Euro Breakup Contagion Risk Is Exploding

With existential elections looming, Sentix Euro Break-up Contagion Index – a market measure of the contagion risk from one or more countries leaving the euro area within the next 12 months period – has hit its post-2012 record recently…

As Sentix notes, the Eurocrisis is once again in the limelight. And this time the
drama consists of three main actors: Greece, Italy and France.

this tendency for the cohesion of the eurozone could become is
a look at the index to the spreading risk, which has almost climbed to
the 50% mark – an all-time high!

h/t Constantin Gurdgiev

France and Italy both seeing Euro-exit odds rising…

The Eurozone has now developed many more breaking points than just Greece. Although it has now been somewhat calmer about Italy, the euro exit probability remains almost unchanged at 13.9%. Added to this is the strong rise in the probability of exit from France. This is now 8.4% – compared to 5.7% in January! An all-time high.

via Read More Here..

America’s In A Drugged Stupor

Authored by Bill Bonner (Bonner & Partners) via,

Learning Machine

The Dow, the S&P 500, and the Nasdaq remain near record highs and are up about 10% since Election Day. Fed officials say they could raise interest rates “fairly soon.” Blah… blah… blah…


One of these days… sooner rather than later… as soon as the data permit…


The economy is a learning machine. So is a person. We’re not talking about the kind of faux “learning” you do in school. Much of that is negative – ideas, information, and skills that destroy or delay real learning. In fact, some people stay in school to avoid learning.

Learning can be painful, humbling, and hard. And only win-win deals teach you  anything useful. Economist Adam Smith described the process more than 250 years ago. Willing buyers and sellers discover what things are worth (what someone is willing to pay).

This information directs – like an “invisible hand” – investors, producers, and consumers. Result? More wealth (or, in other words, satisfaction). This learning metaphor is more useful than we thought: How do you learn? By trying. When do you try? When you have to.


Adam Smith’s famous tome…


Why does extreme poverty persist in Baltimore and other places? Because the feds pay people not to try – and not to learn. Why do rich kids often get nowhere in life? Because their parents give them money; they don’t have to figure things out for themselves. They spend; they don’t learn.

Why does the U.S. economy stagnate? Because fewer people are learning. The zombies don’t have to learn. The cronies learn the worst lesson of all: that crime pays.


Win-Lose Deals

Today, smart mommas want their babies to grow up to be Washington lawyers or Wall Street bankers or crony hacks. That’s where the stolen money is – and they know it. But that is not how an economy learns.

Those are win-lose deals forced onto people by regulations, legislation, and the fake-money system. Some people win; most people lose. Those who aren’t in on the larceny get stuck in lower-paying, lower-learning jobs.

They’re at the checkout counter at Sheetz gas stations in Virginia. Or clearing away trees from the power lines in Ohio. Or they have no work at all. Economist Nicholas Eberstadt at the American Enterprise Institute think tank:

Between 2000 and 2015, according to [government statistics office the Bureau of Economic Analysis], total paid hours of work in America increased by just 4% (as against a 35% increase for 1985-2000, the 15-year period immediately preceding this one). Over the 2000-2015 period, however, the adult civilian population rose by almost 18% – meaning that paid hours of work per adult civilian have plummeted by a shocking 12% thus far in our new American century.

What do you learn when they have no work to do? Not much. According to one study, unemployed adult Americans dedicate 2,000 hours to TV and the internet a year. You learn by satisfying demanding customers and impatient bosses; you learn nothing from watching TV or surfing the web.


Growth in hours of paid work may have slowed, but there’s evidently nothing wrong with hours of TV watched…  and look at this, they do actually learn something!


Drugged Stupor

But it could be worse. And it probably is. Our brother-in-law, a retired preacher, enlightened us.

“I couldn’t believe it. I’ve been telling everybody that we live way down here in the rural Virginia mountains and how nice everyone is. It’s just like The Andy Griffith Show. But then the police showed up and arrested everyone in the house down the road. They were running a drug business. They had more than $100,000 in cash. Imagine, here in Nelson County.”

According to the DEA, in 2015, more Americans died from drug overdoses than from traffic accidents or guns. Washington spends trillions of taxpayer dollars to stop terrorists. But that year, Americans were 3,096 times more likely to kill themselves by drug overdose or suicide than to die in a terrorist attack.


