What is good for the fake economy

Is good for the Fake Americans, but no one else in the USA.

According to official US government economic data, the US economy has been growing for 10.5 years since June of 2009. The reason that the US government can produce this false conclusion is that costs that are subtractions from GDP are not included in the measure. Instead, many costs are counted not as subtractions from growth but as additions to growth. For example, the penalty interest on a person’s credit card balance that results when a person falls behind his payments is counted as an increase in “financial services” and as an increase in Gross Domestic Product. The economic world is stood on its head.

It is aggregate demand that drives the economy. Payments made on a rise in interest rates on credit card balances from 19{1603ff2a6a588d58223e197ffd7f0c0e99c41a7d65ea3396012a60862884ee77} to a 29{1603ff2a6a588d58223e197ffd7f0c0e99c41a7d65ea3396012a60862884ee77} penalty rate reduce consumers’ ability to contribute to aggregate demand by purchasing goods and the services of doctors, lawyers, plumbers, electricians, and carpenters. Contrary to logic, the fee is magically counted in the “financial services” category as a contributor to GDP growth. The extortion of a fee that reduces aggregate demand lowers GDP, but builds paper wealth in the financial services sector.

GDP growth is also artificially inflated by counting as GDP abstract concepts that do not produce income streams. For example, for homeowners the US Department of Commerce estimates the rental values of owner-occupied housing, that is, the amount owners would be paying if they rented instead of owned their homes, and counts this imputed rent as GDP.

These and other absurdities have caused economist Michael Hudson to conclude correctly that the “financial reality of how the U.S. economy works is no longer captured in GDP statistics.”

You may recall that I pointed out this sort of thing repeatedly back in 2008 and 2009. We have been living in the Great Depression 2.0 ever since, even though the massive financialization of the economy has managed to disguise that being exposed in the statistics.

This is why I no longer pay any attention to the statistics or comment upon them. CPI is fictitious, GDP is fictitious, and Z.1. has been rendered useless. It would be about as meaningful as commenting on the fictional economics of the post-imperial Star Wars universe.

The reason that the fake growth has to continue indefinitely is because once the paper gains are correctly written off and accounted for as losses, the whole structure begins to collapse.

How “financial efficiency” kills civilization

How a Republican vulture capitalist killed a Nebraska town:

Major Republican donor Paul Singer has very few fans in this town of 6,300 people, where 80 percent of voters backed Donald Trump in 2016.

“I hope Paul Singer is proud of what he did,” Tim O’Connell, a local lumberyard owner, told Tucker Carlson Tonight. “I don’t know how he sleeps at night.”

O’Connell and many other residents are still suffering from the loss of sporting goods retailer Cabela’s, which kept its headquarters in Sidney until it merged with Bass Pro Shops in 2017.

The town’s mayor, Roger Galloway, told Tucker Carlson Tonight that the merger cost Sidney 2,000 jobs.

The sale of Cabela’s to Bass Pro Shops was announced in 2016, a year after Singer’s Elliot Management disclosed an 11 percent stake, and said Cabela’s should explore a possible sale. Singer has earned the title of the “world’s most feared investor” and became a billionaire through tactics described as “vulture capitalism.”

After the sale announcement, the stock price surged and Singer’s hedge fund cashed out within a week. Elliott Management reportedly made at least $90 million.

“They got in there to get the business sold and the business was sold, so they took it and ran,” Damien Park, managing partner at consulting firm Hedge Fund Solutions, told the Omaha World-Herald in October 2016.  “They made a fortune, so they’re happy.”

The residents of Sidney, however, were left without the town’s major employer.

It’s important to remember that the financial benefits of capitalism come with certain costs, and the rewards are not always net beneficial to society. One should always recall that the preamble to the U.S. Constitution does not indicate that its purpose is to maximize gross national product or the sum total of societal wealth.

Predator complains about imitator

It’s jaw-droppingly astonishing to see a US diplomat complain about anyone else debt-trapping less-developed countries:

A senior US diplomat launched a verbal barrage at Beijing’s economic presence in Pakistan, claiming the massive investment brought nothing but corruption and a legacy of debt. China hit back saying IMF loans were a worse burden.

