Obama’s Former Chief Economist Calls For An End To US Dollar Reserve Status

Zero Hedge
by Jared Bernstein at The NY Times

There are few truisms about the world economy, but for decades, one has been the role of the United States dollar as the world’s reserve currency. It’s a core principle of American economic policy. After all, who wouldn’t want their currency to be the one that foreign banks and governments want to hold in reserve?

But new research reveals that what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles. To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status.

The reasons are best articulated by Kenneth Austin, a Treasury Department economist, in the latest issue of The Journal of Post Keynesian Economics (needless to say, it’s his opinion, not necessarily the department’s). On the assumption that you don’t have the journal on your coffee table, allow me to summarize.

It is widely recognized that various countries, including China, Singapore and South Korea, suppress the value of their currency relative to the dollar to boost their exports to the United States and reduce its exports to them. They buy lots of dollars, which increases the dollar’s value relative to their own currencies, thus making their exports to us cheaper and our exports to them more expensive.

In 2013, America’s trade deficit was about $475 billion. Its deficit with China alone was $318 billion.

Though Mr. Austin doesn’t say it explicitly, his work shows that, far from being a victim of managed trade, the United States is a willing participant through its efforts to keep the dollar as the world’s most prominent reserve currency.

When a country wants to boost its exports by making them cheaper using the aforementioned process, its central bank accumulates currency from countries that issue reserves. To support this process, these countries suppress their consumption and boost their national savings. Since global accounts must balance, when “currency accumulators” save more and consume less than they produce, other countries — “currency issuers,” like the United States — must save less and consume more than they produce (i.e., run trade deficits).

This means that Americans alone do not determine their rates of savings and consumption. Think of an open, global economy as having one huge, aggregated amount of income that must all be consumed, saved or invested. That means individual countries must adjust to one another. If trade-surplus countries suppress their own consumption and use their excess savings to accumulate dollars, trade-deficit countries must absorb those excess savings to finance their excess consumption or investment.

Note that as long as the dollar is the reserve currency, America’s trade deficit can worsen even when we’re not directly in on the trade. Suppose South Korea runs a surplus with Brazil. By storing its surplus export revenues in Treasury bonds, South Korea nudges up the relative value of the dollar against our competitors’ currencies, and our trade deficit increases, even though the original transaction had nothing to do with the United States.

This isn’t just a matter of one academic writing one article. Mr. Austin’s analysis builds off work by the economist Michael Pettis and, notably, by the former Federal Reserve chairman Ben S. Bernanke.

A result of this dance, as seen throughout the tepid recovery from the Great Recession, is insufficient domestic demand in America’s own labor market. Mr. Austin argues convincingly that the correct metric for estimating the cost in jobs is the dollar value of reserve sales to foreign buyers. By his estimation, that amounted to six million jobs in 2008, and these would tend to be the sort of high-wage manufacturing jobs that are most vulnerable to changes in exports.

Dethroning “king dollar” would be easier than people think. America could, for example, enforce rules to prevent other countries from accumulating too much of our currency. In fact, others do just that precisely to avoid exporting jobs. The most recent example is Japan’s intervention to hold down the value of the yen when central banks in Asia and Latin America started buying Japanese debt.

Of course, if fewer people demanded dollars, interest rates – i.e., what America would pay people to hold its debt – might rise, especially if stronger domestic manufacturers demanded more investment. But there’s no clear empirical, negative relationship between interest rates and trade deficits, and in the long run, as Mr. Pettis observes, “Countries with balanced trade or trade surpluses tend to enjoy lower interest rates on average than countries with large current account deficits, which are handicapped by slower growth and higher debt.”

Others worry that higher import prices would increase inflation. But consider the results when we “pay” to keep price growth so low through artificially cheap exports and large trade deficits: weakened manufacturing, wage stagnation (even with low inflation) and deficits and bubbles to offset the imbalanced trade.

But while more balanced trade might raise prices, there’s no reason it should persistently increase the inflation rate. We might settle into a norm of 2 to 3 percent inflation, versus the current 1 to 2 percent. But that’s a price worth paying for more and higher-quality jobs, more stable recoveries and a revitalized manufacturing sector. The privilege of having the world’s reserve currency is one America can no longer afford.

*  *  *

Strawman? De-Dollarization goes Domestic…

*  *  *

Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow.  From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team.

Zero Hedge

The Death of the Dollar: “I Can’t Emphasize Just How Serious Of An Issue That’s Going To Be”

SHTFplan
by Mac Slavo

death-of-the-dollar-smallGeo-political tensions around the world are indicative of a fast approaching breaking point. There is not a single populated region on earth right now that is not experiencing sweeping changes. Europe, the middle east, Asia, the Americas – it’s happening everywhere and all at once. Trying to make sense of it all can be a daunting task. But make no mistake. All of these events are interrelated and their outcomes will have a direct impact on the future of America and the world in the 21st century. To understand what’s happening on the grand chessboard one must avoid the narratives being touted by media propaganda networks in their respective countries and focus instead on the motivating factors behind the moves.

