SHIBOR came down substantially today, perhaps in part due to the Fed's decision to hold steady on policy.

Secession Is Going Mainstream: Silicon Valley Wants Out Of America

Once the elite begin to make a call for secession, the movements will pick up steam because the idea will become more popular.

Silicon Valley Roused by Secession Call
In a nutshell, Mr. Srinivasan, a computer scientist and co-founder of the genomics company Counsyl, told a group of young entrepreneurs that the United States had become “the Microsoft of nations”: outdated and obsolescent. When technology companies calcify, Mr. Srinivasan said, you don’t reform them. You exit and launch your own. Why not do so with America?

In practice, this vision calls for building actual communities that would be beyond the reach of the state that Silicon Valley’s libertarians despise. But in the near term, Mr. Srinivasan noted, there are piecemeal ways to opt out of the society — like spending unregulated digital currency, sleeping in unregulated hotels and manufacturing unregulated guns. What Mr. Srinivasan called “Silicon Valley’s ultimate exit,” he explained, “basically means build an opt-in society, ultimately outside the United States, run by technology.”
This is one path to secession: defacto secession by ignoring laws, or if not acting illegally, acting by the philosophy of wu wei (无为), non-action. The state requires support from the citizens to exist. Removing support and participation in its systems does not cause it to collapse, but if enough people leave it, that could be the eventual result.
Disruption makes enemies, Mr. Srinivasan said, but war is not an option: “They have aircraft carriers; we don’t.” His proposed solution is seceding from the society before the “backlash” against the Valley grows.

The tools are already here, he noted: 3-D printing makes it “impossible to ban physical objects,” from guns to drones. The borderless digital currency Bitcoin defies economic regulation. The Quantified Self movement helps people self-measure and opt out of the health care system. He urged his audience to invent opt-out tools of their own, including one “allowing people, the middle class, to make tax shelters.”

Mr. Srinivasan has influential support: Some of the biggest names in the Valley have variously proposed building a Mars colony, an unregulated zone of experimentation on Earth or floating libertarian islands at sea.
The difference between Silicon Valley and farmers in northern California is that Silicon Valley is cool. Secession is going to jump from the thing that wacko hippies in Vermont or crazy gun owners in Colorado want, to something seriously discussed.

The Incredible Shrinking Euro: IMF COFER Shows Diversification Happening At Expense of the Euro

While the U.S. dollar has stabilized as a percentage of central bank reserves the past couple of years, the euro has borne the brunt of diversification. The 2013 numbers are as of Q2 and preliminary. Canadian and Australian dollars are now broken out. Adding them back into Other would put the total over 6%, up strongly from the 4% of the past couple of years.

This chart shows the change over time.

Overnight and 1-Week SHIBOR Above 5%


Got Guns?

You might need them if you live in an area with heavy welfare dependency.

During the 2003-07 expansion, the SNAP case load, -- in a break with historic trends -- rose 24 percent, the Center for Retirement Research at Boston College reported. CRC economists Matt Rutledge and April Yanyuan Wu said one reason is a change in the longstanding correlation between poverty and the unemployment rate.

Poverty used to fall in tandem with the jobless rate, reducing the need for food stamps but the researchers found poverty did not decline as the economy grew in the mid-2000s -- and in the recovery following the Great Recession, the number of people receiving food stamps kept rising.

The assumption has always been a stronger labor market would reduce the need for food stamps, the economists said, but the new trend suggests rising employment might no longer be enough.
The big question for economists is whether this is a pause or a major shift. There was a similar pause during the Great Depression, when farm productivity gains left many people in transition. The Internet and global trade are taking their toll today, as well as shifting demographics. Whether the problem is short-term or long-term may be a smaller issue if the money runs out first.

Food Bank CEO Suggests Welfare Cuts May Spark Riots
Margarette Purvis, the president and CEO of the Food Bank for New York City, told Salon.com that the expiration of stimulus funds, which will see the Supplemental Nutrition Assistance Program reduced by $5 billion dollars, will have an “immediate impact” and represent a recipe for civil unrest.

