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The Australian government said a deal for a Chinese company to take control of the Kidman beef company is “contrary to the national interest.” …read more

Source: Australia set to block sale of ranch to Chinese firm

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By Tyler Durden

Authored by Project Chesapeake's Tom Chatham, via Alt-Market.com,

It has been said that history may not repeat but it sometimes rhymes. Just as the generals always seem to fight the last war people seem to prepare for the last depression. Times change and the mechanism that leads to misfortune changes with it. Looking at the past may not give us the clear answer to how to deal with the future but it can help us to determine what might happen and how to deal with it when the time comes.

We always look at the last incident because that is what we know. The problem is that social and economic conditions are always changing and they have a major impact on how things unfold. When people hear that they should prepare for another great depression they immediately think about how people survived the last one and how events unfolded. That is a good starting point but things will not be exactly the same the next time.

In the 1930’s people did not posses specialized skills, they had general knowledge that allowed them to take any job that was available. Today people are skilled in one area and loss of employment in that area requires them to obtain skills to work in a new area. The jack of all trades has been replaced by the specialist so when job loss comes they have a more difficult time finding a new one.

In the 1930’s we had a deflationary depression and anyone holding cash and bonds were able to hold on to their wealth and banks were allowed to fail. The farmers suffered from a drop in commodity prices but taxes were low and most people that had land owned it free and clear allowing them to stay in place. Today we are more likely to have an inflationary depression due to the mandate to save the banks at all costs. Anyone trying to save their wealth in cash and bonds will get slaughtered in the paper assets they hold due to massive money printing.

In the 1930’s most people lived in rural areas and people worked to help their neighbors in difficult times. Most people had the skills to take care of themselves and their families until things got better. Today most people live in urban and suburban areas and society has been fragmented into militant groups that cannot work together even in good times. Declining economic conditions will likely make society turn in on itself even more causing suffering and loss of life. Most people have no idea how to care for themselves if the system breaks down.

In the 1930’s people were forced to find new employment due to job loss because there were no social safety nets to provide for them. In difficult times they were forced to look to family, friends and the church for help but most people felt they had failed if they asked for help. Today people losing a job have unemployment, welfare, food stamps …read more

Source: All Depressions Are Not Created Equal

    

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By Tyler Durden

Tensions continue to escalate between the US and Russia. As a reminder, Russia conducted several close encounter fly-bys when first a Russian Su-24 “buzzed” the US missile destroyer USS Donald Cook in the Baltic Sea, and just days later flew within 50 feet of a US recon plane also flying over the Baltic Sea. The U.S. quickly responded and complained vocally to Russia, followed quickly by the first deployment of US F-22 stealth fighter to Romania, in close proximity to both the Black Sea and 400 km from the Russian military stronghold of Sevastopol on the Crimean Peninsula.

It now appears there was a third incident involving an extremely close encounter. According to the Free Beacon, a Russian MiG-31 jet flew within 50 feet of a U.S. surveillance aircraft in Northeast Asia last week, in what was dubbed “Moscow’s latest aerial saber-rattling” against American ships and planes by US defense officials.

Russian Mig-31 planes

“On April 21, a U.S. Navy P-8 Maritime Patrol reconnaissance aircraft flying a routine mission in international airspace was intercepted by a MiG-31 Russian jet in the vicinity of the Kamchatka Peninsula,” Cmdr. Dave Benham, a spokesman for the Pacific Command, told the Washington Free Beacon. While Benham added that the intercept was “characterized as safe and professional” there was more to the story as another defense official familiar with the MiG-31 intercept said the jet flew within 50 feet of the P-8, a maritime patrol and anti-submarine warfare aircraft.

The WFB adds that the incident took place near the Russian city of Petropavlovsk-Kamchatsky, a port located on the southeastern end of the peninsula, which explains why Russia may not have been particularly enthused with a US spy plane flying virtually on top of its territory.

Kamchatka is Russia’s main military hub in the Pacific and the focus of a buildup of Russian military forces that Moscow has said is intended to match the U.S. military rebalance to Asia. Several military bases are located there, along with a major naval base. The peninsula is also the main impact range for Russian missile flight tests launched from the central part of the country.

Worse, the P-8 flight appears to have been part of an effort to spy on Russia’s deployment of a new missile submarine at Petropavlovsk, and since clearly the US was fully aware that Russia would respond unfavorably to this encroachment one wonders if the US wasn’t merely acting to provoke its Russian counterparts into something more than merely a “safe and professional” response.

The Russian navy’s Pacific Fleet conducted exercises in the Sea of Japan on April 22, a day after the P-8 was intercepted, according to a Twitter search. Russian naval forces from Kamchatka also carried out missile and artillery fire exercises in recent days. The WFB adds that the military activities may have also been a target of the P-8 surveillance operations.

