to pass the Cape without a fight.

Bartholomew Dias is the first European known to have braved the Cape, in 1488 (four years before Columbus stumbled on the Americas in 1492). Sent by Portuguese King John II to find an ocean route to India, Dias was more than 1,000 miles south of the edge of any known map when a storm blew his ship away from the coastline and out to sea. Little is known of his actual voyage, since the records were later destroyed in a fire, but historians believe Dias must somehow have had knowledge of the southeasterly winds that could blow him around the Cape and against the powerful Agulhas Current (the second fastest ocean current in the world) without crashing him against the rocky coastline. Although Dias survived the storm, successfully rounded the Cape, and unequivocally proved the Indian Ocean could be reached by sailing around the southern tip of Africa, he had not planned for such a long and treacherous journey. With supplies running low and the threat of mutiny in the air, Dias was forced to turn back to Portugal – braving the “Cape of Storms” once more on the way home.

But our story continues (building toward the inevitable, if tenuous, economic connection!). The next great Portuguese explorer to round the recently renamed “Cape of Good Hope” (given that positive moniker by Portuguese King John II, who wanted to encourage sailors to risk the voyage – he was one of the original spin doctors) was Vasco da Gama, who consulted closely with Dias in planning the long, hard voyage from Lisbon to India. With Adamaster’s pardon, da Gama successfully sailed around the Cape on the westerly South Atlantic winds Dias had discovered on his first voyage and finally reached Calicut, India, in 1497. Although he eventually died in India, da Gama had finally opened the trade route that European merchants had desperately sought.

Dias was not so lucky. Illustrating the soon to be learned 50-50 odds of challenging the Cape of Storms, Dias did not survive his second voyage. After voyaging to Brazil, the intrepid explorer crossed the South Atlantic Ocean on a follow-up expedition to India – and sailed right into a terrible storm just off the same Cape that had almost claimed his life a decade earlier. Four ships disappeared beneath the waves, and Adamaster had evened the score.

In the years that followed, more than two million Dutch settlers attempted to round the Cape of Good Hope, and more than one million of them fell victim to the high waves, violent storms, and nearly impossible navigating conditions. Naturally, such cataclysmic death and destruction gave rise to another dark myth: the Flying Dutchman.

Now, leaving both historical and supernatural tales aside, let’s turn to another CAPE that is deserving of exploration – and that may be signaling danger. As we will see in the pages ahead, buy-and-hold investors are clearly sailing in dangerous waters, where the strong, cold current of deleveraging converges with the warm, fast rush of quantitative easing. Not only does this clash of forces create the potential for epic storms and fateful accidents, it dramatically increases the chances for sudden loss as rogue waves crash unwary investment vehicles against the underwater demographic reef!

Yes, the equity markets are an increasingly treacherous environment, but investors have an opportunity to diversify away from historically expensive equity markets into other asset classes that respond differently to changing economic conditions, and into other countries that may experience very different economic outcomes in the years ahead.

(Please note that this letter will print rather long as there are more than the usual number of charts.)

The Second Most Expensive Stock Market in the World

Last week’s letter focused on my 2014 outlook for the US stock market and highlighted an important, but controversial, measure for long-term valuations: Robert Shiller’s cyclically adjusted price-to-earnings ratio (CAPE). Unlike the more common trailing 12-month P/E ratio, Shiller’s CAPE smooths out the earnings series and helps us avoid what could be false signals by dividing the market’s current price by the average inflation-adjusted earnings of the past 10 years. Historically, this range has peaked and given way to major market declines at around 29x on average (26x excluding the dot-com bubble), and it has usually bottomed in the mid-single digits. Except for relatively brief windows during the late 1920s, the late 1990s, and the mid-2000s, Shiller’s CAPE ratio has never been as expensive as it is today (see chart below).

As you can see, the S&P 500’s high and rising CAPE ratio signals that US stocks are sailing into a well-proven danger zone. Also note that if we get a repeat of the stock market prior to 2007, the market can stay at this elevated range long enough to make investors complacent.