“If you look across the world, riots always begin typically the same way: when people cannot afford to eat food,” said Purvis, adding that families face the “daunting” prospect of losing a whole week’s worth of food every month.
The U.S. will eventually cut funding for everything because the math doesn't add up. If the number of people on welfare rises and rises, it's a recipe for catastrophe.

Tea Party Exposes Political Fault Line

I don't know if the Tea Party will be the third party people are waiting for, but the Tea Party is making the right enemies.

Big business declares war on tea party
But business leaders argue that the scorched-earth tactics used by tea party Republicans during the 16-day shutdown and debate over raising the federal government’s borrowing limit marked the fourth time since the GOP took control of the House in 2011 that tea party adherents precipitated a governmental crisis that zapped consumer and business confidence, raised uncertainty and exerted a major drag on economic growth.

Besides encouraging more business-friendly candidates in primary contests, business groups are rallying behind establishment Republicans such as Senate Minority Leader Mitch McConnell, the Kentucky Republican who is being targeted by tea party activists for brokering a deal to temporarily raise the debt ceiling and reopen the government, while launching a negotiation with Democrats over budget cuts and proposed tax and entitlement reforms.

Business executives agree with many tea party goals such as cutting the deficit and reforming entitlement spending, but they argue that conservative lawmakers have erred in their tactics and wounded the economy by driving the government with increasing frequency into states of crisis and dysfunction — this time for the ultimately unsuccessful cause of trying to force President Obama to cancel his health care law.
They lie. What they want is a smooth economy and anything that deviates from a smooth economy is bad news. The reality is that the Tea Party is the only entity in Washington that is doing anything about spending and entitlement reform. If they really agreed with the Tea Party, they'd infuse it with cash and try to help it win more, not less, with better leaders.

This is an inevitable result though. Big business and big government are joined at the hip. The failure of the Republicans in 2008 and 2012 was their unwillingness to challenge Wall Street. The Tea Party is increasingly anti-big business, anti-Wall Street and against the Federal Reserve. These are positions popular with independents and voters on the left.

The one missing piece of the puzzle is foreign policy. If the Tea Party becomes anti-war, they have a winning formula. If not, they are at least blazing a trail and picking up disaffected voters from the right that will form the core of a new third party.

Chinese Doctors Protest, Liquor Profits Cut in Half

China doctors protest after murder by patient
Chinese hospital staff protested on Monday after a patient killed one doctor and wounded two more, local media said, in the latest violence to hit the country's overburdened medical sector.

Dozens of doctors and nurses wearing white coats and blue surgical masks crowded outside their workplace in Wenling, in the eastern province of Zhejiang, photos posted on the major web portal Tencent showed.

Chinese Austerity Measures Hit Wine and Spirits Sales
Recently, baijiu sales have plummeted. In 2011, the average bottle of Moutai cost more than $323, and aged Moutais from the 1980s sold for $5,000 per bottle. In early 2012, the prices began dropping and now hover at around $164. Admittedly, it's been boom and bust. Just seven years ago, the same average bottle of Moutai was sold for $33 before prices shot skyward.

I haven't seen any English news with details, but Wuliangye, a competitor with Moutai, saw it's profits plunge in the third quarter. Profit was basically cut in half from a year ago. 五粮液三季报净利润大降 白酒板块难言拐点到来

I covered the liquor bubble previously, including: Chinese Maotai bubble bursts! and Maotai bubble continues to burst, but Maotai stock hits a new high. Maotai and Wuliangye are now well off their highs. That second post was written as Maotai was making its all-time high. Since then these stocks are down more than 40 and 50%, respectively.