A senior American diplomat in South and Central Asia mounted harsh criticism of the China Pakistan Economic Corridor (CPEC) project, an ambitious plan to turn Pakistan into a major trade route connecting China directly with the Arabian Sea. Speaking at the Woodrow Wilson Center, Assistant Secretary of State Alice Wells said the multibillion-dollar project, which China touts as a model of cooperation with other nations in its ambitious Belt and Road Initiative, was riddled with corruption and only hurt the Pakistani people.

“Together with non-CPEC Chinese debt payment, China is going to take a growing toll on Pakistan’s economy, especially when the bulk of payment starts to come due in the next four to six years,” the US diplomat said. She added that a “lack of transparency” would boost the cost of the projects and result in an even heavier debt burden.

All China is doing is precisely what the USA, through the IMF, has been doing since 1945. Apparently it is bad to be in debt to Chinese bankers, but good to be in debt to US bankers.

Why won’t you move?

Economists are upset that Americans aren’t uprooting themselves from their communities as readily as the Baby Boomers and preceding generations did:

Mobility in the United States has fallen to record lows. In 1985, nearly 20 percent of Americans had changed their residence within the preceding 12 months, but by 2018, fewer than ten percent had. That’s the lowest level since 1948, when the Census Bureau first started tracking mobility.

The decline in Americans’ mobility has been staggering, as the chart below shows. Mobility rates have fallen for nearly every group, across age, gender, income, homeownership status, and marital status.

Declining mobility contributes to a host of economic and social issues: less economic dynamism, lower rates of innovation, and lower productivity. By locking people into place, it exacerbates inequality by limiting the economic opportunities for workers.

A wide range of explanations have been offered to account for these substantial declines in mobility. Many consider the culprit to be the economic crisis, which locked people into declining-value homes; others attribute it to the huge differential in the housing prices in expensive cities. Some economists contend that job opportunities have become similar across places, meaning people are less likely to move for work; others see rising student debt as a key factor that has kept young Americans in their parents’ basements.

Now, a new study from the Federal Reserve Bank of New York suggests that other, more emotional and psychological factors may be at work. The study uses data from the bank’s Survey of Consumer Expectations to examine the degree to which people’s attachment to their communities affects their willingness and ability to move. To get at this, they use data from the survey (which covers a monthly panel of 1,300 respondents and is nationally representative) to group Americans into the three mobility classes I identified in my book Who’s Your City: “the mobile” who have the means, education, and capability to move to spaces of opportunity; “the stuck” who lack the resources to relocate; and “the rooted” who have the resources to move, but prefer to stay where they are.

The survey identifies respondents’ most recent move, their probability of moving in the next two years, and other data related to moving including job opportunities and income prospects, housing costs, the distance from current home, costs of moving to various locations, crime rates, taxes, community values and norms, and proximity to family and friends. The researchers use these data to estimate the overall costs—what they call the “willingness to pay” or WTP—for people to move different locations. They then use statistical models to examine the importance of these psychological factors compared to other mostly financial explanations.

A significant reason for the decline in mobility is that many of us are highly attached to our towns. Nearly half of those in the survey (47 percent) identify as rooted. The rooted are disproportionately white, older, married, homeowners, and rural. Their reasons for not moving are more psychological than economic: proximity to family and friends, and their involvement in the local community or church.

Note the significance of the “disproportionately white” aspect of the so-called “rooted”. In the 1950s and 1960s, even in the 1980s, all those Midwesterners who moved to California were moving, or so they assumed, to another white state. My parents moved from Massachusetts to Minnesota in the 1970s, then my parents’ best friends moved from Minnesota to California in the 1980s. Both moves were textbooks moves made for purely economic reasons.

Would the latter move be made today? Almost certainly not.

Now keep in mind that the entire purpose of free trade’s supposed economic benefits is to expand this labor mobility worldwide. The only price is the complete destruction of everything you know and love, including your relationships with your friends and family. So, it’s good that the US labor mobility rate is falling, the real problem is that it can’t fall fast enough to prevent the country from collapsing or preserve the remaining unity of the least-invaded states.