We must understand, as global resource strategist Marin Katusa notes in a recent highly informative interview, that this is “the dirty secret of all of the governments.” There is a silent war happening behind the scenes and as has been the case throughout history, it is a war for control over the world’s resources.

Katusa, who is a top strategist at Casey Research and has worked closely with political and business leaders in over 100 countries, knows a thing or two about resource control. Like many government run sovereign investment funds, Katusa and his partners are actively engaged in resource acquisitions all over the world, so he has a unique perspective on the driving force behind all of the surface level conflicts being presented to the majority of the public.

Watch this must-see interview as Marin Katusa discusses global resource control, America’s future, the death of the dollar and how to prepare yourself for a massive paradigm shift:


(Watch at Youtube)

Katusa explains that America’s partners all over the world are coming under pressure from Russian and Chinese influence. This includes Europe and our mid-east oil partners, and the goal is to weaken America’s hold over economic, financial and monetary affairs. Thus far, according to Katusa, Russia and China are winning.

The death of the dollar is upon us, the global power shift has already begun.

I call it the dirty secret of all of the governments.

… The reality is, it’s been the Russians, the Chinese, the Indians, they’re trying to look at diversifying out of the dollar. If you look at what Saudi Arabia is doing, they’ve had long discussions with the Russians on major military contracts, is something where they’re true anchors to the petro-dollar of Saudi Arabia flips on America.

And it will happen, it’s just a question of when. You’ll see the death of the petro-dollar. And I can’t emphasize just how serious of an issue that’s going to be.

But if you really see what’s going on in Europe, in Asia, the dominance of America is being challenged, not just by Russia, but Asia. And the strength of NATO is not what it was thirty or forty years ago.

For the last decade, America has gone from global leader to laughing stock, and Katusa lays the blame right at the feet of the source:

They’re chasing their tail. Obama is chasing his tail. He’s going to go down in history as the wizard of Oz, just a voice. And Putin has opened that curtain to expose the wizard as nothing but a confused man. That’s what Obama is.

A shift is certainly afoot. It cannot be ignored. Militarily, the United States may have the most weapons of warfare, but our might is being challenged on all fronts.

The battle for resources is on:

Putin is a man to watch, and you can make a lot of money in these resources if you’re patient and you invest in the right management teams. Because during the last twenty years Russia’s doubled their oil production. They have almost half of the world’s upgrading processing facilities for Uranium. You look at Kazakhstan, they’ve essentially doubled their uranium production in the last ten years. This new alliance, the new Eurasian union, is a force to be reckoned with.

And you have two choices – you can be aware of it and try to profit from it, or you can pretend that America is the sole leader in the world and you don’t have to worry about the petro-dollar. But I think that’s a very unwise choice.

One of Katusa’s favorite investment sectors is one that has been ignored by the big investment firms on Wall Street and it’s the one that will protect your assets when the inevitable death of the petro-dollar finally happens. Precious metals have stood the test of time and throughout history have been used as an asset of last resort, especially during massive shifts like the one facing the world today. Katusa relates an interesting anecdote and one whose implications will resonate with savvy individuals:

I took a photo at the top of the elevator at the 2011 [gold] Cambridge conference in Vancouver. The floor was packed, it was a two hour waiting list to get in, and the lineup was so packed that people coming into the elevator were smashing in to people waiting. And people were falling, hurting themselves, that they actually shut down the elevator.

And I got such a kick out of it that I took a photo of it… And I took a photo, and I sent it out to all my subscribers, and I wrote “A top?”

That is what a top feels like. When people are literally falling over themselves, and everybody’s talking about $2,000 gold and whatever. When you can’t get in to a free conference, with a two hour wait list, that’s when you should be selling.

Today there’s no one on the escalator, there’s no one even checking your badges to come to a free show, never mind a paid show.

That’s why I think right now is the optimal time to invest, because it’s the most hated sector. All the big New York hedge funds that I talk to, they all think, “ah, resources are dead.” 

While top-tier investment firms are piling into stock markets and driving them to new highs, Katusa notes that they are completely ignoring the investments that will skyrocket during this time of global upheaval.

