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The BIS Nightmare That Will Send the World Into Panic
“The derivative position of US banks for Q1 2015 has just been published and the reading is more frightening than ever… The top 5 US banks have total a derivative exposure of $247 trillion. This is 3.5 times world GDP. Total derivatives for all banks in the world are just over $600 trillion. But these figures are less than half of the real exposure. A few years ago the BIS in Basel changed the basis of valuation of derivatives to “Value to Maturity.” This basically halved the value of outstanding derivatives overnight. Based on the old and proper valuation, the total outstanding today would probably be at least $1.5 quadrillion. And remember, when a counterparty fails, notional value is the real value that will be lost. It is absolutely guaranteed that this $1.5 quadrillion will implode in the next few years and drag the whole financial system with it. But before that process has finished, central banks worldwide will print a few quadrillion dollars, euros and yen in their desperate attempt...

American Apparel To Close Stores and Lay Off Workers
American Apparel announced on Monday that it will close stores and lay off employees as it tries to cut costs and turn around its fortunes following a turbulent era. The cuts will save a total of $30 million, the company said, though it did not say how many shops or jobs will be affected. American Apparel has a fleet of 239 retail locations and a total workforce of around 10,000. "We are committed to turning this company around," Paula Schneider, chief executive of American Apparel, said in a statement. "Today's announcements are necessary steps to help American Apparel adapt to headwinds in the retail industry, preserve jobs for the overwhelming majority of our 10,000 employees, and return the business to long-term profitability." Schneider said her focus is to remedy problems that caused "steep losses" over the past five years. In that time, American Apparel has suffered more than $300 million in losses,

Peter Schiff: If US Stays on Current Path, We'll Be the Next Greece
Greece's bankrupt economy and uncertainty could be replayed in America unless we heed the lesson that "this is what happens when politicians promise more than their taxpayers can pay," according to financial analyst Peter Schiff. In an interview Monday with "Newsmax Prime" host J.D. Hayworth on Newsmax TV, the CEO of Euro Pacific Capital warns "[T]he only thing that really separates the [United States] from Greece is that Greek creditors have figured out that Greece is broke and America's creditors are still delusional." "They still think that we're good for our debts and the only reason that delusion is possible is because interest rates are still at zero… were interest rates ever allowed to rise, it would become obvious that we can't pay our bills and we would have a crisis similar to what Greece is looking at now." Schiff says Greece "should be a lesson." "This is what happens when politicians promise more than their taxpayers can pay," he says.

The Fed's Window For Hiking Rates Continues To Close
During the last year, the Federal Reserve has hinted that the period of "ultra accommodative monetary policy" was coming to an end. The Fed started that process last October by terminating the latest "Quantitative Easing" program which induced massive amounts of liquidity into the financial markets. Subsequently, the Fed has turned its focus towards the near ZERO level of the "Fed Funds" rate. Over the last several FOMC meetings, Chairwoman Janet Yellen has hinted on numerous occasions that the Fed will begin increasing the overnight lending rate sometime in 2015. She has been adamant that the Federal Reserve has been "watching the data" closely to determine the appropriate timing of those increases. Not surprisingly, Wall Street has also been singularly focused on this issue. The increase in lending rates is the final step in ending the extremely long period of "accommodative policy" measures that has been a primary support of asset prices.

Gold Still An Important Global Currency

All hail robo-taxis?
Visions of the cities of the future see urbanites being shuttled along the streets in driverless taxis. Some have argued they offer more convenience and safety than privately owned cars. And new research finds that these robotic, self-driven, electricity-powered vehicles roaming our big cities could also dramatically reduce the environmental impact of road travel. A new study out Monday in the Nature Climate Change concluded robo-cabs could reduce individual vehicle emissions by up to 94 percent per mile when compared with current conventionally driven and powered vehicles. Lawrence Berkeley National Laboratory scientists Jeffery Greenblatt and Samveg Saxena, who co-authored the study, modeled the potential impact of these fleets on U.S. transport sector emissions based on greenhouse-gas intensity of gasoline and electricity in 2014 and projections for 2030. They estimate that switching to autonomous taxis could result in per-vehicle emissions savings of 87-94 percent over current conventionally...

