Ron Paul Asks: Is The "Mother Of All Bubbles" About To Pop?
ZeroHedge.com Mon, 11/11/2019 - 17:05
Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity,
When the New York Federal Reserve began pumping billions of dollars a day into the repurchasing (repo) markets (the market banks use to make short-term loans to each other) in September, they said this would only be necessary for a few weeks. Yet, last Wednesday, almost two months after the Fed’s initial intervention, the New York Federal Reserve pumped 62.5 billion dollars into the repo market.
The New York Fed continues these emergency interventions to ensure “cash shortages” among banks don’t ever again cause interest rates for overnight loans to rise to over 10 percent, well above the Fed’s target rate.
The Federal Reserve’s bailout operations have increased its balance sheet by over 200 billion dollars since September. Investment advisor Michael Pento describes the Fed’s recent actions as Quantitative Easing (QE) “on steroids.”
One cause of the repo market’s sudden cash shortage was the large amount of debt instruments issued by the Treasury Department in late summer and early fall. Banks used resources they would normally devote to private sector lending and overnight loans to purchase these Treasury securities. This scenario will likely keep recurring as the Treasury Department will have to continue issuing new debt instruments to finance continuing increases in in government spending.
Even though the federal deficit is already over one trillion dollars (and growing), President Trump and Congress have no interest in cutting spending, especially in an election year. Should he win reelection, President Trump is unlikely to reverse course and champion fiscal restraint. Instead, he will likely take his victory as a sign that the people support big federal budgets and huge deficits. None of the leading Democratic candidates are even pretending to care about the deficit. Instead they are proposing increasing spending by trillions on new government programs.
Joseph Zidle, a strategist with the Blackstone investment firm, has called the government — or “sovereign” — debt bubble the “mother of all bubbles.” When the sovereign debt bubble inevitably busts, it will cause a meltdown bigger than the 2008 crash.
US consumer debt — which includes credit cards, student loans, auto loans, and mortgages — now totals over 14 trillion dollars. This massive government and private debts put tremendous pressure on the Federal Reserve to keep interest rates low or even to “experiment” with negative rates. But, the Fed can only keep interest rates, which are the price of money, artificially low for so long without serious economic consequences.
According to Michael Pento, the Fed is panicking in an effort to prevent economic trouble much worse than occurred in 2008. “It’s not just QE,” says Pento, “it’s QE on steroids because everybody knows that this QE is permanent just like any banana republic would do, or has done in the past.”
Congress will not cut spending until either a critical mass of Americans demand they do so, or there is a major economic crisis. In the event of a crisis, Congress will try to avoid directly cutting spending, instead letting the Federal Reserve do its dirty work via currency depreciation. This will deepen the crisis and increase support for authoritarian demagogues. The only way to avoid this is for those of us who know the truth to spread the message of, and grow the movement for, peace, free markets, limited government, and sound money.
'Solutions Are Obvious' - The US Higher Education System Is Broken
ZeroHedge.com Mon, 11/11/2019 - 21:45
Authored by 'Solutions Are Obvious' via The Burning Platform blog,
The US higher education system is broken. In many cases, it produces individuals with useless degrees purchased at outrageous cost. The system itself is an infestation of ultra liberal professors, spineless administrators and a student body that becomes more and more radicalized and detached from reality the more courses they take.
The higher education system is the incubator for the anti white, anti male, anti Trump, pro freak, pro censorship, anti gun, pro socialist, anti conservative, pro unlimited immigration, pro free everything mentality that pervades what purports to be the evening news. It infantilizes young adults to produce a steady stream of victims and mental midgets completely unprepared to meet the real adult world.
All is not lost, however. By and large, STEM graduates are less affected by the SJW mental aberration as their critical thinking abilities are necessarily on a higher plane to be able to cope with a curriculum that is more than just opinion. STEM fields have empirically based phenomena to comprehend and must use known tested methods of reasoning and logic to handle the problems and situations a particular field is called upon to investigate. Although STEM students are typically forced to sit through nonsense classes and regurgitate what the instructors deem critical information, they instinctively know its BS and promptly forget it once the class is over. They’re typically not permanently scared.
The problem lies with the ‘Basket Weaving’ majors where no proof of anything is required or even possible as it’s all just opinion and supposition. The Humanities / Social Sciences / Liberal Arts courses offer an easy path towards a degree, many of which are absolutely worthless. It’s actually a shame that some of them do lead to living wage and beyond employment options that end up producing many of the fraudulent professions society is encumbered by like Economics, Psychiatry and other specializations that can’t prove anything past common sense.