It’s simple really. In the end it boils down to power and resources. In a world dependent on food, energy, and raw materials it only makes sense that conflicts will rage. We can either ignore the trends or accept them and prepare for the inevitable.

death-of-the-dollar-th

SHTFplan

On The Brink Of A Major Crisis: “This Will Be A Literal Collapse of the Entire Global Monetary System”

SHTFplan
by Mac Slavo

Discussions of the possible collapse of the U.S. dollar often center around how such an event will affect the domestic economy. But the dollar doesn’t just operate inside of a bubble. It is the world’s reserve currency for a reason. Some sixty-six countries world-wide either utilize it as their primary currency or peg their own currencies to its exchange rate. What this means, as noted by Future Money Trends in the micro documentary below, is that if and when the dollar does come under attack the fallout will be everywhere. The collapse will happen simultaneously and affect billions of people worldwide.

This is 33% of the nations of the world all submitting their currency sovereignty to the US Federal Reserve.

If and when the U.S. loses its currency status this will be a literal collapse of the entire global monetary system… A system that is built on lies, fraud and theft.


(Watch at Youtube)

As you might have guessed, when the game is finally up it will wreak havoc across global economies, financial markets and monetary systems. Should that ever happen, those who have failed to exchange their fiat currencies for physical goods of some sort are going to have a rude awakening.

As preparation for a currency collapse of unprecedented magnitude, contrarian economists and analysts recommend acquiring physical assets ahead of time. Because after the ‘event,’ it will be too late for the majority, as their dollars become nearly worthless and the cost of essential goods like food and energy skyrocket to nearly unnatainable levels as priced in dollars.

We have seen it time and again throughout recent history. Germany’s Weimar Republic, Hungary, Zimbabwe and most recently Argentina, have all experienced currency collapses. And in all instances one asset has stood the test of time and become the currency of choice when traditional systems of commerce collapsed.

Living in the heart of the Fiat bubble, Americans especially have forgotten about the one true currency. With the nation approaching nearly $20 trillion in national debt our entire system is built on a lie. But this lie affects the entire world because the US dollar is the world’s currency.

The gold market has been so distorted by governments and central banks around the world that today in an environment of quantitative easing, trillion dollar annual deficits, and negative interest rates, you can exchange your Fiat currency for an ounce of gold for less than the cost a mining company takes to produce it.

In 2013 all-in costs were $1620 per ounce, with an average price of $1411 per ounce. Recently gold has sold for less than $1300 an ounce.

Physical demand is currently setting records, with most of the demand coming from the east. Soon, North America and the world will begin to accumulate gold. 

The world is on the brink of a major fiat currency crisis.

The evidence for a continued downturn in the U.S. economy and further deterioration of the U.S. dollar is clear. The likely end result is a total collapse of Americans’ way of life.

Ask yourself these three questions to help you determine your best course of action:

  1. What is the dollar’s most likely future?
  2. Are you overly exposed to dollar denominated assets like your income, savings and the country you reside in?
  3. Can you envision a scenario where the world turns against the U.S. dollar?

When it happens only those who own physical assets not dependent on the U.S. dollar will maintain any semblance of wealth. Everyone else will be, almost instantaneously, relegated to third world status.

This micro documentary has been contributed by FutureMoneyTrends.com

Read their free Gold Protection and Strategy Guide today. 

global-collapse-2

SHTFplan

53 Million Temps: All You Need To Know About The “Jobs Recovery”

Zero Hedge

After years of ignoring the obvious, the Federal Reserve has been finally forced to admit that the labor force participation rate matters, and in fact has started to point it out as a clear negative when it comes to Yellen’s “dashboard” of thresholds which will allow the Fed to raise rates (for the obvious reason that the Fed is desperate to delay ZIRP as long as possible and is now highlighting all that is wrong with the economy, contrary to Obama who is still focusing on all the rigged greatness of the US recovery) and to do so is going through Zero Hedge archives to note all those things which everyone had ignored for years and which we have pointed out as structural failures of the so-called recovery. 

So while we are happy to oblige the Fed with our tens of thousands of articles summarizing what is broken with the US economy thanks to, well, the Fed, here is another one: one which the Fed can use next year when the time to hike rates has come and gone, and when the Fed is once again scratching its head what to blame it on.

The chart below shows the civilian employment to population ratio: a convenient indicator of the real state of the US labor market which does away with the labor force entirely, and the associated rhetoric of why it may or may not be plunging, and merely focuses on two simple things: total population and the total civilian population of the US. One thing is clear: the ratio crashed when the depression started and has flatlined since. Which, incidentally, may be all you, and the Fed, needs to know about the recovery.

 

But wait, it gets worse, because according to the WSJ, roughly one in three U.S. workers is now a freelancer.

Wait, how many?

Fifty-three million Americans, or 34% of the nation’s workforce, qualify as freelancers, according to a new report from the Freelancers Union, a nonprofit organization, and Elance-oDesk Inc., a company that provides platforms for freelancers to find work. These individuals include independent contractors, temps, and moonlighters, among others.

