Category Archives: Economy

US Budget Deficit Hits $600 Billion In 6 Months, As .Gov Spending On Interest Explodes

The US is starting to admit they have a terminal spending problem.

According to the latest Monthly Treasury Statement, in March, the US collected $210.8BN in receipts – consisting of $88BN in individual income tax, $98BN in social security and payroll tax, $5BN in corporate tax and $20BN in other taxes and duties- a drop of 2.7% from the $216.6BN collected last March and a clear reversal from the recent increasing trend…

https://www.zerohedge.com/sites/default/files/inline-images/receipts.jpg?itok=wXopHgAK

… even as Federal spending surged, rising 7% from $392.8BN last March to $420BN last month, the second highest monthly government outlay on record

https://www.zerohedge.com/sites/default/files/inline-images/outlays.jpg?itok=k4bcxNEK

… where the money was spent on social security ($85BN), defense ($58BN), Medicare ($75BN), Interest on Debt ($33BN), and Other ($170BN).

https://www.zerohedge.com/sites/default/files/inline-images/govt%20spending%20outlays.jpg?itok=Ki61K6ob(click for larger image)

The resulting surge in spending led to a March budget deficit of $208.7 billion, far above the consensus estimate of $186BN, and over 18% higher than $176.2BN deficit recorded a year ago. This was the biggest March budget deficit in US history.

https://www.zerohedge.com/sites/default/files/inline-images/budget%20deficit%20march%202018.jpg?itok=dnX_MyMQ

The March deficit brought the cumulative 2018F budget deficit to over $600bn during the first six month of the fiscal year, or roughly $100 billion per month; as a reminder the deficit is expect to rise further amid the tax and spending measures, and rise above $1 trillion, although at the current run rate it is expected to hit $1.2 trillion. As we showed In a recent report, CBO has also significantly raised its deficit projection over the 2018-2028 period.

https://www.zerohedge.com/sites/default/files/inline-images/2018-04-09_11-13-25.jpg

But while out of control government spending is clearly a concern, an even bigger problem is what happens to not only the US debt, which recently surpassed $21 trillion, but to the interest on that debt, in a time of rising interest rates.

As the following chart shows, US government Interest Payments are already rising rapidly, and just hit an all time high in Q4 2017. That’s when Fed Funds was still in the low 1%’s. What happens when it reaches 3% as the Fed’s dot plot suggests it will?

https://www.zerohedge.com/sites/default/files/inline-images/interest%20payments.jpg?itok=eiIWpM6S

In a note released by Goldman after the blowout in the deficit was revealed, the bank once again revised its 2018 deficit forecast higher, and now expect the federal deficit to reach $825bn (4.1% of GDP) in FY2018 and to continue to rise, reaching $1050bn (5.0%) in FY2019, $1125bn (5.4%) in FY2020, and $1250bn (5.5%) in FY2021.

Revising Our Deficit and Debt Forecasts

https://www.zerohedge.com/sites/default/files/inline-images/exhibit_1.img%20%284%29.png?itok=IJpTHVaa

Goldman also notes that it expects that on its current financing schedule the Treasury still faces a financing gap of around $300bn in FY2019, rising to around $750bn by FY2021, and will thus need to raise auction sizes substantially over the next couple of years to accommodate higher deficits.

https://www.zerohedge.com/sites/default/files/inline-images/exhibit_3.img%20%283%29.png?itok=8PKwva3S

What does this mean for interest rates? The bank’s economic team explains:

The increase in Treasury issuance and the ongoing unwind of QE should put upward pressure on long-term interest rates. On issuance, the economic research literature suggests as a rule-of-thumb that a 1pp increase in the deficit/GDP ratio raises 10-year Treasury yields by 10-25bp. Multiplying the midpoint of this range by the roughly 1.5pp increase in the deficit due to the recent tax and spending bills implies a 25bp increase in the 10-year yield. On the Fed’s balance sheet reduction, our estimates suggest that about 40-45bp of upward pressure on the 10-year term premium remains.

And here a problem emerges, because while Goldman claims that “the deficit path is known to markets, but academic research suggests these effects might not be fully priced immediately… the balance sheet normalization plan is known too, but portfolio balance effect models imply that its impact should be gradual” the bank also admits that “the precise timing of these effects is uncertain.”

What this means is that it is quite likely that Treasurys fail to slide until well after they should only to plunge orders of magnitude more than they are expected to, in the process launching the biggest VaR shock in world history, because as a reminder, as of mid-2016, a 1% increase in rates would result in an estimated $2.1 trillion loss to government bond P&L.

https://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/06/04/bond%20market%20exposure_0.png

Meanwhile, as rates blow out, US debt is expected to keep rising, and somehow hit $30 trillion by 2028

https://www.zerohedge.com/sites/default/files/inline-images/debt%20budget%20trump%202019.jpg

… all without launching a debt crisis in the process.

