What Will Happen Next?

Change is inevitable. Political, social and economic change is often the result of crisis. We examine how our nation and world might change as a result of the crisis

Western Rabble-Rousers Are On The Payroll Of The KGB

By Tyler Durden Zerohedge

Up until this point Angela Merkel, and German media in general, had been staunchly on the side of the west when it comes to dealing with Russia, Putin and realpolitik in broader terms. That changed dramatically today when Gabor Steingart, the chief editor of Handelsblatt, Germany’s leading economic newspaper, came out with a stunning op-ed, in German, English and Russian, titled simply that “The West on the wrong path” in which the editor comes out very vocally against the autopilot mode German media has been on for the past several months and calls for an end to a strategy of sanctions and Russian confrontation that ultimately “harms German interests” and is a dead end.

Ukraine Protestors

The must read excerpts:

  • The politics of escalation does not have a realistic goal – and harms German interests.
  • Newspapers we thought to be all about thoughts and ideas now march in lock-step with politicians in their calls for sanctions against Russia’s President Putin. Even the headlines betray an aggressive tension as is usually characteristic of hooligans when they ‘support’ their respective teams. The Tagesspiegel: “Enough talk!“ The FAZ: “Show strength“. The Süddeutsche Zeitung: “Now or never.“ The Spiegel calls for an “End to cowardice“: “Putin’s web of lies, propaganda, and deception has been exposed. The wreckage of MH 17 is also the result of a crashed diplomacy.“
  • Our purpose is to wipe off some of the foam that has formed on the debating mouths, to steal words from the mouths of both the rabble-rousers and the roused, and put new words there instead. One word that has become disused of late is this: realism.
  • Germany has waged war against its eastern neighbor twice in the past 100 years. The German soul, which we generally claim to be on the romantic side, showed its cruel side.
  • The politics of escalation show that Europe sorely misses a realistic goal. It’s a different thing in the US. Threats and posturing are simply part of the election preparations. When Hillary Clinton compares Putin with Hitler, she does so only to appeal to the Republican vote, i.e. people who do not own a passport. For many of them, Hitler is the only foreigner they know, which is why Adolf Putin is a very welcome fictitious campaign effigy. In this respect, Clinton and Obama have a realistic goal: to appeal to the people, to win elections, to win another Democratic presidency.
  • Even the idea that economic pressure and political isolation would bring Russia to its knees was not really thought all the way through. Even if we could succeed: what good would Russia be on its knees? How can you want to live together in the European house with a humiliated people whose elected leadership is treated like a pariah and whose citizens you might have to support in the coming winter.
  • It is not too late for the duo Merkel/Steinmeier to use the concepts and ideas of this time. It does not make sense to just follow the strategically idea-less Obama. Everyone can see how he and Putin are driving like in a dream directly towards a sign which reads: Dead End.
  • Demonizing Putin is not a policy. It is an alibi for the lack thereof. He advises condensing conflicts, i.e. to make them smaller, shrink them, and then distill them into a solution. At the moment (and for a long time before that) America is doing the opposite. All conflicts are escalated. The attack of a terror group named Al Qaida is turned into a global campaign against Islam. Iraq is bombed using dubious justifications. Then the US Air Force flies on to Afghanistan and Pakistan. The relationship to the Islamic world can safely be considered damaged.
  • The American tendency to verbal and then also military escalation, the isolation, demonization, and attacking of enemies has not proven effective. The last successful major military action the US conducted was the Normandy landing. Everything else – Korea, Vietnam, Iraq, and Afghanistan – was a clear failure.

Punchline #1:

  • Collective movements start in support of the sanctioned, as is the case today in Russia. The country was hardly ever more unified behind their president than now. This could almost lead you to think that the rabble-rousers of the West are on the payroll of the Russian secret service.

And Punchline #2:

  • History does not have to repeat itself. Maybe we can find a shortcut.

