Study confirms that healthy diet and regular exercise are the BEST ways to prevent prostate cancer

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Markets Are All About Flows

Authored by Alasdair Macleod via GoldMoney.com,

This article looks at prospective supply and demand factors for financial assets in the New Year and beyond. Investors should take into account money flowing into and out of financial assets as well as stock flows, particularly escalating government bond issuance, which looks likely to accelerate significantly in the coming years. It adds up to the fundamental case for physical gold and silver.

At this time of year, the thoughtful soul considers prospects for markets. Pundits are laying out their forecasts, and they fall into two broad camps. There are brokers and fund managers who talk of value. Their income and assets under management depend on continually inflating prices. Then there are the pessimists, a ragbag of doom-mongers who sweepingly point to risks on a grand scale. The collapse of Italy, Deutsche Bank, China, Brexit… take your pick. Very few engage on the subject that really matters, and that is the underlying monetary flows into and out of financial markets.

We must assess the pace of monetary expansion relative to the demand for money and credit, and where that expansion goes. Early in the credit cycle, there is little demand from the non-financial sector for monetary expansion, so excess money and bank credit go into the financial sector, pushing up financial asset prices. As the cycle progresses, it begins to be demanded by the non-financial economy and money then flows from the financial sector to non-financials. This is why we have observed that just as business conditions in the real economy start improving, just as valuations begin to be vindicated, interest rates and bond yields start rising and shares enter a bear market.

It should be noted that while some shares are sure to rise reflecting specific corporate developments and investor focus, money draining from financial markets has the same effect as air draining from a leaking balloon. They deflate, and taken as a whole, prices of both bonds and equities persistently decline.

Interest rates begin to rise when the monetary expansion earlier in the cycle finds its way into the non-financial economy, inflating prices of goods and services instead of financial assets. More money ends up chasing the same quantity of manufactured goods and services, and their prices rise without an increase in demand. It is this effect which confuses those who can only equate rising prices with increased demand.

But for investors, the important effect of the evolving credit cycle is that it begins to limit the flow of new money into financials, relative to the money exiting into the non-financial economy. It is the balance of these flows which basically determines market values as a whole. The pessimists, many of whom will have been forecasting the imminent demise of stockmarkets through the whole bull run, at last have a chance of being right, because of the knock-on effects of falling financial asset values. And it must be borne in mind that in the absence of new money flowing to support financial asset prices, there are always marginal sellers who will drive prices lower.

The supply of government debt will increase

Besides the ebbing away of money supply from financials into the real economy, we must also consider the effect of stock flows on financial prices, the most significant being changes arising from the financing of government deficits. In a conventional Keynesian economic model, the government stimulates the economy by deliberately engineering a budget deficit early in the cycle. As economic activity recovers, tax revenues improve, and government finances return to a surplus. Therefore, according to Keynes’s theory, demand for capital evens out over the cycle as a balance is restored towards the end of it.

This idealised setup is no longer the case. The last US budget surplus was eighteen years ago in 2000. Since then the US economy has had a bust, followed by a boom, another bust and in 2017-18 was in its second boom. The accumulated budget deficits since 2000 total $12.454 trillion and government debt has increased from $5.674 trillion to $21.516 trillion.[i] Whatever one thinks of Keynesian interventionism, the abuse by the US Government of Keynes’s theory of the state’s management of the economy is truly staggering, and seems set to drive it into a debt trap that can only result in either a severe retrenchment of state spending or the eventual destruction of the state’s currency.

So far, investors have ignored this underlying trend. They have happily taken the combination of zero interest rates and monetary expansion and invested in financial assets, including all the government debt on offer. The money and credit have been issued for them to do this, but it cannot continue for ever. Monetary inflation has led to many governments adding to their debt obligations throughout the whole credit cycle, so the affordability to governments of future debt issues is bound to become an issue.

The rule of thumb employed by economists in the past has been to compare growth in GDP with the interest cost of government funding. This presupposes that GDP growth leads to higher tax revenues, and as long as the increase in tax revenues is expected to cover the interest cost of the increased debt, the debt is deemed affordable.