Not only does today’s CAPE of 25.4x suggest a seriously overvalued market, but the rapid multiple expansion of the last few years coupled with sluggish earnings growth suggests that this market is also seriously overbought, as I pointed out last week and as we are seeing play out this week. Today’s CAPE is just slightly less expensive than the 27x level seen at the October 2007 market peak and modestly below the level seen before the stock market crash in 1929. Although we are nowhere near the all-time “stupid” valuation peak of 43x in March 2000, a powerful narrative drove the markets to clearly unsustainable levels 15 years ago and a powerful narrative is driving markets today. Then it was the myth of dotcom and new tech, and now it is the tale of QE and the Fed.

Unfortunately, the outlook for US stocks only looks more daunting when we examine CAPE ratios for foreign equity markets. Mebane Faber, chief investment officer of Cambria Investments and author of The Ivy Portfolio (2009) and Shareholder Yield (2013), regularly posts international CAPE updates to his research blog, The Idea Farm (www.theideafarm.com). Meb was kind enough to let me reprint his year-end 2013 update here.

A quick look reveals that the S&P 500 is the second most expensive stock market in the world today on both an absolute and a relative basis, second only to that of tiny Sri Lanka.

Expanding on recent valuations, Meb’s work highlights that the relationship between CAPE valuation and subsequent returns is still very much intact. This next table compares the relative returns of the most expensive and cheapest markets. Study it carefully.

On average, the cheapest 10 markets as 2013 opened returned over 21% last year, while the most expensive 10 markets lost more than 5%. This is just one year, but we would expect to see the same basic relationship over the course of the next decade, if history is a reliable guide. I want to draw your attention to a fascinating observation: look at the outliers.

Russian stocks lost almost 1% in 2013, despite showing the fourth lowest CAPE at the beginning of the year. That’s not a huge surprise. Valuations tell us a lot about long-term potential returns but not much about short-term timing. Momentum works until it doesn’t.

US stocks tell quite a different story. They returned over 30% last year, despite starting 2013 with the sixth highest CAPE valuation. Rather than reversing course in the face of sluggish earnings growth, CAPE multiples expanded from 21.1x to 25.4x. By comparison, every market that started 2013 with more expensive CAPEs than the US’s saw notable reversals of fortune, especially the top three: Peru’s CAPE fell from 33.7x to 19.7x; Colombia’s fell from 33.5x to 23.9x; and Indonesia’s fell from 24.7x to 20.1x.

The impressive thing about US stocks is not simply that positive sentiment and Fed liquidity continued to drive valuations higher, but that the market rallied as much as it did with very modest earnings in the face of historically dangerous valuations. I have said it before, and I will say it again: Sentiment, rather than fundamentals, is driving the US stock market, and sentiment can quickly reverse.

Since we have no idea when the inevitable correction will come, we must expect it at any time. Shiller’s CAPE can keep rising longer than any of us expect in the United States, but no one should be surprised if it corrects next week, next month, or next year. My friend, all-star analyst, and Business Insider Editor-In-Chief Henry Blodget makes a compelling point: “Anyone who thinks we need a ‘catalyst’ for a market crash should brush up on their history… There was no ‘catalyst’ in 1929. Or 1966. Or 1987. Or 2000. Or 2008…”

So let’s take Henry’s advice and brush up on our history…

To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – please click here.

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WHY DOES THE MSM COVER-UP THE RACE OF SHOOTERS?

There were two high profile shootings over the weekend that made the national headlines. The liberal anti-gun nuts in the mainstream media pray for a story about a Tea Party member going ballistic with an AK-47. The possibility sends a tingle up their legs. One problem. It never happens. It’s usually a teenager who has been drugged up by psychiatrists and their parents. This weekend’s killings were more traditional. I read they had a suspect in the Maryland Mall murders of two people at a Zumiez store. The MSM was all over the identities of the victims. They were both white. Then the police announced they had the identity of the suspect. This was 24 hours after the crime. He had killed himself at the scene of the crime. The MSM stories made no mention of the race of the suspect. The police knew. The mass media knew. Is it not politically correct to say the shooter was BLACK? I wonder if it was a hate crime against whites. I’m sure Eric Holder will investigate.

