Doomsday Prep

On a cool evening in early November, I rented a car in Wichita, Kansas, and drove north from the city through slanting sunlight, across the suburbs and out beyond the last shopping center, where the horizon settles into farmland. After a couple of hours, just before the town of Concordia, I headed west, down a dirt track flanked by corn and soybean fields, winding through darkness until my lights settled on a large steel gate. A guard, dressed in camouflage, held a semiautomatic rifle. He ushered me through, and, in the darkness, I could see the outline of a vast concrete dome, with a metal blast door partly ajar. I was greeted by Larry Hall, the C.E.O. of the Survival Condo Project, a fifteen-story luxury apartment complex built in an underground Atlas missile silo. The facility housed a nuclear warhead from 1961 to 1965, when it was decommissioned. At a site conceived for the Soviet nuclear threat, Hall has erected a defense against the fears of a new era.
http://www.newyorker.com/magazine/2017/01/30/doomsday-prep-for-the-super-rich

An interesting conspiracy theory

By accident or design, colleges are churning out a perpetual underclass of over-educated but under-qualified "victims" who are massively in debt and see no future in the capitalist system, which has utterly fucked them over from the get-go.   And since every revolution is lead not by the poor, but the middle-class, it seems they are churning out an army of revolutionaries for their cause.  In 10-20 years, we may see a permanent underclass of people willing to try anything, even Communism, to cure their perceived ills.
--http://livingstingy.blogspot.com/2017/03/psst-want-good-conspiracy-theory.html

Whatever you subsidize, you get more of

Peter Schiff and Stefan Molyneux talk about how the government has ruined the healthcare industry and education.  Health insurance is tied to employment due to wage caps during WWII.

NYSE Margin Debt hit another all-time high

February 2017

$528,160

 Source http://www.nyxdata.com/nysedata/asp/factbook/viewer_edition.asp?mode=table&key=3153&category=8

It is up $15 billion from January 2017.  It will keep going up forever.  Don't worry, it's different this time.

Everything will grind to a halt

See also: http://aftermath2022.blogspot.com/2017/02/after-march-15-everything-will-grind-to.html

Jump to 13:25 for this gem:
Mick Mulvaney, the new budget director, has clearly understood that when the Treasury runs out of cash and the debt ceiling has been used up and you can't borrow anymore, the President has the authority to allocate spending.  and so therefore ...  
ha ha ha oh my god, that's like a line item veto, but live ... yes ... oh ha ha my god ...
so the point that I am trying to make here is that we have in a typical month, there is 250 to 300 billion of revenue coming in, that will readily cover the debt service, that will readily cover social security and other critical payments, but when it comes to paying grants to state and local governments, and a whole range of other activities, that if you don't have the cash you put the bills in the drawer.  I think that is what will shock the system and scare the living bejesus out of Wall Street and the financial markets because then you won't have a sudden clarification and resolution of the problem.  It could go on for days and weeks.  In the past since no president has been advised to allocate spending, it comes to an inflection point, somebody blinks, they pass a resolution in the wee hours of the night, and the government goes on its merry way spending and borrowing against the debt ceiling.  This time this summer there's going to be day after day of uncertainty as to whose going to blink, what the deal is, who's getting paid, who isn't, which bills are building up in the drawer and which ones aren't.  This is going to be a malestrom, if I can use that word, like we have never seen before and the markets are not even remotely prepared for this.

BTW, the definition of malestrom is "a situation or state of confused movement or violent turmoil".

We all know how this party is going to end

James Smiith - Fast Track to Financial Freedom

This is a little dated - it opens with an appearance from Bill Coby - so just skip the first two minutes.

Some Men Just Like To See The World Burn

It's the end of the world as we know it ... on April 29!

Top Republican Warns: "Government Shut Down Is A Real Possibility, And Wall Street Is Unprepared"

The government may shut down for a few days at the end of April (because of the end of the continuing resolution which funds the government in lieu of a budget).  Or it may be much longer.  The Liberty Caucus (36 seats in the House) wants a balanced budget over 10 years, so they won't vote for an extension.  The Democrats won't work with the Donald out of spite.  And the moderate middle, led by Paul Ryan, has been disgraced and demoralized and won't stick their necks out.

The joke will really be on the Democrats.  They think shutting down the government will be the end of the world.  In reality, this will play into Trump's hands.  The government will still have tax revenue coming in, just not enough to fully fund everything, so if 15% of the budget is cut, it can go on indefinitely.  He can hold the government budget hostage until he gets the cuts he wants.

Stay tuned for the controlled demolition on April 29.  And even if this event is cancelled, there will still be the budget limit fight sometime this summer.

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Update:  Here is a better explanation of the Republican groupings:  http://thegreatrecession.info/blog/obamacare-repeal-failed-bigly/

There are 3 factions of Republicans:  1) the far right Freedom/Liberty caucus (actually 2 different groups that have memberships that overlap or align).  They want to abolish Obamacare and will shut down the government if that is what it takes to abolish it.  They have about 31 members.  The leader of the Freedom Caucus is Mark Meadows of North Carolina,   The leader of the Liberty Caucus is Justin Amash of Michigan.  They kicked John Boehner out of being speaker.