Also maybe those looking for the moment in time when Germany finally rotated away from its pro-western mindset and took a long, hard look at the rising Eurasian/BRIC/counter US Dollar axis, should remember this article…

Read the Full article

El Pollo Loco IPO Soars To Insane 20x EBITDA Multiple

Submitted By Zerohedge

The “fear of missing out” (on the next Chipotle we presume) is strong with this one as El Pollo Loco (LOCO) went public at $15 on Friday, opened at $19 and today explodes to almost $33 at a mind-numbing ~20x EBITDA (market cap over $1.2 billion on a $53 million EBITDA)… crazy chicken indeed…

20140728_crazchicken

These kind of crazy stock run ups are indicative of speculative blow-off.

About That “Recovery Summer”: Its Deja Vu All Over Again

Baseball great Yogi Berra had a saying “It’s déjà vu all over again”. Every year around this time, we are reminded of those words.  As we have once again, happened upon that magical time of year I call, recovery summer déjà vu. It’s the time of year when Wall Street and Washington apologists trot out their dog and pony narrative, in an attempt to spin the actual data, proving we have finally embarked on the summer that will launch sustainable economic growth.

And this year is no exception, as those same people appear to be downright giddy about the prospect that we finally have something to feel optimistic about.  For instance, they are euphoric about the most recent jobs report, some suggesting that there is absolutely nothing to find fault with.  Of course, they fail to mention anemic wage growth, the lower quality and part-time jobs created; or the discouraged workers who have left the work force.

Yes, they will admit that they were stunned when GDP contracted in the first quarter, but that was a mere weather-related incident.  It was the blizzard of Q1 2014 that left GDP buried under 2.9 percent of negative growth.  In truth, a more accurate reason for the economic slump was the move in the 10 year note from 2.48 percent on October 23rd, to 3.03 percent on December 31st of 2013.  And the move over 3 percent was the peak of the cyclical advance from the low of 1.63 percent on May 2nd. The doubling of interest rates, although still to a historically low level, was enough to send this debt-laden asset-bubble driven economy into the freezer. But why allow facts get in the way of a good weather story.  So once again we hear cheers for another summer recovery.

The truth is, since 2010 every second half recovery has disappointed and this one will be no exception.  The first quarter of 2014 gave us 2.9 percent negative growth.  I am in agreement with most economists that the 2nd quarter will come in somewhere around 3 percent, resulting in an economic flat line for the first half of 2014.  This puts enormous pressure on the second half of year to bring us out of stagnation that has led to the most anemic recovery since WW II.  Let’s review:

  • GDP shrank in both 2008 and 2009,
  • growth returned in 2010 by 2.5 percent,
  • in 2011 GDP fell back to 1.8 percent,
  • GDP then went up slightly in 2012 to 2.8 percent,
  • then down again in 2013 to 1.9 percent.

The inability to obtain growth above 3% in each year since the economy collapsed during 2008-2009 underscores this tremendous economic failure to bounce back after the Great Recession.

united-states-gdp-growth

So why do they think this year will be different?  After all, if you subscribe to the Keynesian fairytale of money printing and deficit spending, it was easy to see why they were excited back in the summer of 2010.  The economic spigots were over flowing with a treasure trove of demand stimulus and monetary elixirs.

In the summer of 2010 optimism was in the air… Time magazine’s 2009 man of the year Ben Bernanke was poised to save the day, ready to do whatever it took to get this economy growing again.  Today, despite lack luster growth, the Fed is retreating.  Essentially conceding—at least for now–printing money didn’t solve the problem; QE is set to wind down in just 90 days.

But for a Keynesian it gets worse.  Instead of an Obama phone, we have the roll-out of the job-killing Obama-care plan this year and next. In addition, profligate tax-payer subsidized loans that funded the likes of Solyndra, have been supplanted by a capital goods strike.   “Shovel ready” has been replaced with anemic real income growth and record debt levels.

Putting the Keynesian fantasy aside, the truth is there isn’t much ahead that will stimulate real growth.  The middle class, which was already saturated in debt, has not been the beneficiaries of the Federal Reserve’s money printing.  Instead, those dollars have been funneled into the creation of new asset bubbles and have led to an increase in food and energy prices—like it always has in the past.  Stagnant wages are being stretched further to pay for the necessities of living.  We still don’t have the regulation and tax reform that catapulted the Reagan revolution. Companies that have cash flow would rather make stock purchases to increase their Earnings per Share than invest in property, people, plant and equipment.  And, unless the economy is headed back into a severe recession, the economic boost from a lower cost of money will be absent.