A football player was killed at South Carolina State University. It was the identical MO from the mainstream press. They knew the killer was BLACK and felt there was no need to mention it in their politically correct stories. We wouldn’t want to upset Sharpton and Jackson by singling out black men as killers.

I see this every night on the evening news. People are gunned down on a daily basis in West Philly and North Philly. The politically correct talking head news boobs will describe the age and height of the perpetrator, but they NEVER say whether they were black.

The liberal bias of the mainstream media does not change the Federal Crime Statistics. Propaganda and misinformation does not change the facts:

Blacks are seven times more likely than people of other races to commit murder, and eight times more likely to commit robbery.

Blacks are three times more likely to use a hand gun, and twice more likely to use a knife.

The best indicator of violent crime levels in an area is the percent of the population that is black and Hispanic.

Blacks are 39 times more likely to commit a violent crime against whites then vice versa, and 136 times more likely to commit a robbery.

Forty-five percent of black crime is against whites, 43 against other blacks, and 10 percent against Hispanic.

SHOULD THE FED BAILOUT EVERY CRONY CAPITALIST LOSER?

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Should The Fed Stop The Dominoes From Falling?

The forest (the economy) can only remain vibrant and healthy if the dead wood is burned off in bankruptcy and insolvency. Retail commercial real estate is over-built and over-leveraged. If it is allowed to burn off as Nature intended, we can finally move forward.

Last week I suggested that Retail-CRE (Commercial Real Estate) would be The First Domino to Fall in the domestic U.S. economy. The reason is simple supply and demand: for a variety of structural reasons, there is an enormous oversupply of retail commercial space and an ever-declining demand for bricks-n-mortar commercial space.

I laid all this out in a three-part series last week:

Dead Mall Syndrome: The Self-Reinforcing Death Spiral of Retail (January 22, 2014)
The First Domino to Fall: Retail-CRE (Commercial Real Estate) (January 21, 2014)

After Seven Lean Years, Part 2: US Commercial Real Estate: The Present Position and Future Prospects (January 20, 2014)

I’ve prepared a graphic depiction of dominoes falling that depicts the causal chain:

1. Standard-Issue Financial Pundits (SIFP) underestimate the CRE implosion, just as they underestimated the domino-like consequence of subprime residential mortgages blowing up in 2007-2008.

2. Few grasp how over-leveraged CRE is, so the “surprise” will be considerable, i.e. the shock-and-awe of malls being recognized as near-worthless will be outsized.

3. Occupancy and lease rates plummet in retail, resorts and office space.

4. These dynamics (fewer leases and lower lease rates) push leveraged owners of CRE into bankrupty.

(Recall that rolling over existing mortgages doesn’t increase dwindling cash flow.)
5. The Fed may want to add $1 trillion in impaired commercial real estate mortgages to its bloated $4 trillion balance sheet, but the bond market may question yet another open-ended bailout of the Fed’s cronies, i.e. the banks who foolishly lent monumental sums against marginal commercial properties.

6. The lenders foolish enough to leverage loans against phantom collateral fail as $1+ trillion in CRE loans default.

7. The “recovery” in the U.S. economy is revealed as just another fiction sold as fact by the Fed, the political Status Quo, the organs of Federal propaganda, etc.

(The Recent “New High” in Stocks Is as Bogus as the Unemployment Rate January 25, 2014)

Here’s the key issue at stake: propping up failed private enterprises with Fed or Federal money throws up roadblocks to the real growth of our economy. Rather than bail out more banks and save over-valued, over-leveraged mall owners from the consequences of the economy changing, we should be casting off what’s been holding the economy back–phantom assets, debt that should be written off and failed financial sectors bailed out with taxpayer funds and Fed trickery.

The question shouldn’t be could the Fed bail out the imploding retail-commercial real estate (CRE) sector? but should the Fed bail out the imploding retail-CRE sector?