In other words, the US was deploying spy planes in the immediate vicinity if not over Russian territory and …read more

Source: Russian Fighter Jet Flies Within 50 Feet Of US Spy Plane Over Russian Naval Base

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The Apple employee found dead Wednesday at the company’s headquarters killed himself. …read more

Source: Apple employee found dead at HQ shot himself

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By Tyler Durden

Submitted by Kessler Companies

Output Gap Update – Q1 2016

Among our favorite indicators to write about is the GDP output gap. Today we update it with the latest Q1 2016 GDP data. We’ve written about it many times in the past (some recent examples: 09/30/2015, 12/27/2014, and 06/06/2014). It is the standard for representing economic slack in most other developed countries but is usually overlooked in the United States in favor of the gap between the unemployment rate and full employment (also called NAIRU (link is external)). This is partially because the US Federal Reserve’s FOMC has one half of its main goal to promote ‘full employment’ (along with price stability) but it is also partially because the unemployment rate makes the economy look better, which is always popular to promote. In past US business cycles, these two gaps had a close linear relationship (Okun’s law (link is external)) and so normally they were interchangeable, yet, in this recovery, the unemployment rate suggests much more progression than the GDP output gap.

The unemployment gap now, looked at on its face, would imply that the US is at full employment; i.e., the unemployment rate is 5% and full employment is considered to be 5%. Thus, this implies that the US economy is right on the verge of generating inflation pressure. Yet, the unemployment rate almost certainly overstates the health of the economy because of a sharp increase over the last many years of unemployed surveyee’s claiming they are not involved in the workforce (i.e. not looking for a job). From the beginning of the last recession, November 2007, the share of adults claiming to be in the workforce has fallen by 3.0% of the adult population, or 7.6 million people of today’s population! Those 7.6 million simply claiming to be looking for a job would send the unemployment rate up to 9.4%!. In other words, this metric’s strength is heavily reliant on whether people say they are looking for a job or not, and many could switch if the economy was better. Thinking about this in a very simplistic way; a diminishing share of the population working still has to support the entire population and without offsetting higher real wages, this pattern is regressive to the economy. The unemployment rate’s strength misses this.

Adding to the evidence that the unemployment rate is overstating the health of the economy is the mismatch between the Bureau of Labor Statistics’ (BLS) household survey (unemployment rate) and the establishment survey (non-farm payroll number). Analyzing the growth in non-farm payrolls over the period of recovery (and adjusting for aging demographics) suggests that the US economy still has a gap to full employment of about 1.5 million jobs; this is the Hamilton Project’s Jobs Gap (link is external).

But, the labor market is a subset of the economy, and while its indicators are much more accessible and frequent than measurements on the entire economy, the comprehensive GDP output gap merits being …read more

Source: Why The US Output Gap Means The 10 Year Is Going Below 1%

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By Tyler Durden

Submitted by Annie Zhou via FinancialRepressionAuthority.com,

FRA Co-founder Gordon T. Long is joined by Professor Michael Hudson in discussing his concept of the FIRE economy and its influence on the production and consumption economy, along with some of his writings.

Michael Hudson is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of Killing the Host (2015), The Bubble and Beyond (2012), Super-Imperialism: The Economic Strategy of American Empire (1968 & 2003), Trade, Development and Foreign Debt (1992 & 2009) and of The Myth of Aid (1971), amongst many others.

ISLET engages in research regarding domestic and international finance, national income and balance-sheet accounting with regard to real estate, and the economic history of the ancient Near East. Michael acts as an economic advisor to governments worldwide including Iceland, Latvia and China on finance and tax law.

Full Interview:

Abstract:

FIRE ECONOMY

FIRE is an acronym to the Finance, Insurance, and Real Estate sector. Basically that sector is all about assets, not production and consumption. Most people think of the economy as being producers making goods and services and paying labor to produce them, and then labor is going to buy the goods and services. But this production and consumption is rife in the asset economy of who owns assets and who owns other things.

The Finance, Insurance, and Real Estate sector is dominated by finance. For instance, 70-80% of bank loans in North America and Europe are mortgage loans against real estate. The only way of buying a home or commercial real estate is on credit, so the loan to value ratio goes up steadily, banks lend more to the real estate sector, and real estate is worth whatever banks are willing to lend against it.

As banks loosen credit terms, lower interest rates, take lower down payments and basically lower amortization rates, interest only loans, they’re going to lend more hand more against property.

“Property’s bid up on price, but all of this rise in price is debt leverage.”

A financialized economy is a debt leveraged economy, whether it’s real estate or insurance or just living, and debt leveraging means a larger portion of assets are represented by debt, raising debt-equity ratios, but also that more and more of people’s incomes and tax revenue is paid to creditors. So there’s a flow of revenue from the production and consumption economy into the financial sector.

WE’RE STILL IN CAPITALISM, NOT CREDITISM

There’s a huge amount of gross savings, about 18-19% of the US economy, coded in part in debt. The savings that are lent out to borrowers are debt. So you have the 1% lending out their savings to the 99%, but the gross savings are higher.

“Every economy is a credit economy.”

“The IMF has this Austrian theory that pretends money began as barter and capitalism operates on barter, and this is a disinformation campaign. This is a very modern theory that is …read more

Source: Junk Economics: Michael Hudson Rages "Wall Street Has Taken Over The Economy.. & Is Draining It"

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