I’ll concentrate primarily on what to do to eliminate only the most egregious fraudulent degrees that are currently plaguing society.
The concept of tenure needs to be eliminated. No one should be guaranteed a livelihood by managing to hit some arbitrary mark and thereafter have no responsibility for doing a good job as reviewed by their employer. The education profession needs to get rid of the dead wood clogging the system and consuming resources.
All higher education facilities should be mandated to provide their graduates with job opportunities via an employment agency owned and operated by the institution, not a contracted for service. The schools should be totally responsible for finding each graduate a position in the degree field of study for 5 years post graduation.
If the institution is unable to place a graduate, then the former student is entitled to a full refund of all tuition paid for a proven obviously useless degree plus 5 times tuition paid for the waste of time involved and to provide the former student with a funds cushion to get retrained in something with a future. In the case where a graduate is unemployable for no reason the school is responsible for or where there is a dispute over responsibility, a 3rd party would be called upon to make a judgment.
If this were implemented, Gender Studies, Recreational Science, Hospitality Science, Museum Curator, Drama Studies and similar courses would disappear overnight from most campuses along with the faculty that teach the classes. The schools know these are for the most part BS courses and know that the chances of someone getting employed with one of the basket weaving degrees is so low that it would be financially too risky to offer the course.
Gone would be the professors teaching these nonsense courses. Gone would be the lenders to provide the student loans, guaranteed by the Fed Gov which steals the funds from the general public. Gone would be the students mentally or some other way incapable of STEM degrees with no option but to consider vocational training or learn how to say – ‘Do you want fries with that’. Gone would be the windfall profits higher ed facilities have enjoyed in recent decades. Gone would be the unsustainable building boom for facilities completely unrelated to teaching but used as enticements to attract low IQ students easily dazzled by shiny objects. Gone would be the nonsense classes STEM students are now forced to take. Gone would be the environment were the purveyors of bullshit get to indoctrinate the latest crop of weak susceptible minds.
Some may claim this violated free market principles. I would counter that the advancement of institutionalized fraud is not in the society’s best interests. If a student were to sign away his/her rights to compensation and effectively opt for today’s environment, then that would absolve the institution of responsibility. The free market would be restored as long as informed consent is involved.
In addition, it should be obvious that no one should be able to get an advanced degree in a field that can’t prove its basic precepts. As mentioned previously, something like Economics is almost entirely BS. Economists can’t prove anything past common sense and can’t even provide a proper postmortem after an economic catastrophe. Likewise, Psychiatry has not a single empirical test for the hundreds of conditions listed in their DSM. Psychiatry is opinion masquerading as science and is simply an outlet for Big Pharma to push their mind altering poisons. The large majority of mass shooters have been on prescription only psychoactive drugs.
Other fields that I generally refer to as the ‘story telling’ professions should likewise be reigned in. Paleontology, Anthropology, Cosmology, large portions of Geology and many more fields are largely based on a plausible story as their foundation, sans evidence. Absolute proof for their assertions is impossible and consequently it should be impossible to get a degree above Bachelors in these disciplines.
No one should claim to be an expert (PhD) in a field that is based on opinion. In the off chance that something like Climate Science might someday actually be able to provide proof of their assertions, it, as an example, should be able to produce Bachelors graduates that can attempt to further the field but would no longer be able to fool the public into thinking they know what’s going on due to their bogus PhD pedigree.
Global debt surges to record high $188 Trillion : IMF chief
AFP•November 7, 2019
The global debt load has surged to a new all-time record equivalent to more than double the world's economic output, IMF chief Kristalina Georgieva warned Thursday.While private sector borrowing accounts for the vast majority of the total, the rise puts governments and individuals at risk if the economy slows, she said. "Global debt -- both public and private -- has reached an all-time high of $188 trillion. This amounts to about 230 percent of world output," Georgieva said in a speech to open a two-day conference on debt.
That is up from the previous record of $164 trillion in 2016, according to IMF figures.
While interest rates remain low, borrowers can use debt to make investments in productive activities or weather a bout of low commodity prices. But it can become "a drag on growth," she said.
"The bottom line is that high debt burdens have left many governments, companies, and households vulnerable to a sudden tightening of financial conditions," she cautioned.
Corporate debt accounts for about two thirds of the total but government borrowing has risen as well in the wake of the global financial crisis.
"Public debt in advanced economies is at levels not seen since the Second World War," she warned. And "emerging market public debt is at levels last seen during the 1980s debt crisis." She called for steps to ensure "borrowing is more sustainable," including making lending practices more transparent and preparing for debt restructuring with "non-traditional lenders" -- an apparent reference to China, which has become a major creditor to developing nations including in Africa.
