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Tuesday 05.03.2016

A New Digital Cash System Was Just Unveiled At A Secret Meeting For Bankers In New York

Last month, a “secret meeting” that involved more than 100 executives from some of the biggest financial institutions in the United States was held in New York City. During this “secret meeting“, a company known as “Chain” unveiled a technology that transforms U.S. dollars into “pure digital assets”. Reportedly, there were representatives from Nasdaq, Citigroup, Visa, Fidelity, Fiserv and Pfizer in the room, and Chain also claims to be partnering with Capital One, State Street, and First Data. This “revolutionary” technology is intended to completely change the way that we use money, and it would represent a major step toward a cashless society. But if this new digital cash system is going to be so good for society, why was it unveiled during a secret meeting for Wall Street bankers? Is there something more going on here than we are being told?

None of us probably would have ever heard about this secret meeting if it was not for a report in Bloomberg. The following comes from their article entitled “Inside the Secret Meeting Where Wall Street Tested Digital Cash“…

On a recent Monday in April, more than 100 executives from some of the world’s largest financial institutions gathered for a private meeting at the Times Square office of Nasdaq Inc. They weren’t there to just talk about blockchain, the new technology some predict will transform finance, but to build and experiment with the software. By the end of the day, they had seen something revolutionary: U.S. dollars transformed into pure digital assets, able to be used to execute and settle a trade instantly. That’s the promise of a blockchain, where the cumbersome and error-prone system that takes days to move money across town or around the world is replaced with almost instant certainty.

So it is not just Michael Snyder from The Economic Collapse Blog that is referring to this gathering as a “secret meeting”. This is actually how it was described by Bloomberg. And I think that there is a very good reason why this meeting was held in secret, because many in the general public would definitely be alarmed by this giant step toward a cashless society.

Aéropostale Set to Close 100 Stores, File for Bankruptcy Protection

Unable to shake off a long slide in sales, teen retailer Aéropostale is set to file for bankruptcy protection this week and close more than 100 of its stores, the Wall Street Journal reported on Monday evening.

Unlike its higher end peers American Eagle Outfitters and Abercrombie & Fitch, Aéropostale has not been able to return to growth in the last years as young consumers turn away from branded clothing. The retailer has also been hurt by the growth of fast-fashion retailers like Forever 21, Uniqlo, and H&M. Aéropostale’s comparable sales fell 6.7% during the holiday quarter.

Aéropostale plans to reorganize under a Chapter 11 filing this week ahead of May rent payments, the Journal reported, citing sources. The clothing chain would close more than 100 of its roughly 800 stores after the filing, according to the Journal.

A spokeswoman did not immediately return a request from Fortune for comment. Aeropostale’s shares were delisted by the New York Stock Exchange last month after shares traded below $1 for an extended period. Its current market value of $30 million is a fraction of that at its peak in 2010, when the company was worth $3 billion on the stock market.

A Few Facts About Gold That Nay-Sayers Conveniently Ignore

We continue to see articles by so called “experts” trashing Gold and Silver as investments. Gold is everything from a “Pet Rock” to a “Dumb Investment” or “Barbarous Relic.” Do these people even bother doing research? Or are they just stock shills?

First and foremost, you cannot compare Gold’s performance relative to stocks anywhere before 1967. Why? Because Gold was pegged to currencies up until that point. Any comparison of Gold’s performance relative to other asset classes prior to 1967 is completely misleading because Gold’s performance was limited by currency pegging.

However, once began to be de-pegged in 1967, the story changes. As Bill King notes, Gold’s performance has absolutely DEMOLISHED that of stocks post 1967. The below chart normalizes both asset classes. As you can see, even with Gold having lost nearly 40% of its value since 2011, and stocks soaring to all time highs over 2,100 on the S&P 500, the comparison isn’t even close.

Between the year 2000 and today, stocks have been in two of the biggest stock bubbles in history. Over this time period the Fed has done almost nothing but prop stocks up by printing money or maintaining interest rates far below where they should be.