The modern breakfast that will keep you in a proper trance for most of the day – cube morphine, a handful of happy pills… best washed down with Bogg’s Tawny Cocaine Port, the well-known cure for drunks – to keep you from nodding off completely.  If you don’t work, you’ll have way too much time to think, but there are ways to ensure you’ll remain only semi-conscious. The colorful little helpers on the right are even paid for by Papa State (not to forget, the government promised to create new businesses, and apparently it is succeeding in this particular field, see below).


The president’s Council of Economic Advisers tells us that about half of all working-age Americans without jobs are on some form of drug – either prescription or illegal. Where do they get all these drugs? From the feds, of course. Eberstadt continues:

Of the entire un-working prime-age male Anglo population in 2013, nearly three-fifths (57%) were reportedly collecting disability benefits from one or more government disability program in 2013… As [Sam Quinones’ book] Dreamland explains:


[The Medicaid card] pays for medicine – whatever pills a doctor deems that the insured patient needs. Among those who receive Medicaid cards are people on state welfare or on a federal disability program known as SSI [Supplemental Security Income]. If you could get a prescription from a willing doctor, Medicaid health-insurance cards paid for that prescription every month. For a three-dollar Medicaid co-pay, therefore, addicts got pills priced at thousands of dollars, with the difference paid for by U.S. and state taxpayers. A user could turn around and sell those pills, obtained for that three-dollar co-pay, for as much as ten thousand dollars on the street.

How much can you learn when you’re in a drugged stupor? Probably not much.


Zombie Effect

Another place you can’t learn much is prison. The U.S. has about 5% of the world’s population. But according to the International Centre for Prison Studies, it has about 22% of the world’s prison population. America has more people behind bars than any other nation – about 2.3 million souls.


Worrisome statistics – US prisons are brimfull, both in absolute and relative terms – click to enlarge.


Shuffling around their cells, following orders… what do they learn? Fake money produces much the same prison-like zombie effect on the economy. It dulls the senses. It cushions the pain of failure. It lulls people into not trying.

Where’s the real learning done in an economy? In new businesses. Those are the ones with the new ideas, new models, and new products. Each one is an experiment. If successful, they grow and hire people.

But the rate of new business formation in America has collapsed. It is now only about half of what it was in 1978. A recent World Bank study puts the US in 51st place for the ease of starting a business. That’s behind the Ivory Coast, Afghanistan, Ukraine… even France. By comparison, Canada ranks No. 2.

But there’s more to business than just starting one. The World Bank study also shows that the U.S. is still near the top in at least one category – “Getting Credit.”

Yes, when it comes to making fake money available to people who can’t afford to pay it back, the U.S. is still among the best.


An interesting batch of crony-indicators: the number of new jobs created by new businesses and the distribution of existing employment between large and small business establishments – click to enlarge.


But wait – the fake money flows to the big boys, not the start-ups. They use it to keep out entrepreneurs. And their revolving-door contacts in the regulatory agencies also help prevent competition. Learning is stifled.

via Read More Here..

Crystal Quartz Could Reveal The Reason Why Our Magnetic Field Is So Old

Charged particles moving with the flow of molten rock rising away from a heated core created what we now refer to as Earth’s geomagnetic field. The core is thought to be about a billion or so years old, though some studies have found that the resulting magnetic field dates back as far as 4 billion years ago. Such opposing figures have only added to the mystery of the magnetic field’s actual age. But new evidence could finally provide the breakthrough needed to give us some answers.

Research by Kei Hirose from the Tokyo Institute of Technology in Japan suggests that the formation of tiny crystals of quartz far beneath our feet may be the answer to accurately modelling the buoyancy of our planet’s deep molten rock.

The New Core Paradox, or the mismatch between the age we think our planet’s core is, and the age of its magnetic field, occurs in part because of how heat from the inner core forces currents of gooey rock up toward the crust from the outer core.

Computer models created in 2012 suggest that heat is generated in the inner core’s iron at 150 watts per meter per kelvin. It happens too rapidly to have triggered convection currents in the surrounding molten rock. And so the pesky paradox lives on.

Though other solutions to the paradox have tried to offer other ways Earth’s core could have generated heat, Hirose chose to analyze the core’s chemistry beyond its iron.