2)  the "mainline" Republican Study Committee with 172 members chaired by Mark Walker of North Carolina, but really led by Paul Ryan.  They were solidly in favor of the AHCA, Ryancare bill.

3) the "moderate" Tuesday Group with about 50 members. They aren't liberal, but they don't agree with the Freedom caucus' willingness to shut down the government.

So there are 435 representatives in the House, with 5 vacancies, and 193 Democrats, and 237 Republicans.  The numbers of the Republicans don't add up, maybe because of overlapping membership.  Anyways, 218 votes were needed to pass the AHCA, and the Republicans couldn't get both the Freedom Caucus and Tuesday Group to support it.

The same problem will occur with passing a budget.

James Smith

This is the most interesting speaker I have ever heard.

We have already passed the point of no return

The Doctrine of Odious Debt

“If a despotic regime incurs a debt, not for the needs and in the interests of the State, but to reinforce its tyranny and to put down any resistance on the part of the people, then this debt is deemed odious for the population of the entire State. It is not an obligation of the nation: it is the debt of a regime, a personal debt of the power that incurred it. Consequently, it falls when the power falls.”
--http://www.cadtm.org/Demystifying-Alexander-Nahum-Sack

Stock market will fall at least 50%

Flashback from 2000: Fed raises interest rates

Fed lifts key rates again
March 21, 2000: 3:10 p.m. ET
Fed funds rate, discount rate raised a quarter point each to slow growth 
NEW YORK (CNNfn) - The Federal Reserve Tuesday lifted short-term interest rates by another quarter point -- the fifth increase in less than eight months -- in an effort to slow the seemingly unstoppable U.S. economy and ensure prices for goods and services remain in check.
    It also put another warning shot over Wall Street's bow that it likely will raise rates again in the face of what it sees as a risk for an outbreak of inflation.

Source: http://money.cnn.com/2000/03/21/economy/fomc/

17 year business cycle

In a previous post, I theorized that there might be an 11 year cycle.  Now I am thinking about a 17 year cycle.  The Dow hit a high of 11,722 on 1/14/2000, and this cycle hit a high of 21,115 on 3/1/2017.   

Previous cycles had turning points in 1932 (the depths of the great depression), 1949, 1966, and 1983.  There wasn't a recession in 1966, but it reached a high of 981 on 1/5/1966.  The first time the Dow broke 1,100 was on 2/24/1983, so the stock market went sideways for 17 years from 1966 to 1983 before beginning a great boom from 1983 to 2000.

The 17 year cycle is about double Martin Armstrong's pi cycles of 8.6 years.

If the 17 year cycle is correct (and it probably isn't), then we can the Fed to raise rates 3 more times this business cycle, a recession starting in March 2018, and a stock market crash in September 2018.

=====================
Armstrong sees a cycle of 3,141 days, so two cycles have 6,282 days.  If you start with 1/14/2000 and add 6,282 days, you get to 3/26/17.  The actual high in 2017 was on 3/1/2017, 25 days early.  That's pretty close.

A recession began in March 2001 (call it March 1 for our purposes).  6,282 days from then is May 12, 2018, or really on May 1, 2018.

Other parallels between the year 2000 and the year 2017 is the feeling of something totally new.  In 2000, it was a new millenium.  It 2017, it was the election of Trump.

On May 16, 2000 the Fed raised interest rates to 6.5%.  They have never been that high since.  6,282 days from then is about July 27, 2017.  The next time the Fed meets is in June.  So I am predicting that they will raise rates at that meeting to 1.00% and that will be the last time they raise rates.

All's Fair at the Fair

Luxembourg is the next London

There were plenty of reasons for financial outfits of all kinds to settle in the City of London. But now that Brexit will likely throw a monkey wrench into unfettered access to the European Union for these firms, they need to head to the continent. And tax haven Luxembourg appears to be a big beneficiary in a post-Brexit world.
--http://wolfstreet.com/2017/03/13/brexit-financial-firms-move-from-london-to-luxembourg/

Is Trump planning on defaulting?

On March 15, the debt limit will be reimposed.  The Treasury only has $34 billion cash on hand.  The government will receive a lot of tax revenues in April and is slowing down paying the tax credits.  Still, it may be out of cash by the end of May.  (I previously speculated September 1).  The exact day doesn't really matter, but it will probably be sometime between June 1 and Sept 30.

Trump may be able to negotiate a deal by then. When Obama had the same type of crisis in 2011, 2013, and 2015, he and Jack Lew stared down the Republicans and insisted that the Treasury was unable to prioritize payments and if it missed a single accounts payable deadline it would be in default.  McConnell caved and this lead to a deal which will soon expire.

I think Trump is more devious than that.  I think he will order that payments be prioritized so that payments for interest, Social Security, and the military, and other programs he likes will be paid, and programs he doesn't like, such as the EPA, won't.  He will force a downsizing of the federal government whether anyone likes it or not.  All hell will break loose, and this will end up in the Supreme Court.