$2 gas could return if Iran deal goes through
Oil prices plunged nearly 8% and broke below $53 a barrel on Monday, the deepest plunge for crude oil since early February. American drivers may have even lower prices to smile about in the future, especially if an Iran nuclear deal is in place by this week's deadline. The national average gas price could return to nearly $2 a gallon later this year, said Tom Kloza, chief oil analyst at the Oil Price Information Service. The national average is currently sitting at $2.77. For now all eyes are on Iran, which has the fourth biggest oil reserves in the world. A big part of the nuclear deal is that the West will lift sanctions on Iran, allowing it to increase its oil exports. That could be a game changer by deepening the oversupply of oil and sending prices down even further. "You could have a bunch of crude hitting the market in 2016 -- probably when it needs it least," said Kloza. That's one reason why oil plummeted to $52.53 a barrel on Monday -- its lowest price since mid-April.

Ron Paul: U.S. needs ‘a revolutionary change in our economic thinking’
For years, Ron Paul has been adamant and consistent about his Austrian, libertarian-learning economic thinking. Each time the former Texas Republican Congressman has been interviewed, he usually attacks the system and not those in charge. One just has to look back to the 2012 presidential election, Dr. Paul hardly criticized President Obama but rather the system – government, Federal Reserve, bureaucracy – itself. Paul is now urging, once again, for the United States to embrace “a revolutionary change in our economic thinking” in order to help the country return to its glory. Speaking in an interview with Newsmax, Paul explained that the federal government is supposed to give the American people an environment where everything and everyone is “energized,” but now the U.S. is approaching the end, citing the collapse of the city of Detroit. “We have to have a revolutionary change in our economic thinking and then the people are the ones that produce the jobs, not the government,” said Paul.

Bare Supermarket Shelves In Greece Should Be A Huge Wake Up Call To Millions Of Clueless Americans
What you are watching unfold in Greece right now is eventually going to come to your own neighborhood. Someday, people living all around you will be storming the supermarkets in a desperate attempt to secure the food and supplies that they neglected to store up when they had the chance. Of course the Greeks never thought that it would happen to them either. Their civilization had endured for thousands of years, and they were a part of the most powerful economic alliance on the face of the planet. Most Greeks never imagined that they would be plunged into a multi-year economic depression that would ultimately lead to “bank holidays”, long lines at ATM machines, and people diving into dumpsters in a frantic search for something to sell. And this is just the beginning of the chaos in Greece – things are going to get much, much worse for them. Hopefully, this will serve as a wake up call for millions upon millions of clueless Americans out there, because we are on the exact same path...

Obama: Islamic State Can and Will Be Defeated

54% of American adults living with friends or relatives plan to move out within a year
Young people want to own a home just as much as their parents did. Unfortunately, a lot of them have to get out of their parents' house first. During the economic recovery, the number of shared households — those with an adult that does not own the home or is not the significant other of the homeowner — has taken off to incredibly high levels. Currently, about 13% of Americans aged 21-34 live as the other adult in a shared household, according to a survey done by UBS economists. These shared households have put a drag on household formation, which is an important economic driver leading new house construction and growth in durable goods spending. From the late 1980s until the mid 2000s, annual household formation growth fluctuated between approximately 0.8% and 1.8%. Since that time, however, it has been hanging between approximately 0.4% and 0.8% according to a chart from UBS. The UBS economists did have some good news: 54% of people living at home plan to move out in the next year, up 10%...

Have worker wages really gone nowhere since the 1970s?
“Workers wages have been flat for decades.” It’s a common talking point on the left, especially among unions. But how you measure earnings and inflation can have a big effect on those numbers. Real earnings for men, deflated by the consumer price index, are down 4% since 1979. (Earnings for women are up 48%.) But if you add in benefits and use a different inflation measure, you get a very different result. Like down becomes up. Here is the Wall Street Journal’s Josh Zumbrun on research by economist Stephen Rose: But this analysis ignores one of the major shifts in the labor market in recent decades: Employers have paid larger and larger health insurance bills for their employees. “From the employer’s standpoint, the costs of each worker is the total package of cash wages and benefits,” Mr. Rose writes. And from the standpoint of many employees, too, receiving good health insurance is a valuable part of a compensation package.