Source: ZeroHedge

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Trade Wars Just Beginning… In A Fight Over An Indefinitely Shrinking Pie

From a growth perspective, it doesn’t matter if the world is 7.5 million or 7.5 billion persons…it only matters how many more there are from one year to the next.  Economic growth (or the ability to consume more…not produce more) is about the annual growth of the population among those with the income, savings, and access to credit (or governmental social pass-through programs).  That’s what this trade war is all about and why it’s just beginning.  First it was a fight for decelerating growth…but now it’s about a shrinking pool of consumers.

https://www.zerohedge.com/sites/default/files/inline-images/download%20%281%29_3.png?itok=DO2GUo09

Nowhere is this decline in potential consumers more acute than East Asia (China, Japan, N/S Korea, Taiwan, plus some minor others).  I have previously detailed China’s situation HERE but the chart below shows the broader East Asia total under 60 year old population (blue line) and annual change in red columns.  Peak growth in the under 60yr/old population (consumer base) took place way back in 1969, annually adding 22 million potential consumers.  As recently as 1988, an echo peak added 19 million annually but the deceleration of growth since ’88 has been inexorable.  Then in 2009, decelerating growth turned to decline and the decline will continue indefinitely.  What began as a gentle decline is about to turn into progressively larger tumult.  By 2030, the under 60yr/old population will be 9% smaller than present.  East Asia’s domestic consumer driven market is collapsing in real time and it’s reliance on exports greater than ever.

The chart below shows the total 0-65 year old global population (minus Africa and India…blue line) and the annual change in that population in the red columns.  Why excluding Africa/India?  Because they represent nearly all global population growth, consume less than 10% of the global exports, and haven’t the income, savings, or access to credit to consume relative to the rest of the world.  Growth (x-Africa/India) peaked in 1988, annually adding 52 million prime consumers.  However, the annual growth of that population has decelerated by 2/3rds to “just” 17 million in 2018.  Before 2030, the under 65 year old population will peak and begin shrinking.

https://www.zerohedge.com/sites/default/files/inline-images/download%20%282%29_3.png?itok=_EGpOR1Q

Simply put, West and East are fighting over a soon to be shrinking pie.  Of course, individual companies will perform better than others…but on a macro basis, global demand will be falling indefinitely aside from the debt and monetization schemes  federal governments and central bankers can conjure.

From an asset appreciation viewpoint, consider the decelerating (and soon to be declining consumer population) vs. accelerating asset appreciation.  The chart below shows the same annual under 65yr/old population growth (x-Africa/India) versus the fast rising Wilshire 5000 (all publicly traded US equities, yellow line) and global debt (red line).

https://www.zerohedge.com/sites/default/files/inline-images/download%20%283%29_3.png?itok=S9vdS79y

Next, consider the decelerating annual global population growth (as a percentage of total population x-Africa/India) versus the supposed infinite 7.5% appreciation of assets (chart shows the Wilshire 5000 continuously growing at 7.5%) versus fast decelerating consumer growth. Clearly, anticipated asset appreciation is all about rising debt and monetization…not organic growth.

https://www.zerohedge.com/sites/default/files/inline-images/download%20%284%29_3.png?itok=hxWOLOs9

Finally, a peek at the situation in the US. The chart below shows fast decelerating annual growth of the under 65 year old US population as a % of total population (black line), the ebullient Wilshire 5000 (shaded red area), actual and anticipated 7.5% appreciation of US stocks from 1970 through 2025 (dashed yellow line), and total disposable personal income representing the actual economy (blue line).

https://www.zerohedge.com/sites/default/files/inline-images/download%20%284%29_3.png?itok=hxWOLOs9

Infinite growth  models are running headlong into very finite limits.  Invest accordingly.

Source: ZeroHedge

Subprime Auto Implosion Surge as Lenders Start Dropping Like Flies

https://i1.wp.com/www.listoid.com/image/64/list_2_64_20101121_071351_218.jpg

We are in the midst of watching the subprime auto lending bubble burst in its entirety. Smaller subprime auto lenders are starting to implode, and we all know what comes next: the larger companies go bust, inciting real capitulation. 

In addition to our coverage out just days ago  talking about how the subprime bubble has burst and, since then has been crunched even further and additional reports today are showing that smaller subprime lenders are starting to simply implode after being faced with losses and defaults. In addition, Bloomberg reported this morning that there have been allegations of fraud and under reporting losses, tactics that are clearly reminiscent of ➹ throw a dart at any financial crisis/bubble burst over the last 30 years:

Growing numbers of small subprime auto lenders are closing or shutting down after loan losses and slim margins spur banks and private equity owners to cut off funding.