“In the past, most research on iron alloys in the core has focused only on the iron and a single alloy,” says Hirose. “But in these experiments we decided to combine two different alloys containing silicon and oxygen, which we strongly believe exist in the core.”

(Credit: Javier Trueba/MSF)

(Credit: Javier Trueba/MSF)

To try to understand how these elements might form alloys and other compounds under these given conditions, Hirose and his team squeezed microscopic amounts of iron, silicon, and oxygen to core-like pressure by using precision-cut diamonds.

Next, they used layers to hit the samples in order to reach temperatures of up to 4,000 degrees Celsius, which caused some of the material to melt, and other parts to crystalize into quartz.

Such results suggest that the slow rise and fall of molten rock in a young Earth was helped along by quartz pulling silicon and oxygen from the mixture billions of years ago.

“This result proved important for understanding the energetics and evolution of the core,” notes team member John Hernlund.”We were excited because our calculations showed that crystallisation of silicon dioxide crystals from the core could provide an immense new energy source for powering the Earth’s magnetic field.”

Geophysicist David Stevenson from the California Institute of Technology in Pasadena presented a different idea, however, arguing that magnesium oxide would be more likely to precipitate out of the molten solution before silicon dioxide. Hirose and his team agreed magnesium oxide is more likely, but that the temperatures inside a new Earth would require much hotter temperatures for magnesium to reside in the core.

Whichever the case may be, the fact remains that the more we know about chemistry’s role in the formation of the geomagnetic field, the more we can understand when Earth created it.

Vía Collective Evolution

Gold Stumbles, Dollar Strengthens as Market Prices in March Rate Hike

Gold prices fell near 1-week lows Wednesday in London, dipping beneath $1240 per ounce as US traders joined the session after Donald Trump’s first speech to Congress about his fiscal plans was overshadowed by 5 senior Federal…

Vía Financial Sense

Q1 GDP Estimates Tumble: Goldman, Atlanta Fed Cut To 1.8%, JPM At 1.5%, Bank Of America Sees Only 1.3%

With the Fed telegraphing an imminent rate hike, one which together with the “tempered” Trump speech has once again unleashed the reflation trade, and sent the Dow Jones soaring above 21,000, it appears the Federal Reserve will be hiking in a quarter in which GDP comes in in the mid 1%-range.

The reason: while “soft data” – which is important to animal spirits if not actual economic output – continues to surge as shown most recently by today’s Manufacturing ISM survey, the “hard data”, that which actually matters to the economy, is still disappointing.

On Wednesday morning, this divergence was noticed by the Atlanta Fed, which after forecasting Q1 GDP as high as 3.4% one month ago, revised its forecast sharply lower and moments ago reported that its GDPNow model forecast for real GDP growth in the first quarter of 2017 is 1.8 percent on March 1, down from 2.5 percent on February 27. The forecast for first-quarter real personal consumption expenditures growth fell from 2.8 percent to 2.1 percent after this morning’s personal income and outlays release from the U.S. Bureau of Economic Analysis.

According to the “beancount” breakdown of details, this is what the Atlanta Fed sees as of this moment:

PCE contribution est. at 1.44%

  • Nonresidential equipment investment contribution est. at 0.50%
  • Nonresidential intellectual property products Investment contribution est. at 0.21%
  • Nonresidential structures investment contribution est. at 0.18%
  • Residential investment contribution est. at 0.54%
  • Government contribution est. at -0.10%
  • Net exports contribution est. at -0.47%
  • Change in inventory investment contribution est. at -0.52%

* * *

What crushed the Atlanta Fed’s recent exuberant optimism? Perhaps it was a similar cut to GDP forecasts unveiled earlier today by Goldman Sachs,  which now likewise expects Q1 GDP of 1.8%, down from 2.1% previously. The reason: disappointing data in both consumer spending and residential investment, to wit:

Personal income rose 0.4% (mom) in January, slightly above consensus expectations for a 0.3% rise. Nominal wage and salary incomes increased by 0.4% (mom), but real disposable personal income fell -0.2%. Consumer spending increased by 0.2% in nominal terms – below expectations – and fell 0.3% adjusted for inflation. The personal saving rate edged up to 5.5% from 5.4% previously. The core PCE price index (excluding food and energy) increased 0.30% month-over-month and rose to 1.74% year-over-year, rounding down to +1.7%. This result was very slightly below our expectations, reflecting a 3bp miss on the mom change and yesterday’s small downward revision to core PCE inflation for Q4. Headline PCE inflation firmed but also a touch less than expected, rising 0.43% mom and 1.89% yoy.