CA Insurance Exodus: Homeowner Coverage Evaporating in the Wake of the California Wildfires
Theorganicprepper.com November 1, 2019
By Jenny Jayne
The California wildfire catastrophe continues for many residents even after the fires go out. Vulnerable residents are left with a mess to clean up or their homes have been reduced to ashes.
But even as the ashes are settling, residents of wildfire-ravaged areas that the California Department of Insurance is calling “The Wildland-Urban Interface” or WUI, are facing yet another looming threat. National big-name insurance companies offering home and property insurance are cutting their losses and evacuating California in droves, leaving entire communities in financial crisis.
California communities, already devastated by wildfires or even just in high-risk fire zones, are facing double and triple rate hikes or being dropped from their insurance carriers altogether, reports The Sacramento Bee:
Two consecutive disastrous wildfire seasons have created a budding insurance crisis for thousands of Californians who live in and around fire-prone areas. Stung by $24 billion in losses, insurers are imposing rate hikes or dumping customers altogether, leaving homeowners to seek replacement policies that can be two or three times as expensive. (source)
The rate of affected California residents continues to grow – so far, insurers have dropped 350,000 California residents from their policies.
Insurance companies are leaving California over massive losses.
As Fox Business explains, “Last year’s Camp Fire, the deadliest and most destructive in California history, engulfed more than 18,000 structures and killed more than 80 people before it was contained. It caused more than $12 billion in insured losses.”
Insurance providers face devastating losses from payouts due to wildfires. Some providers didn’t survive at all. One smaller insurer crumbled under the pressure and became yet another casualty of the wildfires. “The Camp Fire…also claimed one additional victim: Merced Property & Casualty, a small carrier that folded under the weight of roughly $100 million in claims from the Paradise disaster,” The Sacramento Bee reported.
Other insurers are taking note of the demise of one of their own and are getting out of California’s high-risk areas. This poses a massive problem for the residents of those areas, many of whom are low-income families without the resources to endure sudden enormous increases to their insurance premiums even while state officials struggle to enact insurance reform.
Insurance Commissioner Ricardo Lara favors a proposal by the legislative task force to create state subsidies for those living inside the fire zones, which tend to be people who are already struggling economically. “There’s this misconception about folks living in the (fire areas), especially in Southern California — people think there are these multimillion-dollar homes in Malibu,” he told The Bee.
Many long-time residents are scrambling to find affordable home owner’s insurance after either receiving notice of cancellation of their policy or enormous rate hikes. Those with existing mortgages are required to keep insurance in order to keep their homes. Their options are either to find an insurer or be forced to sell their home. Some who have paid off their homes are simply risking being without coverage.
Penny, a real estate agent who shared her story with The Organic Prepper, said: “They can no longer afford their mortgage they were able to qualify for AND the additional insurance payments. And if you don’t find insurance, your lender/bank/mortgagor will tack onto your payment to cover the insurance thru (sic) some affiliate they have and you loose (sic) the option to shop for something affordable. Those who have their homes paid off are opting to not cover and figure they will just have a mortgage if a fire occurs. Some have lowered it by raising their deductible.”
“It’s really sticker shock for people to see their homeowners’ (premium) go from $1,200 to $3,600,” The Bee reported.
Residents don’t have many options to turn to.
As insurance rates rise, customers are looking desperately at every option. But there’s not much to choose from.
Some residents are forced to turn to insurers of last resort when even insurers like Lloyds of London, who are known for their high-risk tolerance, deny coverage. Those options are limited, expensive, and disappointing.
Penny told The Organic Prepper that “It came up in the public meeting that I believe Lloyd’s of London was one of the few writing policies for a bit and suddenly the light came on what a risky area this was considered and they sent out cancelation (sic) notices in mass giving 30-45 day notices to find other insurance.”
The last resort after homeowners have exhausted all other options is an expensive, short-term band-aid called FAIR, as The Bee explains:
If all else fails, they go to the California FAIR Plan. The FAIR Plan, created by the California Legislature when insurers abandoned inner cities following the 1960s riots, offers bare-bones coverage that doesn’t include theft or liability insurance. It isn’t subsidized by the state. FAIR Plan rates are regulated, but with fewer limitations compared to the traditional insurers. (source)
“The California Fair (sic) Plan is considered the wrap around plan covering the structure in case of a fire and your other insurance will then cover the contents,” Penny told us. This means that the FAIR plan will only cover your structure, and the owner will have to get additional insurance to cover anything else including contents. Penny continued, “The California Fair plan, it was made clear in the meeting, is not a long term solution and for many, it’s not an affordable option.”