Governments have benefited from this relationship in recent credit cycles, not through increases in GDP, but through the suppression of interest rates. This is particularly dangerous, because a debt trap will almost certainly be sprung when that unnatural suppression comes to an end. It also assumes that economic growth continues with little variation. It cannot apply to countries heavily exposed to the volatility of commodity prices, particularly emerging economies, nor is it viable in the real world of increasingly destabilising credit cycles evident in consumer-driven welfare states.

The next two sections in this article will concentrate on the debt position of the US, on the basis that the dollar is the world’s reserve currency, and international markets reference prices in dollars. An acceleration of debt supply from the US Government is likely to dominate global investment flows and financial valuations in the next decade, so we should try to quantify them.

When considering the US Government’s debt, it must be noted that roughly one-third is held by the government itself in accounts such as the Social Security Trust Fund. However, they represent funding of external welfare obligations, so are external liabilities for the Federal Government. For the purposes of this debt analysis, they will be dealt with the same way as other public obligations, rather than as a purely technical internal government arrangement, which is the assumption of the Congressional Budget Office from which much of our information is drawn.

The threat of a US Government debt trap

The issuance of debt is normally subject to a contract that it will be repaid at the end of its term, along with the coupon interest. The exception is undated bonds, when only the interest contract must be fulfilled. In practice, governments and many corporations roll over debt into new bond obligations at the end of their terms, but at least bondholders have the opportunity to be repaid their capital. Therefore, the credibility of government debt is based on the assumption the issuer can afford to continue to roll it over rather than repay it.

However, the rolling over of old debts and the continual addition of new ones will almost certainly become a problem for governments everywhere. It is less of a problem when the debt is put to productive use, but that is rarely, if ever, the case with government finances. To judge whether the rolling over of debt is sustainable and at what cost, we need to rely on other metrics. The traditional method is to compare outstanding debt with GDP, and by using this approach two economists (Carmen Reinhart and Ken Rogoff) came up with a rule of thumb, that once a government’s debt to GDP ratio exceeded approximately 90%, economic growth becomes progressively impaired.[ii]

The Reinhart-Rogoff paper was empirically based, and loosely impresses upon us that the current situation for the US and other nations with higher debt to GDP ratios is unsustainable. Key to this reasoning is that rising debt levels divert savings from financing economic growth, and therefore a government’s ability to service it from rising taxes is undermined. At the Rubicon level of 90% and over, median growth rates in the countries sampled fell by 1%, and their average growth rates by “considerably more”. It is entirely logical that a government forced to tax its private sector excessively in order to pay debt interest will restrict economic potential overall.

This analysis was published in the wake of the Lehman crisis, when an unbudgeted acceleration in the rate of increase of government debt everywhere was a pressing concern. The signals from financial markets today indicate that we could be on the verge of a new credit crisis, in which case tax revenues will again fall below existing estimates, and welfare costs rise above them. Therefore, government debt will increase unexpectedly, as was the case that caused the Reinhart-Rogoff paper to be published in 2010.

To look at the increase of government debt between 2007 and 2009, as Reinhart-Rogoff did, was not, as it turned out, a long enough time-frame to fully reflect the consequences of the Lehman crisis on government debt. The increase recorded over 2007-09 was 32%, yet economists and others were still talking of austerity until only recently. The whole period between the Lehman crisis and the election of President Trump is perhaps a better time-frame, and we see that US Government debt between 2007 and 2016 increased by an astonishing 217%.

It turns out that the Reinhart-Rogoff report severely understated the problem by reporting early. Their 90% debt to GDP Rubicon has been left behind anyway, with government debt to GDP ratios around the world in excess of 100% becoming common. In the case of the US, total Federal debt, including intragovernmental holdings, is currently over 105% and rising. The Congressional Budget Office is forecasting substantial budget deficits out to 2028, adding an estimated further $4.776 trillion in deficits between fiscal 2019-23, or $9.446 trillion between fiscal 2019-28.[iii]

This assumes there is no credit crisis, so for those of us who know there will be one during the next ten years, these numbers are far too optimistic. Accordingly, we should look at two possible outcomes: first, a best case where price inflation continues to be successfully managed with a target rate of two per cent, and a second base case incorporating an estimate of the effects of the next credit cycle on government finances.