Construction spending edged down by 1.0% (mom) in January, against consensus expectations for an increase (+0.6%). January construction spending showed an increase in private residential investment (+0.5%) that was offset by softer public residential (-15.1%) and nonresidential (-4.7%) spending and flat private nonresidential building. Total public spending is now 9% lower than a year ago, driven by declines in public spending on residential construction (-16.3%) and infrastructure-related categories, including power (-28.8%), sewage and waste (-27.3%), transportation (-11.7%) and highways (-10.1%).

Goldman’s conclusion: “Following this morning’s data we have lowered our tracking estimate for Q1 GDP growth by three tenths to +1.8%, primarily due to weaker-than-expected real consumer spending for January.”

* * *

JPMorgan was not far behind, and the bank similarly cut its 1Q GDP forecast to 1.5% from 2.0%, tied to “weak” January real consumer spending, which declined 0.3% in the month, economist Michael Feroli wrote in in note.  He maintained his call for Fed’s next rate hike to come in May, with March meeting used to signal the move. “The market is clearly giving the Fed a free pass to hike two weeks from today. However, in doing so the Fed would be opening the door to possibly hiking as many as four times this year”; unlikely Yellen wants to go that route

* * *

And then there was Bank of America, which first cut its 1.8% GDP estimate coming into today to 1.4% following the poor consumer spending data, then took another 0.1% off the number after the plunge in construction spending.

Real consumption contracted 0.3% mom in January, missing consensus expectations of  -0.1% and our expectations of 0.1%. While retail sales were strong during the month, auto sales saw a large payback after reaching a cyclical high in December. Utilities consumption was also very weak amid above-average temperatures in the US. On balance, these data chopped 0.4pp from 1Q GDP tracking, bringing us down to 1.4%.

And then this:

Construction spending declined 1.0% mom in January, owing largely to a 5.0% plunge in public spending. Private spending was up 0.4% mom, as residential spending grew 0.5%. Meanwhile, private nonresidential spending was unchanged.  The disappointing January data nudged 1Q GDP tracking 0.1pp lower, leaving us at 1.3%. Meanwhile, the revisions did not move the needle for 4Q, which remains at 1.9%. Table 1 provides a breakout for the composition of growth, with changes to tracking highlighted.

Assuming the two banks (and their other peers who similarly have slashed their GDP forecasts), and the regional Fed are right, and Q1 GDP prints around 1.5%, this will be worst quarter since Q1-Q2 2016, when rate hike odds for the “data dependent” Fed were effectively non-existent, making one wonder just what data is the Fed looking at this time around?

via Read More Here..

Spanish Government Appoints a ‘Sex Czar’ to Reverse Country’s Declining Population

The Spanish government has created a new post in an attempt to boost pregnancy rates and halt the country’s declining population. The role of the so-called “sex czar” is to be taken up by Edelmira Barreria Diz, a demographics expert and senator in the Galician parliament. According to official statistics, Spain recorded a lower number of births than deaths last year, the first time this has happened since 1941.

Vía BlackListed News

Columbia profs blame student suicides on Trump

Professors at Columbia University want space to discuss their “distress” over Donald Trump’s election, saying they don’t know anyone who isn’t “chronically and deeply” upset by the result. In a letter to Columbia President Lee Bollinger, professors Robert Pollack and Letty Moss-Salentijn, the co-chairs of the Columbia Faculty Affairs Committee, say Trump’s election has cast a “malaise that sits like a fog over Columbia” that not even George Orwell’s classic 1984 can adequately address.

Vía BlackListed News

Spycraft: Leaked Documents Show German Intelligence Agency Spent Years Spying On Foreign And Domestic Journalists

The tools are there to be abused. Anyone who doubts this aspect of intrusive surveillance programs is either a supporter or a beneficiary. Oversight might be in place and various checks and balances instituted, but the scope and breadth of these programs ensures — at minimum — collection of communications and data government surveillance agencies have no business looking at. If someone’s given a tool that allows them to snoop on almost anyone with impunity, it will eventually be abused. Case in point: everywhere and everything related to state-sponsored surveillance.

Vía BlackListed News