So 53 million, let’s call them, temps? That is probably the most stunning number we have seen in years, and flips the entire premise of a “job recovery” on its head.

The experience of work has fractured in recent years, said Fabio Rosati, chief executive of Elance-oDesk. Layoffs that accompanied the recession forced many individuals to forge a living from short-term gigs, while online marketplaces such as Elance, TaskRabbit and Uber emerged to match independent workers with companies or individuals in need of labor. Plus, the rise of mobile technologies allow more people to work when and where they choose.

Or not work, considering there is no contract tying them to a job.

Independent workers “don’t have the workforce protections that have developed over the last 80 years. They are simply on their own,” said Robert Reich, the Secretary of Labor under President Bill Clinton and now a professor at the University of California, Berkeley. An accurate census would help policymakers determine how to fill gaps, he said.

 

Counting the number of contingent workers has not been a high priority in Washington, DC over the last couple of decades. The number “is likely to be large and growing and there is no political advantage in signaling that fact,” Mr. Reich said.

The punchline:

Companies, eager to lower payroll costs and take advantage of a more flexible workforce, are relying more on contingent labor. According to the National Employment Law Project, temp jobs now constitute an all-time high of 2% of all positions in the U.S., or 2.8 million.

So the Fed is trying to boost wages and generate demand-pull inflation at a time when some 53 million US workers, or a third of total, are “freelancers”, which is a polite way of saying part-time workers. and “moonlighers.”

Well…. good luck!

Zero Hedge

Wall Street Declares Victory Against the American People: The Banking Elites are Now Waging War against One Another

Global Research
By Eric Zuesse

wallstreet

On August 31st, the Republican political site Politico bannered “Wall Street Republicans’ Dark Secret: Hillary Clinton 2016,” and Ben White and Maggie Haberman delivered a blockbuster report about the big-money Republican donors they had talked to, who confided (not for specific attribution, though) that they might finance Hillary Clinton to become President, if Jeb Bush announces after November’s mid-terms that he won’t run for the Republican Presidential nomination. Ms. Clinton is so appealing to Republican aristocrats, many of them will back her if Republicans won’t nominate Bush. 

Of course, virtually all Democratic aristocrats are already pouring money into the place-holding fundraising campaign for Clinton’s expected entrance into the Democratic Presidential contest.

This means that virtually the entire aristocracy will be flooding Clinton’s Presidential war-chest, unless Jeb Bush seeks the Republican nomination.

Where, then, does this leave the public? Obviously (barring some unimagined scenario of a progressive running against Hillary for the nomination and beating her), both of the two people who will be the major-Party nominees are going to be running in order to go farther than NAFTA, and farther than deregulating Wall Street, and farther than re-invading Iraq, and farther than financing Ukraine’ s ethnic-cleansing operation ousting the ethnic Russians out of that country’s southeastern region, and farther than threatening to bomb Assad’s forces in Syria, and farther than arm-twisting the EU to weaken their anti-global-warming regulations so that the EU can import the Koch brothers’ dirty oil from Alberta Canada’s tar sands — in other words: farther than Obama has gone, or is yet aiming to go.

Does it make much of a difference, then, which of those two people, Clinton or Bush, will be doing these things for America’s aristocrats? Not enough to make Republican aristocrats back the other Republican contenders instead of Hillary if Bush doesn’t enter the race. They’ll then be joining with the Democratic aristocracy, who have already thrown in their lot behind her. Aristocrats don’t much care whether its name is “Clinton,” or is instead “Bush.” Either one would make an acceptable king (or queen) for them during the following eight years.

Of course, the two candidates will pander to their respective voting-bases: Hillary will pander to women, etc.; and Bush will pander to ‘job-creators’ etc.; but that’s basically just squabbling about how to decorate the aristocratic cake, not about what the cake will consist of, from the aristocrats’ viewpoint. Either way, it’ll be a tasty dessert for them, custom-made for their delectation.

On the other hand, White and Haberman are also clear that there is now emerging a war between two main portions of the Republican aristocracy, regarding which of these two Republican factions will control the White House beyond 2016. Haberman and White, perhaps being Republicans themselves, don’t mention this internal conflict explicitly (since doing so would emphasize their Party’s split), and they don’t even mention the word “Koch,” not even once (even though the Kochs are the Party’s biggest fundraiser by far); but these Politico journalists do indicate that the very same Republican moneybags who are demanding that Bush become the nominee are threatening to bolt to Clinton if Ted Cruz wins the Republican nomination. Haberman and White don’t so much as mention, at all, that Cruz is the invention of the Koch brothers’ wing of the aristocracy, and that he had had his political career financed via the Kochs’ agent Jim DeMint, who recruited Cruz into the Senate and who raised the money to get him to knock off the Republican Establishment’s Kaye Bailey Hutchison and become the new Republican U.S. Senator from Texas. (That was a Rove-versus-Koch contest, and the Kochs won it in far-rightwing Texas, whose far-rightwingism was a chief reason why the Kochs chose that state to mount their big assault against their Party’s ‘moderate’ Establishment.) So: this is actually an intra-Republican war over which faction of the Republican aristocracy will own (or else co-own) the next White House. Bush or Cruz would then be leasing it – either (if Bush or else Clinton) from the Rove (that is: the Bush or — if shared with the Democratic aristocracy — Clinton) group; or else (if Cruz) from the Koch group.