Some homeowners got creative with finding obscure insurance loopholes like Lynda, who shared her story with The Organic Prepper:
“We have lost 4 insurance carriers in 3 years because of our wildfire danger. We have never filed a claim… We have insurance through the farm bureau now through a company called The Grange because we have livestock…we found our best option was to insure as a farm, which we meet the criteria for, even though it’s considered a hobby farm. The insurance was lower too.”
Insurance companies are using questionable methods to evaluate risk.
Insurance companies are dropping their customers or raising rates because of the location of the homes, even if the homeowners take it upon themselves to install elaborate “hardening” systems to protect their homes from fires.
The Bee reported a story on Jennifer Burt, a local CA real estate agent:
…she’s done everything she can to fire-proof her home in Meadow Vista, in the bushy, densely wooded Placer County foothills, even installing a sprinkler system on the roof. Yet a few weeks ago, her insurance carrier — Lloyd’s of London, known for insuring high-risk properties — told her it was declining to renew her homeowners’ policy. (source) Insurers don’t even visit the property to see what “hardening” has been done. They lump the “bad” with the “good” risks by area and leave responsible home-owners in the lurch. Penny told The Organic Prepper she is concerned about this method of determining coverage and premiums:
“What we are seeing is that the insurance companies are not coming out to the location of the home, but looking at the location on a satellite map and declining without ever driving by or stepping foot on the property.
Many companies are looking at the chances of a particular area in general and the likelihood of it going up in flames. They then look at the ratio of houses they currently insured in that area and if it did go up in flames, what is their loss % ratio and could the company survive a hit like that. At least one company went under the Paradise fire which is the basis of their findings. Other companies just say no. Not risking it.”
It’s a problem that the California Department of Insurance takes note of in their report titled The Availability and Affordability of Coverage for Wildfire Loss in Residential Property Insurance in the Wildland-Urban Interface and Other High-Risk Areas of California: CDI Summary and Proposed Solutions:
Based upon complaints received from homeowners and members of the Legislature, the majority of non-renewals, refusals to insure, and increased premiums in these rural areas were the result of insurers’ greater use and emphasis on wildfire-risk models, which are used to underwrite and rate residential properties. Legislators, other public officials, and their constituents have expressed concern that wildfire-risk models are not accurate, do not provide satellite imagery that is granular enough to objectively identify fuel sources and other physical characteristics, and do not take into account mitigation done by the homeowner or the community. Since the wildfire-risk tools that insurers use have a measure of objectivity and a relationship to the risk of loss, CDI lacks the statutory authority under current law to prohibit an insurer from using these tools to determine whether it will issue or renew a homeowners’ insurance policy. While CDI has authority over how an insurer uses a wildfire-risk tool to classify and rate individual properties in a homeowners’ insurance program, we have no authority over the development and construction of the models. (source)
Leaving the area is not always a viable option, either.
Some find it impossible to find an affordable option and are forced to sell. But cutting their losses and getting out is still expensive and hard to do. Many are facing plummeting housing prices.
Penny told The Organic Prepper what some of her clients are experiencing:
“As a realtor, I had a full price offer in Sierra Springs last May and buyers backed out because of the cost of insurance. Another listing, we came down $65k to try to get an offer. They finally got one after lowering it a total of $120k. The original price was a good, mid grade price for the property.
And yes, buyers were discouraged due to the cost of insurance. What would have cost roughly $750 a year to cover, is now costing $3,800-$6,800. These were the bids we were receiving. The best quote at $3,800 was thru USAA which is available for vets, but not the general public.
It is so bad, as listing agents and buying agents, we are bending over backwards to find quotes before going any further. But, I have also heard of the current company covering the home, somehow finding out that someone is inquiring about insurance quotes and then dropping their coverage. So, we have to tread lightly as agents when we are trying to get quotes prior to a sale.
It’s a serious problem that we are trying not to panic about, but it is affecting us as we live here too.
Higher-end homes in the Pollock Pines area are getting quoted much higher.
I heard from another agent, his client’s home was 3,500 sqft and their insurance was being dropped. The lowest quote he could get was $20,000 a year. So, now, he can’t afford to keep the home if he wanted to, and no buyer would be willing to step in at that price. I’m afraid that we could see a market crash as the problem isn’t being fixed.