Best and base case outcomes

Our best-case outcome of controlled price inflation is essentially that forecast by the Congressional Budget Office. Working from the CBO’s own figures, by 2023 we can estimate accumulated debt including intragovernmental holdings will be $26.3 trillion[iv] including our estimated interest cost totalling $1.3 trillion[v].

That is our best case. Now let us assume the more likely outcome, our base case, which is where the effects of a credit cycle play a part. This will lead to a fall in Federal Government receipts and an increase in total expenditures. Taking the last two cycles (2000-07 and 2007-18) these led to increases in government debt of 59% and 239% respectively. Therefore, it is clear that borrowing has already been accelerating rapidly for a considerable time due in large measure to the destabilising effect of increasingly violent credit cycles. If the next credit cycle only matches the effects on government finances of the 2007-18 credit cycle, government debt including intragovernmental holdings can be expected to rise to $51.4 trillion by 2028. This compares with the CBO’s implied forecast of only $34 trillion of government debt over the same time-frame and makes no allowance for the cyclical effect on interest rates. More on interest rates later.

Because the underlying trend is for successive credit cycles to worsen, the $51.4 trillion figure for federal Government debt becomes a base figure from which to work. But there are still considerable uncertainties, particularly over the form it will take.

The character of the next credit cycle is unlikely to replicate the last one, which was a sudden financial and systemic shock. Today, the US banking system is better capitalised and off-balance sheet securitisation has been brought largely under control. There are however, uncertainties concerning the Eurozone banking system. There are also risks in global derivatives markets and the potential knock-on effects of counterparty failures on the US banks. Furthermore, there can be little doubt the sudden systemic shock of Lehman afforded a degree of protection for the purchasing power of the dollar, and therefore of the other mainstream currencies, despite the unprecedented monetary expansion.

However, it would be complacent to expect an outcome of relatively low price-inflation to be simply repeated at a time when government finances are even more dramatically spiralling out of control. Last time the threat was systemic to the banks, but next time the inflationary consequences of government finances is likely to be the dominant problem.

The explosion in the quantity of government debt that our analysis implies has many economic consequences. In the context of our rough analysis we should comment on the point made in the original Reinhart-Rogoff paper, which is that the reduction in GDP potential that results from an increase in the ratio of government debt to GDP is likely to be significant. The growth in Federal debt that replicates the post-Lehman experience will leave the US Government with a debt to GDP ratio of over 170%. The CBO assumes GDP will increase by 48% by 2028 to $29.803 trillion, whereas our cyclical case is for debt to rise to $51.4 trillion. While both these figures should be taken as purely indicative, clearly, US Government debt will increase at a faster pace than the growth in GDP and will strangle economic activity.

If the purchasing power of the dollar declines more rapidly than implied by the CBO’s assumed 2% price inflation target, interest payable on Federal debt will in turn be sharply higher than expected, compounding the debt problem. The Federal Government will face a potentially terminal debt trap from which there can be no escape.

Flows v purchasing power

On the face of it, bulls in financial markets will face an uphill struggle if they are to make money during the next credit cycle, given the prospect and consequences of an increasing supply of government debt. It is the diminishing flows into and increasing flows out of financial markets, together with the escalating demand for funding from governments that will decide the outcome.

When these parallel conditions developed in the UK between 1972-74, the FT 30 Index lost 73% of its value, or 80% allowing for price inflation. Collapsing asset values hit leveraged loans and a commercial property collapse ensued, taking out the secondary banks. A long-dated gilt (government bond) with a twenty-year maturity was issued with a coupon of 15.25% in 1976. That was great for the pension funds who loved the income stream, but ordinary investors were wiped out. The conditions today not only rhyme with this history on a global scale, but there is a worrying degree of replication becoming evident in US financial markets.

We have seen from the above analysis that demand for investors’ money from cash-strapped governments is almost certain to accelerate. The example taken of the US Government’s prospective finances is by no means the worst culprit. All major governments running welfare states are likely to increase their bond issuance in the next few years, particularly, as seems increasingly likely, if the investing world is on the verge of another credit crisis that threatens individual economies.