Tax cuts are terrible incentives

A straightforward industrial policy would be vastly preferable to abstract arguments with no means of holding corporations accountable for their failure to follow through on the theory:

In the 2017 fiscal year, FedEx owed more than $1.5 billion in taxes. The next year, it owed nothing. What changed was the Trump administration’s tax cut — for which the company had lobbied hard.

The public face of its lobbying effort, which included a tax proposal of its own, was FedEx’s founder and chief executive, Frederick Smith, who repeatedly took to the airwaves to champion the power of tax cuts. “If you make the United States a better place to invest, there is no question in my mind that we would see a renaissance of capital investment,” he said on an August 2017 radio show hosted by Larry Kudlow, who is now chairman of the National Economic Council.

Four months later, President Donald Trump signed into law the $1.5 trillion tax cut that became his signature legislative achievement. FedEx reaped big savings, bringing its effective tax rate to less than zero in fiscal year 2018 from 34{f18bb1fdf52d98bded86883b9be18028c561f8992f79c47739bf349fa8a297cc} in fiscal year 2017, meaning that, overall, the government technically owed it money. But it did not increase investment in new equipment and other assets in the fiscal year that followed as Smith said businesses like his would.

Nearly two years after the tax law passed, the windfall to corporations like FedEx is becoming clear. A New York Times analysis of data compiled by Capital IQ shows no statistically meaningful relationship between the size of the tax cut that companies and industries received and the investments they made. If anything, the companies that received the biggest tax cuts increased their capital investment by less, on average, than companies that got smaller cuts.

From free trade to immigration to corporate tax cuts, the more one examines economic theories in practice, the more obviously false one observes them to be.

The lethal poison of debt

Usury eventually kills every company that grows through debt, and sooner or later, it will kill the economy too:

There were tears at Thomas Cook’s Peterborough headquarters today as 9,000 UK staff lost their jobs and 12,000 more around the world are also of work after the world’s oldest and most famous travel operator officially went bust at 2am.

The company’s check-in desks at the 20-plus UK airports the business flew from are shut today with all customers with holidays and flights told they are cancelled – but many will not get their money back for months. 600 high street store are also locked up today.

 Last-minute talks to try and rescue the ailing firm collapsed last night with nobody willing to service its £1.7billion debt, and the Civil Aviation Authority announced the end for the 178-year-old company in the early hours of this morning.

Boris Johnson today said that the Government had been asked to bail-out the business with £150million of taxpayers’ money but they had refused.

He said: ‘Clearly that’s a lot of taxpayers’ money and sets up, as people will appreciate, a moral hazard in the case of future such commercial difficulties that companies face.

The math of usury is clear and impossible. Real growth can never keep up with compounding interest. This is why debt is evil and why regular debt jubilees are necessary, even though the usurers use all of their power to try to prevent their victims from escaping.

Think about how many of these historical, century-old companies that are suddenly collapsing almost overnight. There isn’t any saving them. There isn’t any way out. And the catastrophic consequence of these inevitable failures is why these companies should not be permitted to grow so big in the first place.

Remember, corporations are NOT capitalism. They are government interventions in the economy, artificial creations in which the government absolves the normal legal responsibilities of the shareholders and executives.


Is GE the new Enron?

An accounting expert who raised red flags about Bernie Madoff ’s Ponzi scheme has a new target: General Electric Co.

In a research report posted online Thursday, Harry Markopolos alleges the struggling conglomerate has masked the depths of its problems, resulting in inaccurate and fraudulent financial filings with regulators. The report, which numbers more than 170 pages and was reviewed by The Wall Street Journal, is a mixture of detailed financial analysis and sweeping claims.

Mr. Markopolos said, in an interview ahead of the report’s release, his group found GE’s insurance unit will need to bolster its reserves by $18.5 billion in cash and faulted the way the company is accounting for its oil-and-gas business. All told, he said, the accounting problems amount to $38 billion, or 40{0b837c000488b51cdb5548ae5fd7a9dd09188a2c542ead0ccc6c9432c63dc0eb} of the conglomerate’s market value….

The report claims that policy premiums paid to GE are low compared with what rivals typically receive and that GE isn’t receiving any premiums at all on more than a quarter of policies, because those contracts are considered paid in full. The group says that, even after the $15 billion boost, GE’s reserves are well below what would be expected for such a troubled group of policies. GE in the early years front-loaded gains from the long-term-care business by collecting premiums when policyholders were young, the group claims, but failed to properly record reserves as the covered population aged and claims ran at higher levels than originally expected.