Summit Financial Corp., a Plantation, Florida-based subprime car finance company, filed for bankruptcy late last month after lenders including Bank of America Corp. said it had misreported losses from soured loans. And a creditor to Spring Tree Lending, an Atlanta-based subprime auto lender, filed to force the company into bankruptcy last week, after a separate group of investors accused the company of fraud. Private equity-backed Pelican Auto Finance, which specialized in “deep subprime” borrowers, finished winding down last month after seeing its profit margins shrink.

https://www.zerohedge.com/sites/default/files/inline-images/c1_0.png?itok=tpYYe0lb

Article continues:

The pain among smaller lenders has parallels with the subprime mortgage crisis last decade, when the demise of finance companies like Ownit Mortgage and Sebring Capital Partners were a harbinger that bigger losses for the financial system were coming. In both cases, rising interest rates helped trigger more loan losses.

“There’s been a lot of generosity and not a lot of discretion on the part of lenders and investors,” said Chris Gillock, a banker at Colonnade Advisors, which advises companies on subprime auto investments. “There’s going to be more capitulation.”

Representatives for Spring Tree didn’t respond to requests for comment. A lawyer for Summit said “restructuring in a Chapter 11 bankruptcy proceeding is the best strategy to ensure its long term success” and the company is working with its vendors and lenders to meet its obligations.

Astonishingly and ridiculously, the article goes on to talk about this implosion as if it was expected to happen and as if it’s what would have happened during the normal course of business if ridiculous debt and engineered interest rates weren’t a mainstay of current economic policy:

This time around, the financial system’s losses are expected to be much more manageable, because auto lending is a smaller business relative to mortgages, and Wall Street hasn’t packaged as many of the loans into complicated securities and derivatives. As of the end of September, there were about $280 billion of subprime auto loans outstanding, according to the Federal Reserve Bank of New York, compared with around $1.3 trillion in subprime mortgage debt at the start of 2007. There isn’t a standardized definition of subprime borrowers, though it generally encompasses borrowers with FICO credit scores below 600 to 640 on an 850 point scale.

Take, for example, this gem of cognitive dissonance:

“When you think about the effects of housing versus autos, they’re a lot different,” said Kevin Barker, a stock analyst covering specialty finance companies at Piper Jaffray & Co. Losses tend to be less severe for car loans because they are smaller than mortgages and borrowers pay them down faster, he said, and the collateral is easier to repossess. With home loans, in many states foreclosures require a lengthy court process.

As we all saw from the housing crisis, the smaller shops are usually the first ones to go. The law of large numbers plays to the advantage of bigger corporations and usually buys them more time. The bigger the company, the more the government and institutions care if it goes bust. Smaller companies come and go like it’s nothing, because they have no tangible effect on major financial institutions or the US economy. However, this generally only exacerbates the size of the ticking time bomb to come.

In early March of this year, we posted our “Signs of the Peak: 10 Charts Reveal an Auto Bubble on the Brink“. Our timing couldn’t have been better. In that article we pointed out that the key data which seems to suggest that the auto bubble may have run its course comes from the following charts which reveal that traditional banks and finance companies are starting to aggressively slash their share of new auto originations while OEM captives are being forced to pick up the slack in an effort to keep their ponzi schemes going just a little longer.

https://www.zerohedge.com/sites/default/files/inline-images/exp%205_0.jpg?itok=6WTTYXWh

https://www.zerohedge.com/sites/default/files/inline-images/jesus_0.png?itok=z7_xZNro

And while some can claim that this is just a natural result of healthy competition between lenders, what is likely causing sleepless nights at banks who have tens of billions in outstanding loans, is the coming tsunami of lease returns which will lead to a shock repricing for both car prices and existing LTVs once the millions in new cars come back to dealer lots…

https://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/05/cars%201.jpg(Where the worlds unsold cars go to die)

https://www.zerohedge.com/sites/default/files/inline-images/2016.12.09%20-%20Auto%20Lease%20Volume_0.JPG?itok=LKLfieyY

We have seen this bubble coming from a mile away. 

Also, just as we expected, between record prices (courtesy of what until recently was easy, cheap debt), record loan terms, and rising rates, shoppers with shaky credit and tight budgets have suddenly been squeezed out of the market. In fact in the first two months of this year, sales were flat among the highest-rated borrowers, while deliveries to those with subprime scores slumped 9 percent, according to J.D. Power.

https://www.zerohedge.com/sites/default/files/inline-images/subprime%20jd%20power_0.jpg?itok=vThqskJd

Confirming our observations, Bloomberg notes that while lenders took chances on consumers with lower FICO scores after the recession, partially on the notion that borrowers prioritize car payments ahead of other expenses, several financial companies started to tighten their standards more than a year ago. The result is a surge in the amount of captive financing shown in the chart above, which as we warned is the clearest indication yet of the popping car bubble.

We also predicted back in December of last year that certain PE firms would start to feel the pain of their subprime auto bets.

However, no one wants to make the point that subprime auto also followed in the footsteps of the financial crisis because it was a bubble that was engineered due to the Fed making it easy to take on cheap debt in order to fuel our nonsense “recovery”.