During the 2012 “election,” the Kochs and their friends poured at least $400 million into Republican coffers; and, so, even if the majority of the traditional Republican aristocracy end up financing Hillary’s campaign, there will still be plenty of money going into Cruz’s campaign, at least until he gets beaten — if  he gets beaten. (The Kochs are so extreme that even Hillary isn’t acceptable to them. If Cruz looks like he’s going down, then they’ll back a different ‘Tea Party’ favorite. They created the ‘Tea Party.’)

Also, the traditional wing of the Party told Haberman and White that Rand Paul would be unacceptable to them if Hillary gets the Democratic nod. Rand Paul hasn’t yet sold out enough to the Koch brothers, though they are the big financial backers of “libertarianism,” the philosophy to which Paul declares his allegiance. So, if Paul enters the race, then his candidacy is currently expected to be much like that of his father, Ron Paul: purely a “movement” phenomenon, not a part of serious U.S. politics (which has come to be increasingly about transactions, and less than ever about ideology).

However, if Paul does ultimately sell out to the Kochs, and if Cruz fails to do well in the primaries, then again, there might yet be a real battle for the Republican nomination within the Republican Party. Already, Paul is making his pitch to the Koch crowd; so, Cruz will probably have at least one serious competitor for Koch money. (I’m expecting Cruz to fade in the primaries, and Paul to become the Republican nominee, and President — but only after first selling out to the Kochs.)

The general expectation is that Clinton is going to take the Democratic nomination in a walk, so that her gargantuan corporate-backed campaign war-chest — filled with cash from both the Democratic and a large portion of the Republican aristocracies — will be the heavy favorite to win the White House in 2016. The only things that might upset that expectation are:

1) Someone like Alan Grayson enters the Democratic primaries from the progressive side and somehow makes the nomination a real contest without selling out to the aristocracy.

2) Bernie Sanders enters the race as a progressive-movement independent after Hillary wins the Democratic nomination and he draws off enough Democrats for the Republican nominee to win.

3) The $30-billion Mike Bloomberg, former Mayor of Wall Street, spends $3 billion on his own independent Presidential campaign and draws off enough votes in the general election so that for the first time there will be a “third party” (actually no-party) winner of the White House. (He’s like Hillary Clinton on almost all issues — if he was Wall Street’s Mayor, then she was Wall Street’s Senator.)

4) Jeb Bush runs, and turns out to be an even more-skillful politician than he has been cracked up to be, so that he wins the Republican nomination and goes on to beat Hillary Clinton.

5) Rand Paul wins the Republican nomination and unites enough conservatives and libertarians to win the White House (my expectation).

As for the Democratic aristocrats, they already love a candidate, Clinton, who is acceptable to most Republican aristocrats.

So (unless #1 on that list turns out to be the case), the aristocracy, led by some faction of it, will be partying with cake and champaign on Election Night 8 November 2016, no matter which “side” wins: it’ll be themselves. They’ll have beaten us, yet again, in this ‘democracy,’ via these ‘elections.’

Not all that much different from Ukraine, really; and we’re getting closer and closer to that all the time. Let’s hope we’ll avoid the civil war part of it. That could turn out to be even worse than our last one. Next time, it wouldn’t be over slavery versus non-slavery; it would be over nazism versus fascism. Democracy, it seems, is already nearly dead here.

Global Research

Wall Street Admits That A Cyberattack Could Crash Our Banking System At Any Time

The Economic Collapse
by Michael Snyder

Cyberattack - Public DomainWall Street banks are getting hit by cyber attacks every single minute of every single day.  It is a massive onslaught that is not highly publicized because the bankers do not want to alarm the public.  But as you will see below, one big Wall Street bank is spending 250 million dollars a year just by themselves to combat this growing problem.  The truth is that our financial system is not nearly as stable as most Americans think that it is.  We have become more dependent on technology than ever before, and that comes with a potentially huge downside.  An electromagnetic pulse weapon or an incredibly massive cyberattack could conceivably take down part or all of our banking system at any time.