Members of the Eurozone particularly risk these destabilising difficulties. The ropy finances of Greece, Italy, Portugal and Spain have been well publicised. But we must include France, with her rapidly deteriorating finances as well.

There has always been the option for the central banks to open up the money supply tap. But to do that in addition to the post-Lehman monetary expansion still in the system risks undermining the purchasing power of their unbacked currencies. Price inflation is already no longer something that can be dismissed by hedonics, product-switching and repackaging goods into smaller quantities. Ordinary people and businesses will increasingly baulk at the low levels of time preference that do not take real price inflation adequately into account. Therefore, it is hard to see how central banks will be able to suppress interest rates in the way they have managed in the past. That was the hard lesson learned in the UK in the 1970s: The Bank of England had higher interest rates forced upon it by markets, eventually peaking at 17% in 1979.

It is challenging to see how governments can escape from their debt traps when interest rates rise above the levels currently assumed likely by both investors and government agencies. It will take, at a minimum, substantial cuts in government spending, which comes unnaturally to governments used to low-cost money being available on demand. The effect of high compounding interest will make government finances considerably worse than outlined in this article.

Investors faced with deteriorating prospects for government finances will therefore avoid financial assets, switching to tangibles. Top of the list are solid money in the form of gold, and also silver. Commodities might fall in price in real terms (i.e. priced in gold) but will rise priced in government currencies. Residential property will be hit by rising mortgage rates, but homeowners who survive the initial fall in prices are likely to be rescued by the bankruptcy of their lenders.

The ranking of hedges compared with deposits payable in bankrupt government currencies will become increasingly important to those trying to protect their savings. Worst case is a crack-up boom, but let’s leave that one for another time.

A Couple of Thoughts on 2019

Best wishes to all my readers and correspondents for a safe, healthy and productive 2019. Thank you, longstanding supporters, for renewing your financial support at the new year without any pathetic begging on my part. (The pathetic begging will commence shortly.)

While I don’t have any predictions for 2019 (why look any dumber than I have to?), I do have a couple of thoughts on the economy, markets, globalization, etc. Here are a few of the key issues confronting humanity:

1. The war being waged by Corporate Power (Globalization / Open Borders) to eradicate democracy and the power of nation-states to control their own destiny. Democracy ceases to exist in a corporate-controlled globalized system of governance; the sole structure that enables a citizen to have political and economic agency is the nation-state.

Try voting for a U.N. resolution or E.U. regulation. Sorry, pal, there are no elections or representation of the rabble in globalized governance. Globalization destroys democracy and the agency of the citizenry. That’s its goal.

Global corporations seek to destroy any and all barriers to their power and profits, and globalization / tax havens / Open Borders are the means to co-opt, marginalize and neuter nation-states and the political and economic agency of the citizenry. The net result of Corporate Power controlling the machinery of governance is neofeudalism.

2. Energy and capital flows. The status quo holds that energy flows don’t matter very much because energy represents a shrinking percentage of economic activity. In other words, capital is what matters, not energy, because capital can always buy whatever it wants.

Try pushing your car or truck uphill for a mile. How many humans would you need to push your 3,000 pound “compact” vehicle up a slight incline for a mile or two? How about 20 miles, or 100 miles?

Take away liquid fuels and the global economy grinds to a halt, and capital loses its scarcity and value. So-called renewable energy is around 3% of total global energy consumption.

3. Volatility, liquidity and price discovery. Central banks have labored diligently for the past decade to eradicate volatility and price discovery while providing almost unlimited liquidity.

For a variety of reasons (including the political blowback of the 90% who have been stripmined by central bank policies, corporate cartels, taxation and globalization), central banks are now attempting to “normalize” by reducing or withdrawing their distorting, perverse-incentives policies.

As a result, what they’ve suppressed–price discovery and volatility–have erupted. What they’ve pimped–liquidity–is sagging.

As I explained last month, capital gets skittish when certainty evaporates. When big blocks of assets hit the market, liquidity dries up due to the mismatch between sellers trying to unload hundreds of billions of dollars of assets and the few buyers willing to nibble on a couple of billion dollars of these assets.