The continued focus on borrowing and spending, instead of saving and under consumption, will ensure not only that these bubbles continue to happen going forward, but they will get larger in size as time progresses.

Source: ZeroHedge

World’s Hottest Shopping City Becoming A Ghost Town

https://thenypost.files.wordpress.com/2018/04/033018vacant6rm.jpg?quality=90&strip=all&w=1236&h=820&crop=1

If you want to see the future of locally owned storefront retailing in America, walk nine blocks along Broadway from 57th to 48th Street and count the stores.

The total number comes to precisely one — a tiny shop to buy drones.

That’s right: On a nine-block stretch of what’s arguably the world’s most famous avenue, steps south of the bustling Time Warner Center and the planned new Nordstrom department store, lies a shopping wasteland.

Yes, there are bank branches, restaurants, fast-food outlets, theaters, Duane Reades, a vitamin shop and a few tourist-targeted “discount” stores. But mainly there are oodles of empty spaces covered with signs touting SUPERB CORNER RETAIL OPPORTUNITY.

The same crisis blights the rest of Manhattan. The people invested in storefront retailing — real-estate developers, landlords and retail companies themselves — tell us not to worry. It’s a “transitional” situation that will right itself over time. Authoritative-sounding surveys by real-estate and retail companies claim that Manhattan’s overall vacancy is only just 10 percent.

But they are all wrong. Bricks-and-mortar retail is shrinking so swiftly and on such a wide scale, it’s going to require big changes in how we plan our new buildings and our cities — although nobody wants to admit it.

Even the most profitable, can-do-no-wrong global chains are feeling the heat right now. H&M found itself unexpectedly sitting on $4.3 billion in unsold merchandise, The New York Times reported last month.

Why? Shopping from home or on a smartphone is a lot easier than shopping in a store. The ease of buying sweaters and light bulbs online trumps the thrill of people-watching in stores where slow-moving sales clerks take 15 minutes to ring up a $25 tie on balky computers.

Amazon makes it easier to return goods that don’t live up to expectations than it often is to buy things in stores. Clerks have no idea what’s in stock. Fashion goods displayed on shelves are chosen by too-young buyers with their minds more on the current Instagram trend than on customers’ needs.

I now buy many of my clothes from Charles Tyrwhitt online. Many more products offered there fit me than in their stores, where shirts seem cut for skeletons.

And yet, it’s scary to think that one of the city’s great pleasures, window-shopping — which also ensures vibrant, crime-deterring sidewalk life — will become a thing of the past except at certain locations.

At this rate, we face a future where streets will be mostly dark at sidewalk level for miles on end. Third Avenue in the East 60s, Broadway north of Lincoln Center, many blocks in the supposedly thriving Meatpacking District are halfway there already.

Amazon and other online-buying services now account for 9.1 percent of all national retail sales — soaring from just 5.1 percent at the end of 2011, according to the US Census Bureau. Does anyone doubt that it will rise further? Yet real-estate developers are adding to the surplus by putting millions of square feet of retail space into big new Manhattan mixed-use projects from the far West Side to Delancey Street. Just about every individual new office tower, apartment building and hotel opens with “prime” retail space in search of tenants. Super-luxury condo tower 432 Park Ave. has leased less than one-fifth of its store space after three years of trying.

Few retailers can afford to pay more than $250 per square foot annually in rent — yet landlords persist in asking $400 a square foot and up to $2,000 a square foot in prime zones like Fifth Avenue and Times Square.

Mayor de Blasio wants to fine landlords who keep spaces empty until they find tenants who’ll pay astronomical rents. But there’s no fair way to judge who’s actually guilty. Would he punish the owners of the small corner building at 1330 Third Ave. at East 76th Street, who slashed the “ask” from $420,000 a year in 2016 to $360,000 in April 2017 and still can’t find a tenant?

New York’s vacancy crisis is due to the same factors that wiped out malls and chain stores across the United States: the rise of online shopping, private-equity takeovers that saddled retailers with too much debt, and shoppers’ changing tastes.

Only a few grasp the true scope of the problem. Vornado Realty Trust titan Steven Roth said we can only cure the national plague through “the closing and evaporation” of up to 30 percent of the weakest space — which would take five years.

Most others see no evil. So what if JC Penney, Sears, Kmart, Macy’s, Toys ‘R’ Us, The Limited, American Apparel, BCBG, Payless Shoes, J Crew, Banana Republic and Gap have closed (or plan to close soon) thousands of stores across the US, including many in New York City?

We’re told that although sportswear and appliance stores don’t appeal much to millennials, their places are being taken up by fancy coffee places, “fast-casual” eateries serving the same green salads, and gyms and spas. “Experiential” retail — a term that can mean almost anything — will also help plug the gaps.

But munching spots and health clubs can’t come close to filling spaces that sportswear, houseware and bookstores are leaving behind.