This week, the mainstream news is reporting on an attack on our major banks that was so massive that the FBI and the Secret Service have decided to get involved.  The following is how Forbes described what is going on…

The FBI and the Secret Service are investigating a huge wave of cyber attacks on Wall Street banks, reportedly including JP Morgan Chase, that took place in recent weeks.

The attacks may have involved the theft of multiple gigabytes of sensitive data, according to reports. Joshua Campbell, supervisory special agent at the FBI, tells Forbes: “We are working with the United States Secret Service to determine the scope of recently reported cyber attacks against several American financial institutions.”

When most people think of “cyber attacks”, they think of a handful of hackers working out of lonely apartments or the basements of their parents.  But that is not primarily what we are dealing with anymore.  Today, big banks are dealing with cyberattackers that are extremely organized and that are incredibly sophisticated.

The threat grows with each passing day, and that is why JPMorgan Chase says that “not every battle will be won” even though it is spending 250 million dollars a year in a relentless fight against cyberattacks…

JPMorgan Chase this year will spend $250 million and dedicate 1,000 people to protecting itself from cybercrime — and it still might not be completely successful, CEO Jamie Dimon warned in April.

Cyberattacks are growing every day in strength and velocity across the globe. It is going to be continual and likely never-ending battle to stay ahead of it — and, unfortunately, not every battle will be won,” Dimon said in his annual letter to shareholders.

Other big Wall Street banks have a similar perspective.  Just consider the following two quotes from a recent USA Today article

Bank of America: “Although to date we have not experienced any material losses relating to cyber attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the future.”

Citigroup: “Citi has been subject to intentional cyber incidents from external sources, including (i) denial of service attacks, which attempted to interrupt service to clients and customers; (ii) data breaches, which aimed to obtain unauthorized access to customer account data; and (iii) malicious software attacks on client systems, which attempted to allow unauthorized entrance to Citi’s systems under the guise of a client and the extraction of client data. For example, in 2013 Citi and other U.S. financial institutions experienced distributed denial of service attacks which were intended to disrupt consumer online banking services. …

“… because the methods used to cause cyber attacks change frequently or, in some cases, are not recognized until launched, Citi may be unable to implement effective preventive measures or proactively address these methods.”

I don’t know about you, but those quotes do not exactly fill me with confidence.

Another potential threat that banking executives lose sleep over is the threat of electromagnetic pulse weapons.  The technology of these weapons has advanced so much that they can fit inside a briefcase now.  Just consider the following excerpt from an article that was posted on an engineering website entitled “Electromagnetic Warfare Is Here“…

The problem is growing because the technology available to attackers has improved even as the technology being attacked has become more vulnerable. Our infrastructure increasingly depends on closely integrated, high-speed electronic systems operating at low internal voltages. That means they can be laid low by short, sharp pulses high in voltage but low in energy—output that can now be generated by a machine the size of a suitcase, batteries included.

Electromagnetic (EM) attacks are not only possible—they are happening. One may be under way as you read this. Even so, you would probably never hear of it: These stories are typically hushed up, for the sake of security or the victims’ reputation.

That same article described how an attack might possibly happen…

An attack might be staged as follows. A larger electromagnetic weapon could be hidden in a small van with side panels made of fiberglass, which is transparent to EM radiation. If the van is parked about 5 to 10 meters away from the target, the EM fields propagating to the wall of the building can be very high. If, as is usually the case, the walls are mere masonry, without metal shielding, the fields will attenuate only slightly. You can tell just how well shielded a building is by a simple test: If your cellphone works well when you’re inside, then you are probably wide open to attack.

And with electromagnetic pulse weapons, terrorists or cyberattackers can try again and again until they finally get it right

And, unlike other means of attack, EM weapons can be used without much risk. A terrorist gang can be caught at the gates, and a hacker may raise alarms while attempting to slip through the firewalls, but an EM attacker can try and try again, and no one will notice until computer systems begin to fail (and even then the victims may still not know why).

Never before have our financial institutions faced potential threats on this scale.

According to the Telegraph, our banks are under assault from cyberattacks “every minute of every day”, and these attacks are continually growing in size and scope…

Every minute, of every hour, of every day, a major financial institution is under attack.

Threats range from teenagers in their bedrooms engaging in adolescent “hacktivism”, to sophisticated criminal gangs and state-sponsored terrorists attempting everything from extortion to industrial espionage. Though the details of these crimes remain scant, cyber security experts are clear that behind-the-scenes online attacks have already had far reaching consequences for banks and the financial markets.

In the end, it is probably only a matter of time until we experience a technological 9/11.

When that day arrives, will your money be safe?