Pension Heaven? No, Pension Reality

A mistake people make when reading this story is that they think these pensioners have lost 84 cents on the dollar. This is incorrect. What is happening is they are receiving 16 cents of every promised dollar in benefits. Since those benefits were impossible to pay, and also unfunded, the actual loss is far lower.

Detroit Pensioners Face Miserable 16 Cent On The Dollar Recovery

Here's an article from earlier in the year: How Underfunded Are Detroit's Pension Plans?
The actuaries hired by the city’s emergency manager say that the pensions are underfunded by 40 percent to 50 percent.

...Officials working for Mr. Orr said their estimates of a 7% rate of return on the funds' investments is more realistic than the 8% used by the funds, which they said was too high because it didn't account for demographic changes of pensionholders and the funds' investment mix.

... The actuary calculates funding status for three scenarios: 7 percent (what the city requested); 7.5 percent (to show sensitivity or results to changes in investment returns) and 6.3 percent (what the actuarial consultant thinks is the most likely actual market return.) By contrast, the unions are projecting an average market return of 8.4 percent before expenses.
By those estimates, it's likely Detroit was at best 50 percent funded. Suddenly, 16 cents on the dollar turns out to be 32 cents on actual monies. But wait, there's more.

Here’s the really interesting question, however: Why is the pension fund arguing about this? Heading into the bankruptcy, a pension fund would normally try to inflate the underfunding estimates as high as possible, not minimize them. That’s because the unfunded pension liability is treated as an unsecured debt; it has to assemble with other unsecured creditors to collect whatever’s left over after the secured creditors have been paid. The bigger the claim, the larger the amount you’re likely to collect.

Chapter 9 bankruptcy is a little different, of course. Still, it doesn’t seem possible that transforming a $3.5 billion claim into a claim for less than $700 million could be in their interest. So why are they fighting this estimate so hard?
One possibility is that they’re trying to keep from triggering a Michigan law that lets Governor Rick Snyder fire and replace the board of a public pension whose funding status goes below 80 percent. Snyder could then, in theory, replace the board with one that is a better negotiating partner. But I’m not sure how convincing I find this, because we’re well beyond the negotiating stage at this point. Why would the pension funds fear Snyder more than the bankruptcy judge?
The key point to understand here is that pensioners are getting 100 cents of every dollar they put into the system. What they are not getting are their promised benefits that are impossible to pay. They are getting 16 cents on every dollar of the $3.5 billion in pension under funding.

From the Reuters article linked in the ZeroHedge piece above: Detroit pension cuts 'function of mathematics' -investment banker
The city has said about half of its liabilities stem from retirement benefits, including $5.7 billion for healthcare and other obligations, and $3.5 billion involving pensions.
Detroit has $18.5 billion in debt and $9.2 billion of it is healthcare and pension liabilities. Detroit is like almost every other municipality that has declared bankruptcy: it is the pensions and healthcare benefits negotiated by unions and politicians. They made these crony deals together, an exchange of money for power and votes. Voters are to blame as well; most politicians that have tried to cut spending on education, for example, were targeting wages, pensions and benefits of teachers. Ever time a politician tried to cut spending that flowed to the unions, they were demonized in the media and voters bought the story. Everything was going good until reality hit: these huge benefits were never funded.

No money has been stolen. Promises by crooked politicians to crooked unions will not be kept; they are being tossed out by bankruptcy judges. The precedent is now clear: impossible to fulfill pensions and benefits promises will be scrapped.

And by the way, Detroit unions looted their own pensions. Orr proposes freeze for Detroit pension funds
In another move Wednesday, Orr ordered 21 pension officials — including City Council President Saunteel Jenkins — to turn over records relating to more than $1.9 billion in excess earnings paid to city retirees and employees.

Orr wants documents and records relating to the pension fund’s practice of issuing bonus checks to retirees and a savings plan for current employees. The excess earnings totaled $1.92 billion since the mid-1980s.

Any government retiree or worker near retirement needs to find out how much their pension is funded ASAP.