We can still avoid becoming a retail ghost town like many of the country’s malls. But to increase demand for our dark storefronts, the city must roll back zoning rules in some neighborhoods that require even more retail in new buildings whether there’s demand for them or not. We should discourage the inclusion of acres of retail in giant new complexes that only add to the glut.

Otherwise, the whole town will look like Broadway in the 50s — a corridor of salad bars and dark windows.

Source: By Steve Cuozzo | New York Post

Global Trade War Could Not Have Come At A Worse Time

Despite all the propaganda that the world had reached utopian levels of ‘globally synchronous recovery’ growth last year, 2018 has seen that narrative collapse as China’s credit impulse dries up, The Fed continues on its path to ‘normalization’, and the world wakes up to Europe’s smoke and mirrors economic renaissance…

https://www.zerohedge.com/sites/default/files/inline-images/2018-04-06_2-09-59.jpg?itok=B5LidMt4(click for larger image)

And, as if that was not enough to spook even the most ardent bull, Bloomberg notes that rapidly accelerating trade ‘battles’ are focusing minds on that simmering threat to markets: the eventual easing of synchronized global growth.

https://www.zerohedge.com/sites/default/files/inline-images/2018-04-06_2-04-30.jpg?itok=x1PllmGaThe U.S. version – which includes economic, credit and corporate indicators – is close to its 2007 peak.

The trade war tensions have arrived at a risky time, with Morgan Stanley’s cycle gauge for the developed world nearing levels last seen before prior recessions.

Source: ZeroHedge

Some Perspective On The US Trade Deficit With China

In light of increasing trade threats between the US and China, some perspective on US trade deficits is warranted. Piecing together data from a variety of sources, the following chart shows the US balance of trade since 1790, shortly after the country’s founding.

https://i1.wp.com/thesoundingline.com/wp-content/uploads/2018/04/US-Balance-of-Trade-Since-1790-Updated.jpg

The US maintained very closely balanced trade for the first 200 years of the country’s history. From 1790 until 1974, the last year in which the US ran a trade surplus, the US exported roughly $102 billion more than it imported. Since 1974, the US has run a cumulative trade deficit exceeding $11.64 trillion. In other words, in the last 44 years the US trade deficit was 113 times larger than the trade surplus it amassed during all previous American history. The massive deterioration in the US balance of trade since the 1970s is both historically anomalous and highly unsustainable. That multiple Presidents and Congresses have come and gone without taking serious action to correct the imbalance is indefensible, particularly given the American people’s near universal recognition of the problem and its deleterious impacts.

The US is not starting a trade war, the US has been in a trade war since the 1970s and it has been losing badly.

As we discussed here, the bulk of America’s trading problem is not with its free trade partners. The US has entered into free trade agreements with 20 countries and has seen its balance of trade improve with 16 of them since adopting an agreement. The notable exceptions are Mexico and Israel. The following chart shows the indexed change in the balance of trade with the US’s free trade partners since the inception of an agreement.

https://i1.wp.com/thesoundingline.com/wp-content/uploads/2017/02/Change-in-US-Trade-Deficit-With-Free-Trade-Partners.jpg

The majority of the US trade deficit is a result of trade with China. The US trade deficit with China is roughly $375 billion, 66% of the total US deficit. If the US managed to eliminate its trade deficit with every country in the world expect China, it would still have the largest trade deficit in the world.

The rarely discussed truth of the matter is that, in addition to a host of non-tariff trade barriers and intellectual property theft, Chinese import tariffs are over twice as high as import tariffs in the US. That the Chinese feel the need to maintain such high import barriers, despite their huge trade surplus and far lower manufacturing costs, is remarkable. They are trying to protect their high tech industries from American competition while denying the US the same privilege.

https://i1.wp.com/thesoundingline.com/wp-content/uploads/2018/03/Weighted-Average-Import-Tariffs-Around-the-World-2016-web.jpg

About 19% of Chinese exports go to the US, making the US the largest export destination for Chinese goods. Conversely, only about 8% of US exports go to China, the third largest export destination for the US. Furthermore, trade represent a significantly larger piece of the Chinese economy than it does in the US. Chinese exports to the US are also generally products that can be manufactured in other lower labor cost economies such as India, Taiwan, or Mexico.

Given all of these factors, China’s overt unwillingness to take any action to remedy a clearly unsustainable situation is likely to encourage, not deter, further American tariffs. It will be to everyone’s detriment, but mostly theirs.

Source: The Sounding Line

Very Important Economic Ideological Confrontation: Neil Cavuto -vs- Larry Kudlow…

Neil Cavuto is the defender of multinational Wall Street interests.  Cavuto’s boss, Rupert Murdoch has a well known insider nickname: “Mr. Wall Street”… The Murdoch operations (Fox News and Wall Street Journal among them) are ideological advocates for multinational corporations and historic globalist trade practices; to the detriment of the U.S. middle-class. That’s right, they are. Cavuto and Murdoch are also aligned with U.S. Chamber of Commerce President, Tom Donohue, in all things related to Big Multinational Trade.