Dodd-Frank Does Not Make Us Safer

Half a decade after the 2010 Dodd-Frank Act became law, its proponents remain in denial. They confidently proclaim “big banks” are no longer a problem because the law eliminated dangers in the banking system. Former Rep. Barney Frank, D-Mass., co-author of the legislation, recently assured the New York Times that his signature legislation was “doing what it was designed to do.” All such talk is grossly off the mark.

First of all, decades of research have failed to conclusively isolate bank size as a risk factor behind bank failures and economic crises. It certainly didn’t cause the 2008 meltdown. Still, policymakers are debating whether it’s a good idea to “break up the big banks.” This would be utter folly. Even Barney Frank recognizes that it requires an impossible task: identify “the right size” for banks.

Unfortunately, even the Dodd-Frank advocates who understand this bank-size problem fail to acknowledge that it also applies to the so-called risk management regulations in Dodd-Frank. For example, Frank recently claimed his law was a success because, “We gave the regulators the authority to impose risk-retention requirements on all loan securitizations.” (His boast conveniently ignores the fact that private lenders used risk-retention requirements long before the 2008 crisis, without being directed to do so by law.)

Just as it is impossible to identify a bank size that is miraculously risk-free, so nobody can possibly know in advance what the “right” risk-retention requirements should be. No matter what the requirement, there’s still a risk of financial loss from an unforeseen source, on an unanticipated scale. The Dodd-Frank legal standards do nothing to change that equation. At best, they provide a false sense of security.

Too far, too fast? Gold up 19% YTD, But Is it really a commodities comeback ?

The Brink of Economic Collapse? How Did This Happen?

On virtually every alternative news site you visit these days—and many mainstream sites as well—you will find predictions of economic collapse and coming calamity. The bizarre thing is not that these articles exist, but rather that we have somehow adapted to them and taken them in stride. In this essay, I have set out to determine how this came about—how did one of the most developed and educated civilizations in history come so close to the economic brink?

I was especially curious to determine if the core mechanics of demand and supply, the stuff you learn in the first 10 minutes of your very first lecture in Economics 101, were still functioning as they should be…

Apparently not! What I found instead is that our society, our culture, has tacitly allowed traditional economics to be deliberately suborned and subverted by forces of highly dubious intent. What I found, in essence, is that the people we have entrusted to run our economy have, either deliberately or accidentally, thrown out the economic baby while stubbornly holding on to the dirty bathwater.

In the 1980s, I had the wonderful privilege of teaching business law at a university ranked as one of the top 50 in the world. My course included basic economics, as well as an explanation of the most common financial instruments. Then, as now, most financial paper (excluding derivatives) can be classified as belonging to one of three main categories: cash or money market, debt, and, of course, equity. Cash being cash, you get the most safety, but the least return. Debt provides a higher return than cash but more risk; albeit, the risk, in theory, is mitigated by the fact that hard assets usually stand behind the debt.

Blame Wall Street for Puerto Rico crisis: Activist

Wall Street and Congress are, in part, to blame for Puerto Rico's debt crisis, the president and CEO of the National Puerto Rican Coalition said Monday. The island was set to default on a $389 million debt payment to bondholders Monday.

"Let's be real here, Puerto Rico is in an economic, unstable situation in its relationship with the United States. And that is Congress, how Congress decided to build this relationship with Puerto Rico," Rafael Fantauzzi said in an interview with CNBC's "Power Lunch."

He also pointed to hedge funds that own Puerto Rican debt, noting that some of them also own Argentinian debt. "Guess what — they waited 10 years and they got their pay off. But Puerto Rico is a very, very, very different situation."

However, municipal bond investor Hector Negroni, co-CEO of Fundamental Credit Opportunities, called blaming creditors for Puerto Rico's situation "a little appalling." "Our entire marketplace rests upon the rule of law and faith in governments to perform, to live within their means and to make amends to creditors when they fall short," he told "Power Lunch."