The Economic Collapse

The Impending Catastrophe: “It’s Not Difficult To See This Coming”

SHTFplan
by Karl Denninger

The following analysis and commentary have been contributed by Karl Denninger and The Market Ticker. Karl is the author of Leverage: How Cheap Money Will Destroy the World in which he discusses the ill-use of leverage and how it is destroying the global economy, as well as where all of this will lead. The result is ugly: the value of everything—including gold—falls, and even personal safety is at risk in a world where there is limited money even for essentials like food and fuel.


It’s not difficult to see this coming, if you bother to look.

There is no rule of law any more if you’re a government employee — or one of those protected by same.

Let’s put together just a partial list:

  • Health care.  Monopoly and/or cartel behavior of any sort is supposed to be illegal under 15 USC (Sherman and Clayton Acts) if market power exists.  When you’re flat on your ass with a heart attack in process there is no market; ergo, it exists.  Ditto when you were just stung by a scorpion, or when the so-called “treating facility” refuses to present you with a price before they have you on the operating table — and they told you that the operation was immediately necessary to save your health and/or life.  That’s essentially all procedures except for elective, cosmetic ones — where there is actual competition and prices have fallen over time.  All of this behavior, from charging $60,000 for two $100 vials of scorpion antivenom, charging someone $9,000 to bandage a finger or billing a routine $10-30 test at $10,000 is part and parcel of this, and in any unprotected line of business everyone involved would do 10 years of prison time and be fined $1 million each.
  • Government agencies, such as the IRS and NSA.  The number of times that have been documented in which perjury has been committed, a crime, (cough-Clapper-cough!) is too long to list.  We now find out that in the IRS targeting investigation not only is there a backup of Lerner’s computer (as I originally asserted there had to be) but IRS lawyers admitted to the intentional destruction of the data on her BlackBerry after the investigation began.  For you or I that would immediately result in an obstruction of justice felony charge leveled against everyone involved – including Lerner herself.  Well, where is it?
  • Education.  Cartel behavior at its finest.  You can find virtually any sort of knowledge and lectures on any topic you wish online nowdays.  Yet without obtaining them at a price infinitely higher than those freely available, the exact same material I might add and often delivered by the exact same professors, your knowledge is deemed immaterial and worthless.  This occurs due to cartel behavior between universities and businesses — again, something that should bring immediate prosecution under 15 USC.  Well, where is it?
  • Education again.  Not content to try to force you to pay them something they also conspire to force you to pay more.  Once you’re a captive sucker you get hammered on all sides; you are first told to file a FASFA in which your parents must disclose their assets and income, never mind that you’re an adult.  Then, if you’re not poor, despite this being sold to you as being a means of obtaining “aid”, you are offered only loans, which are not aid at all.  This particular cartel behavior includes the government as they will attempt to force you to file one even to claim things they say are earned, such as “Bright Futures” scholarships!  Once you get to class it’s even worse; your son or daughter who paid the full price (and had to borrow the money and thus pay interest too!) is sitting next to a kid who paid little or nothing.  How?  Your son or daughter was effectively forced to buy his tuition!  Communism at its finest, all at gunpoint.
  • So-called “law enforcement.”  Point a gun at another person when you are not legally permitted to shoot (e.g. to stop a forcible felony in process) and you are arrested and charged with assault with a deadly weapon (or aggravated assault in some jurisdictions.)  The identical behavior was documented on video and still camera images all over Ferguson by the police; where are the indictments?
  • Banks.  Swindle someone out of $10,000 and it’s grand theft, extortion, fraud or any one of a dozen other crimes, all serious felonies.  Hell, all you have to do is a pass a bad check in many jurisdictions to wind up on the wrong end of a felony indictment!  It has been proved that myriad large banks sold securities to customers representing them as “good investments” when in fact their own internal emails document that their staff called them “vomit” (and other similar names) — that is, they knew they were worthless.  Where are the indictments?
  • The Federal Reserve.  The Federal Reserve Act specifically charges the FOMC with regulating both money and credit so as to maintain stableprices, moderate long term interest rates and maximum employment.  Maximum employment may be a loosely-defined goal as may “moderate” long-term interest rates but stable is not a fuzzy word.  The Federal Reserve has willfully and intentionally violated this mandate serially since its inception.  You have about 3-4% of your earnings power stolen every single year as a consequence.  Where are the indictments?
  • Ben Bernanke has admitted that (in his view) virtually all systemically important financial firms were on the edge of collapse in 2008.  This, he cites, is justification for his extraordinary policy moves.  There’s a problem — his mandate is to regulate said money and credit systems all the time, not just in a crisis.  That filing is an admission that both he and the NY Fed failed to do so; that is, they failed to perform their statutory duty.  Why aren’t both he and Tim Geithner in prison, seeing as he made this admission before a court in a sworn filing?

Here’s the problem with this sort of behavior and the protection of same: Civility in general only exists because you, I, and most of the rest of society willingly conform our behavior to the law.  