Introducing the latest country that pays you to borrow money
While all eyes were on Greece this weekend, one of the largest banks in Lithuania quietly posted an awkward announcement to its customers. Interest rates are now negative. So negative, in fact, that the bank actually has to pay interest to some of its borrowers. And the bank was totally unprepared for this. Apparently some meaningful percentage of the bank’s loans are on variable interest. This means that when prevailing interest rates go up or down, the interest rate on loan goes up or down. SEB never thought in a million years that interest rates would actually be negative. So many of the loans don’t actually have any provisions in place which would protect the bank in the event that interest rates turn negative. As the bank rather delicately explained to its customers, “Negative interest rates are a new and unique situation” that are “raising a number of challenges for financial institutions.” One of those challenges is that banking systems aren’t designed for negative interest rates.

Gold At $64,000 – Bloomberg’s ‘China Gold Price’
If China were to partially back its yuan with gold it would require a gold price of $64,000 per ounce, 50 times gold bullion’s price today, according to a recent article from respected Bloomberg Intelligence. It seems like an outlandish forecast. However, as tensions between the U.S. and China continue to escalate such a scenario is not actually as implausible as it may first appear. If China were to back its yuan with gold it would require a price of $64,000 per ounce according to a recent report from Bloomberg. While Bloomberg give no details as to how they arrive at this figure, our “back of envelope” calculations would confirm that at its current value relative to the dollar the yuan would indeed require gold – priced in dollars – to be priced in the tens of thousands of dollars. Chinese M1 money supply is roughly 33.64 trillion yuan which at todays exchange rate equates to around $5.4 trillion. Bloomberg conservatively estimate China’s gold reserves at around 3150 tonnes...

Hacking Team, maker of government spyware, gets hacked

U.S. Economy; More People on Food Stamps Now Than Entire Population of Spain
According to a study by Economic Policy Institute, a nonpartisan think tank, between 2009 and 2014, the salaries of CEOs at the largest U.S. companies increased by 54.3%. (Source: Economic Policy Institute, June 22,2015.) But the average American hasn’t done that well. Between 2009 and 2013, median U.S. household income declined by four percent—from $54,059 to $51,939 in 2013. (Source: Federal Reserve Bank of St. Louis, last accessed June 25, 2015.) While the data for 2014 is not available yet, even if there were some improvement, I’m sure it would not be significant. As I have been writing in Profit Confidential, for solid economic growth to develop in the U.S., the middle class needs to be behind it. In all the past economic recoveries I have studied, average Americans increased their spending for goods and services and, as a result, the U.S. economy prospered. After all, consumer spending makes up two-thirds of U.S. gross domestic product (GDP). But in this so-called economic recovery...

Gen X, Baby Boomers see credit cards as a lifeline
Generation X, weighed down by debt, is unfortunately growing accustomed to the burden. Gen Xers — and their older, Baby Boomer peers — see credit cards as a lifeline, according to a new study from Allianz Life. Of the 1,000 Gen Xers age 35 to 48, and 1,000 Boomers ages 49-67 surveyed, 48% say that credit cards now function as a financial survival tool. That reliance on debt is particularly troublesome for younger Americans, who often put off saving for retirement and other needs because of it. "It's really significant and I think it's coming to a head with Generation X,'' says Katie Libbe, vice president of consumer insights for Allianz Life, who noted that members of that age group tend to have greater total debt than Boomers. They are burdened, she says, by a "Bermuda Triangle'' of financial stressors, including student loan debt, a tepid job market, and homes that may be worth less than what they initially paid. Among Gen Xers, only 46% pay part of their credit card balance each month...

No pensions? No paychecks? State budgets in limbo
Faced with rising pension costs and weak revenue growth, Illinois lawmakers began the new fiscal year without a state budget as a bitter, long-running battle on the spending plan went into overtime. The deadlock between the Democrat-controlled legislature and Republican Gov. Bruce Rauner could freeze state workers' paychecks if an agreement isn't reached soon. Facing a union lawsuit to force those payments, state Attorney General Lisa Madigan said the Illinois Constitution bars the state from spending money—even to make payroll—and without a budget "even a court cannot order all of these payments to be made." Illinois isn't alone in failing to enact a state budget on time. As of the July 1 budget deadline, Pennsylvania, Wisconsin and three other states had failed to pass a budget. The Wisconsin Legislature's finance committee, however, completed revisions to the state budget plan in early morning hours on Friday, clearing the way for a full vote by the Legislature. North Carolina, New Hampshire...