Are Subprime Auto Loan Delinquencies a Harbinger of the Next Recession?

Financial services research firm Fitch Ratings is sounding the alarm that subprime auto loan delinquencies are tumbling, causing concern for financial analysts.

Delinquencies recently paused after hitting a 20-year high in February of just over 5%; however, Fitch sees this dip as a momentary hiccup. “Delinquencies on U.S. subprime auto ABS decreased to 4.15% in March reporting from last month's 20-year high of 5.16%,” the company reported in a release. “Driving the decline was borrowers taking advantage of tax returns to pay off debts.”

Are delinquencies and possible defaults on the rise, creating a Groundhog Day type scenario no one wants to relive? “With reputable companies like Moody’s and Fitch Ratings drawing attention to this occurrence, it's normal to be concerned,” says Christopher Kukla, executive vice president from the Center for Responsible Lending.

“However the mortgage and auto loan markets are not the same -- in fact the mortgage market is considerably larger,” Kukla adds, reassuringly. “So while seeing a rise in auto loan delinquencies, especially with subprime borrowers is unsettling, it is really more the time to hone in on what is occurring in this market and learn from the past.” Kukla says the mortgage and auto loan market are not governed by the same set of loan rules and regulations, and while the home loan market has tightened considerably, auto lending, while regulated, is not under the same level of scrutiny. “The bigger issues is the space in lending that has received very little consumer protection attention,” he says. “We’re just seeing the beginning of the Consumer Financial Protection Bureau starting to pay closer attention to a space where you have a few decades of issues that are piling up.”

Closing 800 Department Stores? It's A Start

What will it take to get department store chains, including J.C. Penney, Macy's M +0.81% and Sears, performing at sales per square foot levels not seen in a decade or more? The answer, according to new research from Green Street Advisors, is store closures — and a lot of them.

Around 800 stores in U.S. malls, roughly one-fifth of total anchor space, would need to be shuttered for the chains to reach the same level of sales productivity achieved in 2006. (Green Street, it should be noted, does not see a particularly rosy future for malls either with estimates that over 15 percent will either be closed or repurposed over the next decade.)

Green Street, as reported by The Wall Street Journal, estimates that sales at department stores averaged about $165 a square foot in 2015, about 24 percent lower than in 2006. Over the same period, department stores reduced their collective footprint around seven percent.

Sears Holdings, which recently announced it was closing an additional 10 Sears locations, would need to shutter 300 locations to get back to its 2006 per square foot levels, according to the real estate research firm. In an online discussion last week, many of the industry insiders of the RetailWire BrainTrust agreed that closing stores might be a good start to fixing the woes of big department stores. “There’s gold in that real estate,” said Peter Charness, SVP America, Global CMO, TXT Group. “All of retail needs a rethink of the role/size/location and cost of their stores. There will be a painful transition for many as they make physical locations more compelling to shop, more convenient to pick up at and more cost effective to ship from.”

Obamacare health plans could raise rates just before November election

273,000 union workers and retirees brace for pension cuts

The struggling Central States Pension Fund is in such bad shape that it's seeking government approval to cut benefits -- and the ruling is expected to come this week.

It would be the first time the government green-lights pension cuts under a new law giving the Treasury Department authority to approve, or reject, cuts proposed by a multi-employer, private fund as a way to head off insolvency. Previously, failing pension funds could reduce future benefits for current workers, but they couldn't touch those already being paid to current retirees -- until now.

The Central States Pension Fund covers workers and retirees from more than 1,500 companies across a range of industries, but most of its retirees were truck drivers. A lot of the fund's companies went bankrupt after the trucking industry was deregulated in the 1980s. That's part of the reason the fund is in trouble now. It's currently paying out $3 for every $1 it takes in, and is expected to run out of money in 10 years.