Central banks can fill the mismatch by becoming buyers of last resort, but the political leeway to engage in this sort of manipulation is evaporating along with liquidity.

4. 2018-19 is not a repeat of 2008-09. While many have observed the similarity of the stock market meltdown in 2008 and 2018, the fundamentals are not as close a match. There is no analog to subprime mortgages this time around. That doesn’t mean there won’t be turmoil and asymmetries, but it does suggest we shouldn’t put too much weight on expectations that 2019 will follow the template of 2009. I’ll have more to say on this soon.

5. The predictably outsized returns on capital have ended. There’s more on this in The Crisis of Capital.

6. Debt and stagnant income. Rising debt is supposed to be matched by rising income to service the debt, but the story of the 21st century is debt is soaring while earned income is stagnating for the bottom 95%. That asymmetry eventually matters, for example, when zombie corporations finally default and marginal household borrowers default. The losses can’t be socialized this time around; the stripmined masses have finally awakened to the skims and scams of central states and banks.

7. The much-desired de-dollarization of the global economy has yet to materialize. Personally, I believe a profusion of competing currencies in a transparent, open market is the ideal arrangement, but here’s the current arrangement: the USD and euro are dominant.

8. Global harvests of grain and other essential food commodities have been good. Our luck may run out in the years ahead.

9. Cultural Revolutions are becoming more extreme and divisive. I’ll have more to say on this soon.

10. The topics covered here in December are key issues in 2019: in case you missed these:

How Many of Your Local Taxes and Fees Are Rocketing Higher?

When Certainty Frays, Capital Gets Skittish

Why Everything That Needs to Be Fixed Remains Permanently Broken

“Yellow Vests” and the Downward Mobility of the Middle Class

Neofeudalism Isn’t a Flaw of the System–It’s the System Working Perfectly

France in a Nutshell: “The Government Stopped Listening to the People 20 Years Ago”

The Conflicting Forces of Modernism

Are We in a Recession Already?

The View from the Trenches of the Alternative Media

Truth Is What We Hide, Self-Serving Cover Stories Are What We Sell 

My new book Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic is discounted ($5.95 ebook, $10.95 print): Read the first section for free in PDF format. 

My new mystery The Adventures of the Consulting Philosopher: The Disappearance of Drake is a ridiculously affordable $1.29 (Kindle) or $8.95 (print); read the first chapters for free (PDF)

My book Money and Work Unchained is now $6.95 for the Kindle ebook and $15 for the print edition. Read the first section for free in PDF format.

Rebranding Retirement

A totally engrossing topic is on tap this morning:  What should old people do – once they get old and are comfortably well-off?

It may seem an absurdity to even consider it – especially if you are young and working one, two, or even three jobs and some side-hustles.  But, believe me, if you remember our three laws of life, you may actually get to the point where you’ll have a little side hustle (that’s fun) and be able to ponder the bigger questions like “What’s the absolute BEST way to retire?

The answer should be clear:  Retire with a purpose.  Fine.  But, how, exactly does one go about finding “purpose?”  Our topic this morning after some warm-me-ups and a few charts…

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The post Rebranding Retirement appeared first on UrbanSurvival.

Photos of the June 2nd 2012 Occupy Bilderberg Protest (12 Best photos)

Author: Brian D. Hill

Source: USWGO Alternative News

As all of you have been waiting for, photos of the Occupy Bilderberg protest on June 2nd 2012th at the site of the Bilderberg meeting, a criminal gathering by over 100-200 of the most powerful criminal corporate, banking, and political elites without the right of the press to cover what has been discussed at these meetings.

There were a lot of protesters and every hour the amount of protesters has increased as some got there at a later time. All at Occupy Bilderberg to protest the criminal banking and corporate elites that want to terminate most of the worlds population through the barrel of a gun.

The photos are organized by my top 12 best photos based on my own tastes and photo quality recognition skills while looking through my photos to determine what photos I should add to this short article. They will also be enhanced with contrast and leveling on my photo editing software to make sure these photos are professional and expose the criminals at the Bilderberg meeting. The Bilderberg were meeting at the Westfields Marriott Washington Dulles Hotel in Chantilly, VA near the Hyatt Place hotel where Alex Jones and his crew was staying at. I have met with Alex Jones and had my photo taken with him and then got portions of video of him interviewing Stewart Rhodes.