U.S. banks post detailed crisis plans to avoid breakup threat
A dozen of the largest Wall Street banks on Monday published detailed plans to show how they would shut down their business during a crisis without the help of taxpayer money, a crucial step to prevent being broken up by regulators. After the 2007-09 financial crisis, the banks were required to submit so-called "living wills" each year to show how they would proceed through bankruptcy during a crisis without quietly relying on government support to avoid putting the entire financial system at risk. But the Federal Reserve and the Federal Deposit Insurance Corporation last year said they were unhappy with the quality of the plans and urged banks to improve them by giving more details and using more realistic assumptions, or face tough sanctions including being broken up. The 2010 Dodd-Frank Act gave the regulators the power to carve up the banks if they deem the living wills "not credible," though that is only the starting point of a lengthy procedure giving banks several chances to improve.

"Greece Is Coming To Your Neighborhood" Marc Faber Warns
"Wake up people of the world and investors. Greece will come to your neighborhood very soon, maybe not this year, but next year or whenever it is, because the world is over infected. And defaults will follow, or they will have to create very high inflation rates." That's Marc Faber's message to all of those who may still think that Greece doesn't matter in the grand scheme of things. In an interview with Bloomberg TV, Faber talks Greece, China, and of course the Fed. On Greece: And everybody knows in the world that Greece cannot pay its debt at the current size. So what will happen, in my view, is either Greece will leave the EU and will suffer very badly for a few months, maybe even longer. There will be a cash shortage. Or the EU, and the ECB and the IMF will have to cut a significant haircut. And Tsipras proposed a haircut of something like 30 percent. I don't think that's enough. I think they will need a haircut of at least 50 percent.

California drought crisis hitting poverty-stricken communities hardest

Americans With Retirement Accounts Beware: If Our Government Does What China Just Did You’ll Be Wiped Out
We’ve previously warned that elements within the U.S. government have been feverishly working to take control of all retirement assets in America. The reasoning, of course, is that the government can manage your personal finances better than you can. They’ve already begun plans to have workers invest their earnings directly into government-managed funds, but at some point, should we get into trouble, they may look to seize those assets outright and put them under central control. Like the idea of socialized, centrally-managed health care, this sounds like an impossibility in the Land of the Free. However, it’s already been established, with passage of Obamacare as clear evidence, that should they want to do this, they will. It’s a danger to be sure, but perhaps not as dangerous as what is happening in China right now. While Chinese stock markets are in the midst of a massive collapse, the Chinese have tried just about everything to halt the crash that has so far vaporized about 25% of investor wealth...

Jim Willie: That King Dollar Has Survived to 2015 is an Absolute Miracle
The interior structures are fracturing, seizing, and convulsing. The banking masters are having an increasingly difficult time concealing the damage and breakdown. Meanwhile the Chinese are wresting control of the Gold market. The Chinese will liberate the gold market when they feel like it – and not a moment before. That will happen when they are unable to garner more gold with the heavy discount that Wall Street must provide in order to keep the system appearing to run smoothly. That will happen when the Chinese grow tired of tolerating the insufferable arrogance of the West, with its corruption with enormous abuse. The system under the USD canopy cannot continue too many more months. It is an absolute miracle that the King Dollar has survived to 2015 since the extreme events required to secure its perch. QE and War guarantee the US Dollar’s imminent death. A grand isolation will result, like a quarantine, followed by liquidation, clarification of the terrorism source...

US oil prices tumble nearly 8% on Greece, China worries
US oil prices sank nearly eight per cent on Monday (Jul 6) on worries about slowing global growth after Greek voters rejected a bailout offer and China moved to calm financial market turbulence. US benchmark West Texas Intermediate for delivery in August fell US$4.43, closing at US$52.53 a barrel on the New York Mercantile Exchange. European benchmark Brent oil for delivery in August dropped US$3.78 to US$56.54 a barrel in London. "With the crisis in Greece, with the Chinese market unstable, the demand we once saw for global oil is eroding quickly," said Carl Larry, a consultant for Frost & Sullivan in Houston. Analysts cited fears about Europe after Greece voted decisively against further austerity measures imposed by creditors, throwing its position in the currency bloc into doubt. The Greece crisis has also boosted the dollar, raising the cost of crude for those using other currencies.

Tuesday 07.07.2015

NEWS to Disturb the Comfortable...

We don't tell you what to think,

but we give you something to think about.