About 115,000 retirees face pension cuts under the proposed plan, many of which could be severe. Bill Hendershot, 74, is bracing for a 60% cut to his $3,500 monthly pension check. He's already applied for part-time work, and scaled back his cell phone and cable plans. Bill and his wife rely mostly on his pension and their Social Security checks. They stand to lose $2,104 a month, or about one-third of their income, if the plan is approved.

Stagnant Wages: Americans Can’t or Won’t Compete?

For most Americans, wages simply aren’t rising quickly enough, and that’s blamed for holding back consumer spending and economic growth. Jobs growth has hardly been robust, and that limits workers’ bargaining power. Since the recession ended, employment has increased 187,000 a month, whereas for the Reagan recovery the pace was 251,000 in a much smaller economy.

President Reagan cut taxes, deregulated business and engineered the 1985 Plaza Accord, which resulted in a 50 percent reduction in the exchange rate for dollar against the yen and other major currencies. In those days, Japanese, not Chinese, imports aided by a cheap currency were waxing the ears of American workers. The Obama Administration admits the trade deficit is holding back jobs creation and growth and has chided China and others about currency manipulation and other aggressive trade practices, but Americans have a lot of bucking up to do if they are to compete effectively and reverse a $4000 decline in family incomes in this century.

International supply chain companies, like Li and Fung in apparel and household items and Wipro in electronics and IT, specialize in outsourcing products designed and services managed by American companies. Asian workers often do not enjoy the kinds of health care and income guarantees federal and state programs provide Americans. They are simply more willing to accept alternating periods of unemployment and intense overtime work—for example, churning out millions of garments and computer games for the holiday rush.

American trade diplomats can’t force all of Asia to replicate the U.S. social safety net. That makes essential reforming qualifications for Medicaid, Obamacare subsidies and income support programs to encourage seasonal employment and re-entry into the job market. Moving up the jobs market, many Americans often don’t have the skills to do the jobs that are left.

The EPA stashes billions in unaccountable slush funds

An investgigation by the Daily Caller New Foundation has revealed a stunning amount of cash squirreled away bu the Environmental Protection Agency and spent without congressional authorization. More than $6 billion in settlements from parties found to have polluted Superfund toxic waste sites has been deposited in more than 1300 bank accounts since 1990. The EPA has spent about half that amount and no one knows on what.

“This is the very definition of an out-of-control agency, if they can raise their own money and not have to go to Congress to have it appropriated,” Myron Ebell, director of the Competitive Enterprise Institute’s Center for Energy and Environment told TheDCNF. An EPA spokeswoman told TheDCNF the agency manages the accounts “in accordance with the law, congressional intent, and EPA policy and guidance.”

“In fact, EPA management of Superfund special accounts has been reviewed periodically,” she told TheDCNF. “EPA has responded to [Government Accountability Office], [inspector general (IG)], congressional, public and press inquiries regarding special accounts.” But those reviews are neither regular nor recent.

“EPA lacks transparency in its public reporting of special accounts,” the EPA’s IG wrote in 2009, the last year in which the accounts were reviewed by the independent watchdog. “Such transparency is needed to understand how special account funds are being utilized.” Two years before the IG comment, the Center for Public Integrity reported reported that “there are hundreds of these accounts, and the EPA doesn’t need congressional approval to spend the money in them, unlike the Superfund trust fund.” The CPI has not returned to the special accounts in the years since.

Venezuelans cope with food shortage

Number of Children Brought to U.S. Under Obama Amnesty Program Up 5 Times Since February

The number of Central American children the federal government has intentionally brought to the United States under the president's newly launched Central American Minors (CAM) Program has more than quintupled in the last two and a half months, rising from just 48 in early February to 241 by May 1, according to the most recent data from President Obama’s State Department.

First launched by President Obama in December of 2014 as part of his executive actions on immigration, the CAM program was designed as a “safe” way for Central American children with family living in the United States to be brought into the country without having to make the dangerous trek to the Southwest U.S. border, where many cross unlawfully. Under the program, children are screened and processed in their home country before being brought to the United States to be reunited with their families.