So, the result is that even tho prices are good and getting better for buyers, after tacking on the inflated insurance payment, buyers now can’t qualify for the mortgage payment they could have and they are having to lower their standards across the board to find something they CAN afford.
It is killing the market. The only ones able to afford are coming from the Bay Area.”
Penny is not the only one who fears an economic toll on the real estate market in the fire-prone areas of their state.
Jennifer Burt’s story from The Bee relayed the same fears: “I get so frustrated that the insurance commissioner won’t do anything. It’s reaching a point where it’s a daily conversation in my office as to whether insurance rates are going to kill real estate in California.”
The Economic Crisis Of 2008 Never Ended...
ZeroHedge.com Tue, 10/29/2019 - 09:15
Authored by Rob Bennett via ValueWalk.com,
There have been many articles appearing in recent months suggesting that the economy might go into a recession within the next year. Many have focused on whether the Federal Reserve should cut interest rates to stop this from happening. There also has been a lot of speculation as to the effect that an economic downturn will have on the 2020 Presidential elections. I have not seen anyone talk about how today’s high stock prices will likely cause an economic collapse.
There have been numerous suggestions coming at things from the opposite direction, making the case that a recession will likely cause stock prices to fall hard. But I view that way of thinking about things as a holdover from the Buy-and-Hold Era. If stock price changes are caused by rational assessments of economic developments, it would make sense that economic bad times would cause stock prices to fall. But I believe that Shiller’s research showing that valuations affect long-term returns is legitimate research. If that is so, then high stock prices are caused by irrational exuberance and the inevitable disappearance of irrational exuberance causes trillions of dollars of consumer spending power to leave the economy, causing a contraction.
If that’s the way things work, the economic crisis of 2008 never came to an end. Employment numbers improved and businesses stopped going under. So, in a surface sense, economic conditions certainly improved. But the economic numbers improved only when CAPE levels returned to the dangerous levels that applied prior to the onset of the crisis. We pumped up stock prices to make people less fearful of spending but at the cost of insuring that a follow-up price crash would be coming in not too long a time.
So the economic crisis never really ended. It went into remission. If the economy was booming with stock prices at reasonable levels, we could take comfort that good times really had returned. But I don’t feel able to trust a recovery that is financed by an overpriced stock market. Overpriced stocks makes us feel that it is safe to spend again. But the financial security pushing spending forward is illusory. There is no “there” there when stock prices could fall to fair-value levels at any moment and trillions of dollars of spending power could be taken off the table again.
I am not a fan of illusory stock prices. I think that we all should be doing all that we can to keep stock prices at something close to fair-value levels at all times. All of our financial planning decisions depend on us knowing how much wealth we possess and it is not possible to know this for so long as stocks are priced at two times their real value, as they are today.
We cannot even form reasonable assessments of the merit of the actions of policymakers at times when high stock prices are causing the economic numbers to look better than they would look if stock prices were at reasonable levels. President Trump naturally says that it is his policies that have brought on good economic times. But how can we know how the economy would be doing if the entire stock market were priced at one-half of the level at which it is today priced. And I of course do not intend to make a partisan comment here. President Obama’s policies looked better because of the effect of high stock prices as well.
It is the Federal Reserve’s job to keep the economy from contracting too hard. Does that mean keeping stock prices from crashing? I get the sense that there are times when Federal Reserve members take this factor into consideration. But keeping irrational exuberance going at some point becomes a futile endeavor. We can’t just create money out of thin air by pushing stock prices upward. At some point the market insists that prices reflect real value (this is Shiller’s core finding). Pushing prices up is a holding action. Sooner or later we have to accept that fair-value prices will prevail again and that the economic pain that follows from a return to fair-value prices must be endured.
High stock prices are a lie. That’s what I am saying. They are not just a lie that affects stock investors. They are a lie that affects everyone who is living in our economic system. The Pretend Money that is created when stock prices rise above fair-value levels always disappears down the road a bit. And the net result is a negative because of the disruption experienced when businesses that appeared to be doing well go under and when workers who appeared to be headed for decent retirements find themselves far short of achieving their financial goals at a time in life when it is too late to do anything about it.
I reject the idea that we may be seeing a new economic crisis in the days ahead. To my way of thinking, we will be seeing a resumption of a crisis that we experienced for only a few months in late 2008 and early 2009 and then put off for another time. We put that crisis off because we did not look how out stock portfolios looked when fair-value price levels were restored. But the put-off was a temporary thing. To achieve more permanent solutions to the problems that received national attention in late 2008, we are going to have to come to terms with the primary cause of those problems -- the high stock prices that still apply today.