We may as well ask if the Fed should have bailed out the buggy whip industry in 1914. The retail-CRE sector is imploding for a very good reason: speculators built way too much space with way too much credit and leverage supplied by banks emboldened by the notion that the Fed will never let crony-capitalists suffer the consequences of their insanely risky bets.

On top of that cheap-credited-fueled over-building, Web shopping and the systemic decline in household income for the bottom 90% (please look at the income charts in The First Domino to Fall) have undercut the need for ever-more commercial real estate space.

In any economy with the slightest bit of free enterprise still left breathing, the retail CRE sector would be allowed to go bankrupt and all those exposed to the risks (mall owners, banks with CRE loans, etc.) would absorb the losses. Anything less than the creative destruction of a failed sector that time has passed by will impede the economy in terribly negative ways.

Yes, the Fed can print up another $1 trillion and buy every CRE loan that’s worth $1 for $1 million and bury the defaulted loan away from public view. But should it be allowed to do so? Should the Fed’s role of savior of every crony-capitalist in America who loses a leveraged bet go unchallenged?

Should the Fed end up owning every dead mall in America so the owners and lenders can be cashed out at a fat profit? Janet Yellen, the Nation’s New Chief Slumlord (January 9, 2014)

Should the Fed be allowed free rein to bail out its owners (private banks) and crony capitalists with limitless newly created money? Is that what the U.S. is all about now, bailing out failed speculative bets by crony capitalists and banks? Most commentators believe the Fed has a totally free hand to create as much money as it wants whenever it wants and to use those funds to bail out banks and speculators by buying their defaulted mortgages and hiding them away in the Fed balance sheet.

But I believe the political resistance to this neofeudal arrangement is rising, and the Fed’s ability to bail out crony capitalists and banks is not as infinite as its supporters believe. The bond market might start pricing in negative consequences to the Fed floating yet another $1+ trillion bailout of super-wealthy cronies.

Maybe the public will finally tire of yet more bailouts of the super-wealthy and their failed sectors and failed bets. Maybe the Nation’s New Chief Slumlord, Janet Yellen, will hesitate to pursue Ben Bernanke’s policy of bailing out every failed crony capitalist regardless of the costs to the nation’s economy and the injustice of backstopping foolish risks made for private gain.

“It can’t happen here” includes the Fed. The average SIFP (Standard-Issue Financial Pundit) believes the Fed is politically unconstrained as a matter of unquestioned fact, on the order of a belief in a Cargo Cultish quasi-religion such as Keynesian “stimulus.” (Wow, Paul Krugman can really dance the humba-humba and wave a dead chicken!)

Just as it turns out “it can happen here” (runaway central state suppression, spying, etc.), the Fed can encounter political limits on its Grand Plan of bailing out every crony capitalist in America.

Maybe we should let the retail CRE sector go the way of the buggy whip manufacturers instead of bailing out every super-wealthy crony involved in the orgy of over-building and over-leverage. The forest (the economy) can only remain vibrant and healthy if the dead wood is burned off in bankruptcy and insolvency. One of the biggest pile of dead wood in the U.S. is retail-CRE. If it is allowed to burn off as Nature intended, we can finally start moving forward.

AMERICA HAS BROKEN BAD

Submitted by Jim Kunstler

Like Your Hair’s On Fire

The past two months I’ve taken in all but the final few episodes of Breaking Bad, America’s loathe letter to itself. What a metaphor for a nation’s transition from an ethos of earnest effort to a mood of criminal buffoonery. For you who haven’t tuned in to this cultural artifact, Breaking Bad is a cable TV series about a bland high school chemistry teacher, Walter White, who, facing an expensive battle with lung cancer, decides to get into the lucrative business of cooking methamphetamine, the most atrocious recreational drug there is. The series follows his misadventures in the trade.

The really remarkable thing about the series is that the most interesting theme in the long-running story remains completely undeveloped — at least so far to within a few installments of the end. That is, Walter’s existential predicament as a hostage to America’s medical racketeering matrix. For many families like Walter White’s, a cancer diagnosis is tantamount to a parallel judgment of financial ruin.