If the child does not qualify as a “refugee” under the federal government’s narrow definition, they can be granted “parole” into the United States at the discretion of the administration. Under the CAM guidelines, adults living unlawfully in the United States who qualify for deferred action under Obama’s temporary amnesty programs can legally apply to have their children brought to the United States under this program, despite having no legal status themselves.

According to the New York Times, not a single child had been brought to the United States under the program as of November. As of Feb. 17, MRCTV reported the federal government had brought a modest 48 unaccompanied minors to the United States under the CAM program.

US Manufacturing Sinks Deeper into Mire, Sep. 2009 evoked

The decline of US manufacturing in the cacophony of regional and national indices, which started in mid-2014, is a sight to behold. Today we got two national indices for April. Both added more gloom to the scenario.

Of the national manufacturing indices, Markit’s PMI, which is based on surveys of purchasing managers, had been the more positive one – if that’s the right word. But it too has steadily been losing ground since mid-2014, when it hovered around 57 (above 50 = expansion). In April, the index dropped to 50.8, from 51.5 in March on a seasonally adjusted basis, which as the report put it, “signaled the slowest improvement in overall business conditions” since September 2009.

Output volumes compared to March were “close to stagnation,” with the “weakest rise” since October 2009. But at an annual rate, output actually fell 3% — so an actual decline in output:

Anecdotal evidence suggested that subdued client demand, uncertainty about the economic outlook, and lower energy sector capital spending had all acted as a drag on manufacturing production in April.

Former Shkreli firm responsible for 5,000% drug hike sued

The drug company previously headed by Martin Shkreli was sued Monday for allegedly breaching a contract that let it sell Daraprim, the medication whose price the company marked up 5,000%, sparking nationwide criticism.

New York City-based Turing Pharmaceuticals neglected to provide and certify accurate pricing data for the drug and failed to assume responsibility for Medicaid rebate liability linked to the medication's sales, the federal lawsuit filed in New York by Impax Laboratories (IPXL) charged.

Impax, a California company that sold its Daraprim sale rights to Turing in August, also charged that Turing violated the agreement that it would "use best efforts not to do any act (that) endangers, destroys or similarly affects the value of the goodwill" of Impax's corporate name and trademarks.

Turing did not immediately respond to a message seeking comment on the allegations. Daraprim is a medication used to treat toxoplasmosis, a potentially life-threatening parasitic illness that afflicts those with AIDS, cancer or other conditions that weaken the immune system. Turing's 2015 price hike on the decades-old drug last year under Shkreli's leadership raised the per-pill cost from $13.50 to $750.

Oil fallout: Laid off Saudi workers torch buses

Here's a rare sight in Saudi Arabia: Protesters setting buses on fire. The Saudi Binladin Group, a massive construction company founded by the father of the late al Qaeda leader Osama bin Laden, has laid off at least 50,000 workers, according to local press reports.

The job cuts come as the Saudi government has delayed payment to construction firms and cut spending to grapple with the plunging price of oil, which makes up three-quarters of the government's revenue.

Saudi-based newspaper al-Watan reported the Binladin Group terminated the contracts of 50,000 workers -- mostly foreigners -- and has given them permanent exit visas to leave the country. Some workers refused to leave the kingdom because they claim the company has not paid them for months, the paper reported. The Saudi military confirmed to al-Watan that protesting workers torched seven buses in Mecca -- a rare sight in Saudi Arabia, which Human Rights Watch has criticized for cracking down on free speech and imprisoning peaceful dissidents.

The layoffs are on top of the 15,000 workers cut last year after the Binladin Group's contracts were frozen when a crane collapsed at Mecca's Grand Mosque last year. The incident killed more than 100 people and the company was involved in the expansion project. The Binladin Group, which at times has had close ties to the Saudi royal family, did not return multiple requests for comment from CNNMoney.