There are not enough cops, no matter what sort of badge and uniform they wear, to enforce the law otherwise.  If any material percentage of the population decides to behave as these people in their protected circumstances have and do the entirety of law and order collapses instantly.

Well, why is it that you permit the above to occur?  Why did you allow it to develop?  Why do you still allow it?

And how long will it before all of this theft and fraud renders you unable to keep your head above water?

Let me explain that for you: For most people you’re already unable.

Look at the stock market, as one example.  There is more margin debt outstanding than cash in accounts as of today, and in fact this margin is worse than ever before in history (yes, even worse than in 2007.)  In other words, but for the claimed paper value of said certificates the market is factually bankrupt right now on a gross, “every man” basis!

Almost 20% of the gross domestic product of this nation (that is, everything produced) is siphoned off by the health care “system” with its grift, extortion and abuse.  That’s nearly one dollar in five!  A look at other developed, first-world nations (e.g. Japan) discloses that we should be able to buy our health care for somewhere between 1/10th and 1/5th of what we pay today.  Were that to be the case there would be no need for Medicare, Medicaid or health insurance — Obamacare or otherwise! Medicare is a great example; you’re responsible for 20% of the cost, by default, and you must pay a premium to the government.  But if your care was anywhere from 1/5th to 1/10th of today’s price you would actually pay less than the co-pay and deductible you pay today and you wouldn’t pay any premium at all!  In other words, even for the old guy or gal that currently is “on the dole” and allegedly “getting something” you’d be better off financially without Medicare were all of these acts to be prosecuted instead of protected!  Whether you’re rich, poor, young or retired, this scam steals from you each and every day without delivering any more value than it would without the theft.

Take the scam out of education and the cost collapses.  Now you could flip pizzas to pay for college as you could in the 1970s and early 80s before those schemes were instituted.  Prosecute The Federal Reserve Board and Banks and the price of assets, including houses would collapse — probably by 75% or more.  Not only does this mean you could buy a house for far less but for those who choose not to or who can’t rents would come down by 3/4 as well!

Why do you need Section 8 and other similar programs when your cost of housing is cut to a tiny fraction of what it is today?

You don’t!

If you believe that the cost of food hasn’t skyrocketed in the last five years you’re not paying attention.  It has.  Ditto for energy.  Oh yes, those are “excluded” from “inflation” numbers, but you have to buy them anyway.

So what happens when you can’t make the income balance against the outflow?  You borrow money in some form or fashion.

Yet that simply puts you further in the hole.

And that’s what’s been going since roughly 1980:

impending catastrophe

Of course borrowing against nothing, that is, creating credit with nothing behind it, looks good initially because it makes it appear you can keep buying things.  Unfortunately that credit comes with both a requirement to repay it and interest; the latter is a huge problem because over time it compounds just as do earnings.

The usual chestnut is that borrowing stimulates production and is of net benefit.  But the facts are that when borrowing accumulates faster than output that assertion is proved false; what is really going on is that people are borrowing to either consume or speculate.  The former permanently destroys value and the latter leaves you exposed to instant insolvency since the alleged “price” of what you speculate on has been disconnected from its value and is now largely (or even entirely!) predicated only on what someone else will pay.

The majority opinion appears to be that as long as you can get your little piece of the grift, whether it be Medicare, Food Stamps, Section 8 or a rising stock market it’s all ok.  Ask yourself — is that actually true or are you deluding yourself?  Are you falling behind despite getting your little piece of the grift or are you getting ahead?  What about your children?  Are they able to get ahead?  Is the same sort of investment you made 20 or 30 years ago credible as a means for them to obtain results similar or superior to what you obtained, or are they staring down a black hole of indebtedness while pulling coffees at Starbucks?  How about that “new car”; nearly $40,000 today as a “median” price and loan terms extending toward eight years — when just a little while ago the normal term was four.  How’s the job market in your area?  More importantly than the number of jobs — how’s the pay and how does that compare against the increase in health care, food, fuel and insurance expenses you must pay every day just to remain solvent?

Think about it for a while.

Then once again contemplate this: For how long as you going to allow all of the above to continue?  Will you allow it to continue right up until civility is lost entirely or will you demand that it stop and that those committing these acts face the same charges and penalties that you or I would for the same offenses?

impending-collapse

This analysis and commentary have been contributed by Karl Denninger and The Market Ticker. Karl is the author of Leverage: How Cheap Money Will Destroy the World in which he discusses the ill-use of leverage and how it is destroying the global economy, as well as where all of this will lead. The result is ugly: the value of everything—including gold—falls, and even personal safety is at risk in a world where there is limited money even for essentials like food and fuel.

SHTFplan

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