In this interview there is a very apropos example of the twisted disconnect evident in the multinational corporate media perspective.  Please focus on the part that begins around 04:55 and listen closely to Cavuto:

…”and we’re really seeing the effect on the folks who have to pay the bills for this sort of thing … we’re already seeing soybean prices coming down; we’re seeing pork related prices coming down … folks are taking it on the chin, what are you telling them?”… etc.

There it is.  Did you catch it?

In discussing futures Cavuto sounds the alarm for “Soybean prices coming down.”  “Pork prices coming down”; and “the folks “taking it on the chin.”

Now, think.  What Neil Cavuto is saying is that U.S. food futures prices are forecast to come down.  In that scenario who exactly is taking it on the chin?

Who is it that Neil Cavuto sees losing out in his position?  It’s not the family going to the grocery store… they will see lower prices… so who are these “folks” losing out?

There it is.

Right there.

It’s easy to miss the gas lighting because it is so commonplace. Cavuto doesn’t even see himself doing it.

This is the twisted and controlled market being discussed.

Neil Cavuto is not calling for ‘free markets’, he is advocating for ‘controlled markets’, and his anxiety is because the “folks” he references as “losers” are the Multinational Corporations and Big-AG who control the Pork and Soybean market. Cavuto’s ‘consumers’, those he is advocating for, are Archer Daniels Midland (ADM), Monsanto, Cargill, Unilever, Nestle’ and ConAgra.  Those are the names of Cavuto’s folks that he sees as “taking it on the chin.”   He is NOT, repeat NOT, talking about people who shop at supermarkets and grocery stores, ie. the middle-class. I cannot emphasize this enough… once you know how to spot this economic disconnect in the arguments by advocates for multinational corporations you can never go back to a time when you don’t see it. This is the most important economic lesson that most Americans simply do not comprehend.  We are in an abusive relationship, and most U.S. consumers don’t even know about it. If the U.S. were to exit NAFTA (North American Free Trade Agreement), the price you pay for most foodstuff at the grocery store would drop 10% in the first quarter and likely drop 20% or more by the end of the first year. Here’s why:

Approximately a decade ago the U.S. Dept of Agriculture stopped using U.S. consumer food prices within the reported CORE measures of inflation. The food sector joined the ranks of fuel and energy prices in no longer being measured to track core inflation and backdrop Fed monetary policy. Not coincidentally this was simultaneous to U.S. consumers seeing massive inflation in the same highly consumable sector. There are massive international corporate and financial interests who are inherently at risk from President Trump’s “America-First” economic and trade platform. Believe it or not, President Trump is up against an entire world economic establishment. When you understand how trade works in the modern era you will understand why the agents within the system are so adamantly opposed to U.S. President Trump. The biggest lie in modern economics, willingly spread and maintained by corporate media, is that a system of global markets still exists.

It doesn’t.

Every element of global economic trade is controlled and exploited by massive institutions, multinational banks and multinational corporations. Institutions like the World Trade Organization (WTO) and World Bank control trillions of dollars in economic activity. Underneath that economic activity there are people who hold the reigns of power over the outcomes. These individuals and groups are the stakeholders in direct opposition to principles of America-First national economics. The modern financial constructs of these entities have been established over the course of the past three decades. When you understand how they manipulate the economic system of individual nations you begin to understand understand why they are so fundamentally opposed to President Trump. In the Western World, separate from communist control perspectives (ie. China), “Global markets” are a modern myth; nothing more than a talking point meant to keep people satiated with sound bites they might find familiar. Global markets have been destroyed over the past three decades by multinational corporations who control the products formerly contained within global markets. The same is true for “Commodities Markets”. The multinational trade and economic system, run by corporations and multinational banks, now controls the product outputs of independent nations. The free market economic system has been usurped by entities who create what is best described as ‘controlled markets’. U.S. President Trump smartly understands what has taken place. Additionally he uses economic leverage as part of a broader national security policy; and to understand who opposes President Trump specifically because of the economic leverage he creates, it becomes important to understand the objectives of the global and financial elite who run and operate the institutions. The Big Club. Understanding how trillions of trade dollars influence geopolitical policy we begin to understand the three-decade global financial construct they seek to protect.

That is, global financial exploitation of national markets.

FOUR BASIC ELEMENTS:

♦Multinational corporations purchase controlling interests in various national outputs and industries of developed industrial western nations.

♦The Multinational Corporations making the purchases are underwritten by massive global financial institutions, multinational banks.

♦The Multinational Banks and the Multinational Corporations then utilize lobbying interests to manipulate the internal political policy of the targeted nation state(s).