The truth is there is not much at all on the economic horizon to warrant optimism. Yes, the cheerleaders are hoping if they yell loud enough, a recovery-summer will finally manifest.  Unfortunately, until free-market forces are finally allowed to deleverage the system, it will be a disappointing second half recovery–all over again.

By Michael Pento at Pento Portfolio Strategies

The Federal Reserve and Bubbles

Many market pundits argue that the Federal Reserve is too dumb or too inept to identify asset bubbles.

By focusing on the Fed’s mental acuity (or lack thereof), these pundits are overlooking a key factor: the Fed wants asset bubbles.

Why?

Asset bubbles, at least according to the Fed’s models, will paper over the steady decline in quality of life that began in the US roughly 50 years ago.

This fact is staring everyone in the face, though few people can see past the smoke and mirrors erected by our government to identify and understand it. . Back in the 1950s, the average American family had one working parent and was able to get by just fine. Today, most families have two working parents, sometimes working more than two jobs and they’re still not able to afford a prosperous life.

A 2012 study by NYU Professor Edward Wolff found that the median net worth of American households was at a 43-YEAR LOW. The average American in the 21st century was in worse shape than his 1970s counterpart.

This process began to accelerate in the late 1990s. Looking at real media household income, one can see clearly that things have generally been downhill for nearly 20 years now.

Real Household Income

It is not coincidence that the Fed began blowing serial bubbles starting in the late 1990s. The Fed is aware on some level that quality of life in the U.S. has fallen. The Fed’s answer, rather than focus on solutions to the problems of job growth, income growth, etc. has been (and is) to blow bubbles to paper over this decline.

This is why we’ve had bubble after bubble after bubble in the last 15 years. The Fed doesn’t have a clue how to create jobs or boost incomes. Why would it? Most of the Fed’s Presidents are academics with no real world business experience.

Instead, the Fed believes in the “wealth effect” or the theory that when housing prices or stock prices increase, people feel wealthier and so go out and spend more money. This theory is baloney. People spend based on their incomes, NOT the value of their homes or portfolios.

Assets only convert into cash once the owner sells the asset. Anyone who goes out and spends more money because their home went up in value will only end up with credit card debt or home equity debt, which combined with their mortgage, puts an even greater strain on their financial resources.

The Fed wants asset bubbles because they hide the rot within the US economy. If the Fed didn’t raise stock or housing prices, people might actually start to wonder… “hey, why is my life getting more and more difficult despite the fact that I’m working all the time?”

The Fed wants bubbles. So we’re doomed to keep experiencing them and the subsequent crashes.

Originally published by Phoenix Capital Research

Where to live in the 21st century

Five scientists (John. W. Day, M. Moerschbaecher, David Pimentel, Charles Hall, A. Yá˜nez-Arancibia) have written an interesting article about the best and worst places in the in the future United States based on sustainability when you take into account:

  • climate change
  • energy reserves
  • population
  • sea-level rise
  • extreme weather

Below are a few interesting excerpts from this 16 page paper.

Best places to live

WhereToBe-Day2013-good-places-greenest

The greener the better — unless there are too many people (circles indicate large cities).

where-to-be-day-2013-best-is-underperforming-now

Move to an Underperforming Region (and away from a Megaregion): Many areas rich in natural resources often have high poverty rates, perhaps due to “the resource curse”, usually applied internationally to countries rich in fossil fuels, agriculture, forestry and fisheries, but financially poor with stratified social classes. We believe this concept can be applied to states. You can see above that most underperforming counties are rural. These are regions that have not kept pace with national trends over the last 3 decades in terms of population, employment, and wages. Note that with the exception of the Great Lakes megaregion, the underperforming regions are outside of the 11 megaregions. These underperforming areas generally have high natural resources and agricultural production.

Worst Places to Be

where-to-be-day-2013-WORST-PLACES

Several areas of the U.S. will have compromised sustainability in the 21st century. These include the southern Great Plains, the Southwest, the southern half of California, the Gulf and Atlantic coasts, especially southern Louisiana and Southern Florida, and areas of dense population such as south Florida and the Northeast.

where-to-be-day-2013-not-in-megaregions