As we pass the recent stock market peak and enter a new correction or bear market, a lot of fraud is going to be uncovered. This is almost certainly just the start of an ongoing series of accounting revelations.

China fires its biggest gun

Economically speaking, you understand, by lowering the value of the Yuan against the USD:

“The wait is over for those wondering how Beijing would respond to Trump’s recent tariff announcement,” BMO said. “The result: the yuan was allowed to depreciate well beyond 7.0.”

Krueger called China’s retaliation “massive,” adding that “on a scale of 1-10, it’s an 11.” He cited the Chinese government calling on state buyers to halt U.S. agricultural purchases, while there’s “increased anecdotal evidence that the Chinese government is tightening its overview of foreign firms.”

“While there were measures that could have been chosen with larger direct effects on supply chains, the announcements from Beijing represent a direct shot at the White House and seem designed for maximum political impact,” Krueger said. “ We expect a quick (and possibly intemperate) response from the White House, and consequently expect a more rapid escalation of trade tensions.”

This doesn’t matter to the real economy. The US economy will only benefit from a reduction of trade with China. But it does matter quite a bit to the financial economy, hence all of the sturm und drang and falling stock markets.

It’s interesting that they resorted to this so quickly. It appears things are a little shakier over there than everyone except Nate suspected.


Readers here are well familiar with my rejection of Keynes and his General Theory, which unlike most economists, I have actually read. Twice. And the fact that it is a piece of Freudian lunacy applied to economics means that it is less than astonishing to be told that the lunatic economist was, as the English put it, a paedophile:

Students of economics know Keynes as arguably the most influential economist of the 20th century. His prescriptions for stimulus spending and active government intervention in economic affairs have become go-to-strategies for governments across the world.

However, one lesser known aspect about his life was his pedophiliac activity. Economist Saifedean Ammous’ book, The Bitcoin Standard, details some interesting factoids about Keynes’ life.

Ammous started off by detailing how the family unit is destroyed by government largesse:

Substituting the family with government largesse has arguably been a losing trade for individuals who have partaken in it. Several studies show that life satisfaction depends to a large degree on establishing intimate long-term familial bonds with a partner and children. Many studies also show that rates of depression and psychological diseases are rising over time as the family breaks down, particularly for women. Cases of depression and psychological disorders very frequently have family breakdown as a leading cause.

The economist then transitioned his analysis into Keynes’ life, which revealed his pedophiliac tendencies:

It is no coincidence that the breakdown of the family has come about through the implementation of the economic teachings of a man who never had any interest in the long term. A son of a rich family that had accumulated significant capital over generations, Keynes was a libertine hedonist who wasted most his adult life engaging in sexual relationships with children, including traveling around the Mediterranean to visit children’s brothels.

Keynes was one of the important architects in the construction of Satandom. His work was integral to the inversion required to create the modern financial system that is built on a foundation of usury.

Leashing the tech giants

I did a Darkstream just last night on France enacting a new tax on the big tech companies to prevent them from accounting their way out of taxes. Now the UK has followed suit:

Britain is on a collision course with Donald Trump today after unveiling a ‘digital services tax’ to grab £400million-a-year more from global tech firms such as Amazon, Google, Apple and Facebook. The UK is pushing ahead with plans for a proposed two per cent levy on sales starting next April targeting online giants with global sales of more than £500million and at least £25million in UK revenue.

Amazon, Google, Apple and Facebook would pay an extra £300million-a-year to the Treasury based on their current revenues, MailOnline has calculated, with up to 30 companies set to be hit.

Britain wants more cash from major search engines, social networks and online marketplaces who use legal loopholes to ensure their UK profits are taxed in countries such as Ireland, Luxembourg and the Netherlands at a lower rate than in London.

These revenue-based taxes are an absolutely necessity given the global nature of these businesses. There is no reason global corporations should be permitted to be active in a jurisdiction if they’re not going to pay any taxes there. And before you get all libertarian-indignant about this, remember, corporations are a) even less accountable to the nations in which they are not based than the national government and b) they are literally government agents themselves.