So anyways here is the photos. I will do the best I can to identify who is in each photo if needed.

Note: If you wish to post any of these photos on your website or share them anywhere including forums, Please give credit to photographer Brian D. Hill (Myself) and USWGO Alternative News (uswgo.com). These photos were all taken on June 2nd 2012.

All photos are small in this article so it can load quickly. Click on these smaller photos below to view the more large photos. In other words the large photos are directly linked in each photo below. So click the image to get to the bigger size picture.

The Fairfax Police were right on the opposite side of the Westfields Marriott Hotel in Chantilly, VA. Looks like they were watching the protesters like a hawk and looking for jay walkers to arrest, no offense to good cops out there, I know your doing your job even though the very people your protecting are felons and international war criminals.

Looks like well over seven officers as there were some on the other entrance plus the service entrance including the 2nd layer of police security. Barricades were added for the protesters of the Bilderberg Group meeting. Of course there were fences around the front of the entire complex then of course there were side woods which anybody can sneak through until cops put up police line tape from tree to tree across the side of the complex.

Uh Oh cops!!!! It’s the TRT the Tyranny Response Team – Better be on your best behavior police!!!

Are these guys Bilderbergers or are they security heads or are they hotel employees?

let’s leave that to our imagination :)

A sign a protester made which shows the Pentagram symbol which is considered a Satanic symbol, then there is the all seeing eye, and then a Nazi symbol and then down below it says it equals the Bilderberg Group on an upside down American flag. Pretty creative protest sign!

A lot of protesters have turned out for the protest at Occupy Bilderberg.

The Westfields Marriott with two cops standing to the right of the side where the second road comes into the complex. Nice flowers in HELL Bilderbergs!

A protester (You can tell because of his bullhorn) is walking with his wife/girlfriend/sister to the Bilderberg protest area.

There were reporters there and even a Ron Paul for President sign. Ron Paul is not a establishment puppet, but Mitt Romney and Barack Obama is.

You can tell a lot of people wanted to expose the Bilderberg Group. See how many people showed up!

Where is the Bilderberger if not in this car with dark tinted windows??? Maybe I need to ask Sherlock Holmes to investigate!

The Cops are just waiting around board that they are protecting such spoiled brat criminals.

Federal Jack

Ron Paul would best Obama in Iowa general election matchup

By Felicia Sonmez, WashingtonPost.com

A new Des Moines Register poll shows Rep. Ron Paul (R-Texas) would best President Obama in the Hawkeye State if the general election were held today.

In the Iowa Poll, which surveyed 611 likely Iowa voters over Feb. 12-15 and had a margin of error of 4 percentage points, Paul would take 49 percent to Obama’s 42 percent.

He is the only one of the GOP White House hopefuls who would defeat Obama in Iowa if the election were held today, according to the survey.

Former senator Rick Santorum (R-Pa.) would be in a dead heat with Obama, taking 48 percent to Obama’s 44 percent, as would former Massachusetts governor Mitt Romney (R), who would take 46 percent to 44 percent for Obama. Both candidates are within the margin of error in a potential matchup with Obama.

The poll shows Obama with a wide lead over former House speaker Newt Gingrich (R-Ga.). Obama would take 51 percent to Gingrich’s 37 percent in Iowa if the election were held today.

Iowa will be a key swing state in the November general election. Obama bested Sen. John McCain (R-Ariz.) by 10 points in the state four years ago, taking 54 percent to McCain’s 44 percent.

To read more, visit:  http://www.washingtonpost.com/blogs/election-2012/post/ron-paul-would-best-obama-in-iowa-general-election-matchup/2012/02/18/gIQABoeUMR_blog.html

RE Tea Party » 2012 Elections

Vermin Supreme: The Best Democrat Candidate In The 2012 Presidential Election

http://www.youtube.com/watch?v=lG8Vi6VJ2DQ

Federal Jack

We Are Change TV.US