Like everybody else in America these days, poor Walter just submits to his fleecing. In fact, the blandest moments in the long-running melodrama are the scenes when Walter forks over his massive payments to a grandmotherly-type lady at the hospital billing desk. She’s as sweet as pie, though she also seems rather sweetly surprised that he is actually able to pay his bill. He pays for his treatments, of course, with the income derived from his meth cooking venture. His doctors are portrayed as demigods. There is zero discussion by them of A) the cost of his cancer treatments, and B) the legitimacy of the costs. That’s not their department. He just has to come up with hundreds of thousands of dollars.

Which he does, simply by discarding his persona as an earnest schoolteacher and entering the ranks of illicit drugdom. Of course, the series is mostly concerned with the twists, turns, and torments of that transition, and the metaphors in that are also rich as to what America has lately become. For instance, Walter’s success as a criminal stems from his technological skills. He is the meth cooker supremo because his formula is the best, his lab practices are the most exacting, his standards are the highest! Walter White is the Steve Jobs of meth. He puts out the best product and won’t settle for less than perfection.

This jibes nicely with America’s current mood of techno-rhapsodic psychosis, in particular our tendency to ignore all the diminishing returns and blowback from our techno-grandiose endeavors — which range from the magic of shale-oil fracking to the romance of “green” skyscrapers, to high-frequency front-running in the stock markets, to the recruitment of every teenager in America into an obsessive-compulsive cell-phone culture. It’s all good. Walter White’s “ace-in-the-hole” is his science training.

Another winning metaphor is the supernatural amount of cash-money on display in almost every episode once Walter gets rolling in the meth trade, duffle-bags full of exquisite, freshly packed-and-stacked banknotes, so much that tossing a quarter-million here, a quarter million there loses its meaning. The stuff is tossed around like junk mail. This is not inadvertent, of course. It depicts nicely the disintegration of America’s value system: money is everything and nothing. Walter quickly joins the “one percent” earnings-wise. It hardly makes him a better person. His money-making operations are as disgusting as the “innovation” of new swindles among the Too-Big-To-Jail bankers. By mid-way through the series, Walter even has enough petty cash on hand to pay for his brother-in-law’s hospital and rehab bills, after the BOL is shot up by Mexican drug gangsters. The fantastic cost of all that is also ignored.

An additional metaphor is found in Walter’s “employer,” the super-polite neatnik Gustavo Fring, who rules the Albuquerque-based drug empire via a false-front fast-food chain of chicken eateries. Fring is the fantasy of every businessman’s ideal self-image: meticulous, careful, fair, — until Walter White’s buffoonery shoves him over the edge and Gus, too, breaks bad, so to speak, in his own fussy way. And business itself is depicted as the highest-and-best expression of human culture, just as it has been since the reign of Ronald Reagan.

Finally, there is the matter of what the fruits of Walter White’s techno-savy work does to the “consumer” public who buy his product. It turns them into zombies. It’s also almost too obvious to state that the popularity of zombies in American culture has exactly paralleled the financialization of the American economy. That half the action of Breaking Bad takes place in and around automobiles — in the parking-lot wasteland of Albuquerque — is just the cherry on the metaphorical cake. This is who we are.

I WONDER IF YELLEN & DIMON HAVE TO HEAT THEIR MILLION DOLLAR HOMES

We already know the national propane shortage has driven propane prices up by close to 100% in the last month. Now we’ve seen natural gas prices spike by 16% in the last month and 55% above the level of last year. Oil prices of $97 per barrel have kept gas prices near all-time highs for this time of year. Another round of global warming has hit the Midwest and will hit the East Coast tomorrow. Temperatures will be 30 degrees below normal. Wind chills well below zero will result in massive demand for natural gas and propane. But be thankful to Janet Yellen and her banker owners. They are worried about deflation. The BLS will conclude that natural gas and propane prices didn’t really go up by 55% to 100% because you froze to death and no longer needed heat. They call this deathonomic adjustments. Obama will be using a similar adjustment to healthcare premiums as people die waiting for Obamacare to cure them.

I know you are desperately worried about deflation, so be happy when you get your next heating bill.