♦With control over the targeted national industry or interest, the multinationals then leverage export of the national asset (exfiltration) through trade agreements structured to the benefit of lesser developed nation states – where they have previously established a proactive financial footprint. Against the backdrop of President Trump confronting China; and against the backdrop of NAFTA being renegotiated, likely to exit; and against the necessary need to support the key U.S. steel industry; revisiting the economic influences within the modern import/export dynamic will help conceptualize the issues at the heart of the matter. There are a myriad of interests within each trade sector that make specific explanation very challenging; however, here’s the basic outline. For three decades economic “globalism” has advanced, quickly. Everyone accepts this statement, yet few actually stop to ask who and what are behind this – and why? Influential people with vested financial interests in the process have sold a narrative that global manufacturing, global sourcing, and global production was the inherent way of the future. The same voices claimed the American economy was consigned to become a “service-driven economy.” What was always missed in these discussions is that advocates selling this global-economy message have a vested financial and ideological interest in convincing the information consumer it is all just a natural outcome of economic progress.

It’s not.

It’s not natural at all. It is a process that is entirely controlled, promoted and utilized by large conglomerates, lobbyists, purchased politicians and massive financial corporations. Again, I’ll try to retain the larger altitude perspective without falling into the traps of the esoteric weeds. I freely admit this is tough to explain and I may not be successful.

Bulletpoint #1: ♦ Multinational corporations purchase controlling interests in various national elements of developed industrial western nations. This is perhaps the most challenging to understand. In essence, thanks specifically to the way the World Trade Organization (WTO) was established in 1995, national companies expanded their influence into multiple nations, across a myriad of industries and economic sectors (energy, agriculture, raw earth minerals, etc.). This is the basic underpinning of national companies becoming multinational corporations. Think of these multinational corporations as global entities now powerful enough to reach into multiple nations -simultaneously- and purchase controlling interests in a single economic commodity. A historic reference point might be the original multinational enterprise, energy via oil production. (Exxon, Mobil, BP, etc.) However, in the modern global world, it’s not just oil; the resource and product procurement extends to virtually every possible commodity and industry. From the very visible (wheat/corn) to the obscure (small minerals, and even flowers). Bulletpoint #2 ♦ The Multinational Corporations making the purchases are underwritten by massive global financial institutions, multinational banks. During the past several decades national companies merged. The largest lemon producer company in Brazil, merges with the largest lemon company in Mexico, merges with the largest lemon company in Argentina, merges with the largest lemon company in the U.S., etc. etc. National companies, formerly of one nation, become “continental” companies with control over an entire continent of nations. …or it could be over several continents or even the entire world market of Lemon/Widget production. These are now multinational corporations. They hold interests in specific segments (this example lemons) across a broad variety of individual nations. National laws on Monopoly building are not the same in all nations. Most are not as structured as the U.S.A or other more developed nations (with more laws). During the acquisition phase, when encountering a highly developed nation with monopoly laws, the process of an umbrella corporation might be needed to purchase the targeted interests within a specific nation. The example of Monsanto applies here.

Bulletpoint #3 ♦The Multinational Banks and the Multinational Corporations then utilize lobbying interests to manipulate the internal political policy of the targeted nation state(s). With control of the majority of actual lemons the multinational corporation now holds a different set of financial values than a local farmer or national market. This is why commodities exchanges are essentially dead. In the aggregate the mercantile exchange is no longer a free or supply-based market; it is now a controlled market exploited by mega-sized multinational corporations. Instead of the traditional ‘supply/demand’ equation determining prices, the corporations look to see what nations can afford what prices. The supply of the controlled product is then distributed to the country according to their ability to afford the price. This is essentially the bastardized and politicized function of the World Trade Organization (WTO). This is also how the corporations controlling WTO policy maximize profits. Back to the lemons. A corporation might hold the rights to the majority of the lemon production in Brazil, Argentina and California/Florida. The price the U.S. consumer pays for the lemons is directed by the amount of inventory (distribution) the controlling corporation allows in the U.S. If the U.S. lemon harvest is abundant, the controlling interests will export the product to keep the U.S. consumer spending at peak or optimal price. A U.S. customer might pay $2 for a lemon, a Mexican customer might pay .50¢, and a Canadian $1.25. The bottom line issue is the national supply (in this example ‘harvest/yield’) is not driving the national price because the supply is now controlled by massive multinational corporations. The mistake people often make is calling this a “global commodity” process. In the modern era this “global commodity” phrase is particularly nonsense. A true global commodity is a process of individual nations harvesting/ creating a similar product and bringing that product to a global market. Individual nations each independently engaged in creating a similar product. Under modern globalism this process no longer takes place. It’s a complete fraud. Massive multinational corporations control the majority of production inside each nation and therefore control the global product market and price. It is a controlled system. EXAMPLE: Part of the lobbying in the food industry is to advocate for the expansion of U.S. taxpayer benefits to underwrite the costs of the domestic food products they control. By lobbying DC these multinational corporations [Archer Daniels Midland (ADM), Monsanto, Cargill, Unilever, Nestle’, ConAgra etc] get congress and policy-makers to expand the basis of who can use EBT and SNAP benefits (state reimbursement rates). Expanding the federal subsidy for food purchases is part of the corporate profit dynamic. With increased taxpayer subsidies, the food price controllers can charge more domestically and export more of the product internationally. Taxes, via subsidies, go into their profit margins. The corporations then use a portion of those enhanced profits in contributions to the politicians. It’s a circle of money. In highly developed nations this multinational corporate process requires the corporation to purchase the domestic political process (as above) with individual nations allowing the exploitation in varying degrees. As such, the corporate lobbyists pay hundreds of millions to politicians for changes in policies and regulations; one sector, one product, or one industry at a time. These are specialized lobbyists.