2016 Data Breaches Jump 25% Year Over Year

The latest count from the Identity Theft Resource Center (ITRC) reports that there has been a total of 315 data breaches recorded through April 26, 2016, and that more than 11.34 million records have been exposed since the beginning of the year. The total number of reported breaches increased by 46 compared to the prior week.

The breaches reported last week were relatively small, with the largest accounting for just over 13,000 records. A fast-growing issue is ATM skimming, a data theft method that involves altering an ATM machine in a way that directs card and PIN data to the thief. According to Fair Isaac, the number of ATMs in the United States that have been compromised by data thieves is up 546% year over year in 2015, the highest level ever. Non-bank ATMs, such as those in convenience stores, have experienced 10 times as many compromises as in 2014.

The number of breaches in 2015 totaled 781, just 2 shy of the record 783 breaches that ITRC tracked in 2014.

The 315 data breaches reported so far for 2016 are more than 25% higher than the number reported for the same period last year. A total of more than 169 million records were exposed in 2015.

Ron Paul on the Presidential Race and China’s debt reckoning

China’s “Very Aggressive Program Of Gold Buying” In Motion Right Now

Central bankers took center stage this week as both the U.S. Federal Reserve and Bank of Japan moved markets by NOT moving rates. On Wednesday, the Fed announced that it would refrain from hiking interest rates. Fed officials cited a down tick in some of their economic indicators as the primary reason for standing pat.

Fed chair Janet Yellen teased the possibility of a hike as soon as the next meeting in June. But so far this year, Yellen has been all talk and no action. Investors don’t even seem to be taking Yellen’s talk of tightening seriously anymore. The consensus on rate hikes among Fed watchers at the beginning of 2016 was that we’d see a robust rate-hiking campaign throughout this year. After January, expectations softened a bit, but we were told at least four rate hikes would come. By March, they were saying probably two or three. Now it’s maybe one – or none!

The dovish wing of the Fed got another reason to stay dovish on Thursday after the release of a dismal GDP number. Gross domestic product grew at an annualized rate of just 0.5% in the first quarter, according to the U.S. Commerce Department. Meanwhile, business investment is turning down amidst weak global demand. Aggressive stimulus campaigns by central banks in Europe, China, and Japan have failed to have much impact in the real economy.

The Bank of Japan on Thursday opted not to pursue any additional stimulus measures – such as expanding its bond buying program or driving rates deeper into negative territory. The non-move left many investors disappointed and helped drive a global sell-off in equities. But the news sparked a big rally in the Japanese yen as the U.S. dollar headed toward new lows for the year. And the weaker dollar helped propel precious metals markets higher once again. As of this Friday recording, gold prices come in at $1,288 an ounce – up $20 alone here on Friday and 4.5% on the week.

The Two Income Trap has only gotten worse

America has become a nation where households depend on multiple streams of income just to get by. Many people think that having two incomes is a luxury when in most cases, you need two incomes just to get by and keep up with the rising cost of living. This is reflected in the two income trap. Take for example a couple that works and makes the median household income of $52,000. In many cases if the couple has a child, daycare costs are needed and these can run exceptionally high. Healthcare costs are also incredibly high and have grown unbelievably fast over the last two decades. This recent recession could have been called a Mancession since most of the jobs lost went to men. America is a nation of dual-income households because people are too broke to get by on one income. The current state of the economy hasn’t helped much in supporting economic growth for working families.

Back in 1965 47% of families had both spouses working. That figure is now up to 66% and it is extremely rare to find a household where only the husband works. You also find it more common today that a household will have only the wife working.

Women entering the workforce has shifted how people deal with daily life. But the thought of economic freedom by having an additional income in the household has been largely swept away by inflation.

You would think that this would be providing American families more financial freedom but instead it is merely keeping people from being out on the streets. The homeownership rate is now down to generational lows. Why? Because home prices are inflated thanks to banking policies and investors that have gutted the market and have created a shortage of housing for working families. So what is left is higher rents and higher home prices.

Tuesday 05.03.2016

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