Ironically, this will cause the stock market to boom, for the simple reason that cash has to go somewhere, and the government issuing bonds soaks up some of the cash.

The outcome?  Who knows.  But it could include riots in the streets and the national guard.

Two questions: will this cause a recession?   I don't think so, at least not in the short run.  The government is usually seen as a counterweight to recessionary forces, but it can also damper the "animal spirits".  Unemployment is at a 30 or 40 year low, and the only signs of a recession are reduced government revenues and in retailers.

And is this good for the long-term fiscal stability of the country?  Ironically yes.  The biggest threat to the long-term stability is the debt, or more specifically the interest on the debt.  Anything that stops the debt from growing is good.  So bring it on.

I don't think very many people are aware of the constitutional crisis that will occur this summer.  Well David Stockman has been yelling, but not many people are listening.

So, when the blockbuster hit comes out this summer, grab some popcorn and watch the world explode.

=========================================
Read this: https://dailyreckoning.com/fiscal-horror-show-playing-soon-washington/

I believe it is likely that the debt ceiling will not be raised at least at first when it is hit. By hit I mean after the Treasury plays it's usual bag of tricks to delay hitting the ceiling, if they do. Rather I believe that the White House will instruct the Treasury to simply pay only some bills and thus not 'shut down' the government. After all tax receipts are enough to pay around 90% of all expenditures.

Thus the power of the purse will go to the White House. Don't like EPA, stop paying their salaries. Don't like some program that sends money to Chicago to do something or other, don't send it. Of course they will pay the interest and principal on Treasury paper so there will not be a default on the debt which after all what default means. The question of if not spending money that has been appropriated, by our Byzantine and irrational congressional appropriations process, is default can be left to the courts. Even then why would the administration or the GOP abide by a Supreme Court decision they don't like. Who is going to make them?

An additional thing is that with no Treasury borrowing to suck up investment money it will have to flow into stocks. Something playing our already with a reduced Treasury borrrowing schedule as it burns through the huge $350bn plus cash balance it had when Trump was sworn in, $250bn left to go. (which is one reason stocks are marching higher so relentlessly. Because the Treasury is not in the market as much as it would otherwise be) With zero Treasury issuance it will be almost impossible for stocks not to rise. It will just be like $80bn a month in QE. Well except that the 3% of the money flowing into the real people real jobs economy will stop flowing. Can you say recession?

According to Bannon recession is a small price to pay for a revolution.

I wish someone would start asking the White House, the GOP leadership and the Treasury about this because I firmly believe it is planned already. If so then what we have seen the first two months of the administration is just a warm up to a constitutional and political crisis second to none since the Civil War.

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More on the same topic:

The Treasury will likely be out of cash shortly after Memorial Day. ... Trump is going to find it quite challenging to find the votes to raise the debt ceiling.  After everything that has happened, very few Democrats are willing to help Trump with anything, and many Republicans are absolutely against raising the debt ceiling without major spending cut concessions.  So we shall see what happens.  If the debt ceiling is not raised, it will almost certainly mean that a major political crisis and a severe economic downturn are imminent.

--http://theeconomiccollapseblog.com/archives/21714-for-every-man-woman-and-child-in-the-world-this-global-debt-bomb-is-ready-to-explode

Recession Watch: Government Receipts

Source: http://davidstockmanscontracorner.com/chart-of-the-day-recessioin-warning-us-treasury-receipts-down-yy-for-3rd-straight-month/

Housing in Japan

Houses in Japan rapidly depreciate like consumer durable goods – cars, fridges, golf clubs, etc. After 15 years, a home typically loses all value and is demolished on average just 30 years after being built. And so, despite a shrinking population, house building remains steady. 87% of Japan’s home sales are new homes (compared with only 11-34% in Western countries). This puts the total number of new houses built in Japan on par with the US, despite having only a third of the population. This begs the question: why don’t the Japanese value their old homes?
--http://www.archdaily.com/450212/why-japan-is-crazy-about-housing/

Alan Beaulieu: 2019 Mild Recession, 2030 Great Depression

I've never heard of Alan Beaulieu before but this makes sense.

Alan Beaulieu: Still on Track for 2019 Recession, 2030 Depression

The economy seems to be on an 11-year business cycle.  The last recession started in Dec. 2007.

Radioactive wild boars are taking over the Fukushima exclusion zone

When the exclusion zone was set up - with the surrounding towns population evacuated to a safe distance - hundreds of the wild boars, which have been known to attack people when enraged, descended from surrounding hills and forests into the deserted streets.  Now they roam the empty streets and overgrown garden's of Japan's deserted seaside town of Namie, foraging for food However, the people of Namie are scheduled to return to the town at the end of the month, which means the bloody-toothed interlopers have to be cleared. "It is not really clear now which is the master of the town, people or wild boars," said Tamotsu Baba, mayor of the town.  --http://www.mirror.co.uk/news/world-news/first-photos-radioactive-wild-boars-9996080

See also The Biggest Threat to the Planet.