EXAMPLE: The Committee on Foreign Investment in the United States (CFIUS)

CFIUS is an inter-agency committee authorized to review transactions that could result in control of a U.S. business by a foreign person (“covered transactions”), in order to determine the effect of such transactions on the national security of the United States.

CFIUS operates pursuant to section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007 (FINSA) (section 721) and as implemented by Executive Order 11858, as amended, and regulations at 31 C.F.R. Part 800.

The CFIUS process has been the subject of significant reforms over the past several years. These include numerous improvements in internal CFIUS procedures, enactment of FINSA in July 2007, amendment of Executive Order 11858 in January 2008, revision of the CFIUS regulations in November 2008, and publication of guidance on CFIUS’s national security considerations in December 2008 (more)

Bulletpoint #4With control over the targeted national industry or interest, the multinationals then leverage export of the national asset (exfiltration) through trade agreements structured to the benefit of lesser developed nation states – where they have previously established a proactive financial footprint. The process of charging the U.S. consumer more for a product, that under normal national market conditions would cost less, is a process called exfiltration of wealth. This is the basic premise, the cornerstone, behind the catch-phrase ‘globalism’.

It is never discussed.

To control the market price some contracted product may even be secured and shipped with the intent to allow it to sit idle (or rot). It’s all about controlling the price and maximizing the profit equation. To gain the same $1 profit a widget multinational might have to sell 20 widgets in El-Salvador (.25¢ each), or two widgets in the U.S. ($2.50/each). Think of the process like the historic reference of OPEC (Oil Producing Economic Countries). Only in the modern era massive corporations are playing the role of OPEC and it’s not oil being controlled, thanks to the WTO it’s almost everything. Again, this is highlighted in the example of taxpayers subsidizing the food sector (EBT, SNAP etc.), the corporations can charge U.S. consumers more. Ex. more beef is exported, red meat prices remain high at the grocery store, but subsidized U.S. consumers can better afford the high prices. Of course, if you are not receiving food payment assistance (middle-class) you can’t eat the steaks because you can’t afford them. (Not accidentally, it’s the same scheme in the ObamaCare healthcare system). Agriculturally, multinational corporate Monsanto, ADM, ConAgra says: ‘all your harvests are belong to us‘. Contract with us, or you lose because we can control the market price of your end product. Downside is that once you sign that contract, you agree to terms that are entirely created by the financial interests of the larger corporation; not your farm. The multinational agriculture lobby is massive. We willingly feed the world as part of the system; but you as a grocery customer pay more per unit at the grocery store because domestic supply no longer determines domestic price. Within the agriculture community the (feed-the-world) production export factor also drives the need for labor. Labor is a cost. The multinational corps have a vested interest in low labor costs. Ergo, open border policies. (ie. willingly purchased republicans not supporting border wall etc.). Remember the example of China purchasing Smithfield foods?  In these examples the state-run economic operation of China operates like a corporation. [More Here] This corrupt economic manipulation/exploitation applies over multiple sectors, and even in the sub-sector of an industry like steel. China/India purchases the raw material, coking coal, then sells the finished good (rolled steel) back to the global market at a discount. Or it could be rubber, or concrete, or plastic, or frozen chicken parts etc. The ‘America First’ Trump-Trade Doctrine upsets the entire construct of this multinational export/control dynamic. Team Trump focus exclusively on bilateral trade deals, with specific trade agreements targeted toward individual nations (not national corporations). ‘America-First’ is also specific policy at a granular product level looking out for the national interests of the United States, U.S. workers, U.S. companies and U.S. consumers. Under President Trump’s Trade positions, balanced and fair trade with strong regulatory control over national assets, exfiltration of U.S. national wealth is essentially stopped. This puts many current multinational corporations, globalists who previously took a stake-hold in the U.S. economy with intention to export the wealth, in a position of holding contracted interest of an asset they can no longer exploit. Perhaps now we understand better how massive multi-billion multinational corporations and institutions are aligned against President Trump.

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Source: By Sundance | The Conservative Treehouse