And everyone else take note. The promises of Social Security and Medicare have even less legal standing that these pensions. When the money runs out, benefits will disappear. In the end, the low tide reveals all lies.

Financial Journalism in 2013

China's Big Reform Train Keep Rolling

Despite being bearish on China due to the credit bubble and short-term factors, long-term one must be extremely bullish.

This weekend came a big reform that could lead to a huge increase in business formation.

China relaxes company registration requirements
According to the statement, requirements for the minimum registered capital for limited liability companies, one-person limited liability companies, as well as joint-stock companies with limited liability, will be scrapped.

Requirements on the site registered for business operation will also be relaxed, the statement said.

To improve transparency and strengthen business credit, the current annual inspections on registered companies will be replaced by annual reports open to public inquiry, while companies that commit aberrant behaviors will also be made public.

A system of subscribed capital will also be promoted in an effort to lower the cost of founding a company, said the statement.

China's State Council think tank sets out roadmap for reform
The proposals span eight areas: finance, taxation, land, state assets, social welfare, innovation, foreign investment and clean governance, according to a copy of the 10,000-word report published over the weekend by China News Service. It recommends sensitive changes like breaking up state monopolies and speeding land reforms.

The source of the recommendations was as interesting as the details. Among its authors were the think tank's chief, Li Wei, who served as secretary to former premier Zhu Rongji, and Liu He, a top economic adviser to Xi.

Although the road map would be subject to behind-the-scenes horse-trading during the plenum, the document was clearly aimed at restricting the government's role in economic matters and allowing more freedom in the market. It sets a timetable for action extending to 2020.
From everything I have seen, the trend towards reform is real, but there are those who are not as optimistic.
Guan Qingyou, assistant dean at the Minsheng Securities Research Institute, cautioned that the road map was only one of several research reports submitted to the top leadership ahead of the party plenum.


ADXY Still Climbing

Until this chart breaks south again, it will be relatively smooth sailing for emerging markets.

New Protectionism Vector: Software

The NSA spying scandal could cost the United States billions in exports from one of its top export industries: technology. This isn't a new topic, but IBM's third quarter earnings confirm that it is a serious issue. I'm looking for an economic slowdown by early 2014 and if that happens, many countries and companies will look to cut what is politically unpopular: American tech imports.

NSA Revelations Kill IBM Hardware Sales in China
But the fiasco was tucked away under the lesser debacle of IBM’s overall revenues, which fell 4.1% from prior year, the sixth straight quarter of declines in a row. Software revenue inched up 1%, service revenue skidded 3%. At the hardware unit, Systems and Technology, revenue plunged 17%. Within that, sales of UNIX and Linux Power System servers plummeted a dizzying 38%. Governmental and corporate IT departments had just about stopped buying these machines.

IBM quickly pointed out that there were some pockets of growth in its lineup: business analytics sales rose 8%, Smarter Planet 20%, and Cloud, that new Nirvana for tech, jumped 70%. But in the overall scheme of things, they didn’t amount to enough to make a big difference.

All regions were crummy. Revenues in Europe/Middle East/Africa ticked up 1%. In the Americas, they ticked down 1% – “The improvement came equally from the US and Canada and once again, we had strong performance in Latin America,” is how CFO Mark Loughridge spun the situation during the earnings call because it was less bad than last quarter.

But there was nothing to spin in Asia-Pacific, where revenues plunged 15%. Revenues in IBM’s “growth markets” dropped 9%. They include the BRIC countries – Brazil, Russia, India, and China – where revenues sagged 15%. In China, which accounts for 5% of IBM’s total revenues, sales dropped 22%, with hardware sales, nearly half of IBM’s business there, falling off a cliff: down 40%.

IBM's earnings: The worst thing about IBM's bad earnings report? China
Loughridge went on to say that the China hardware implosion accounted for a whopping 1.2 points of the 1.6-point constant-currency revenue decline across IBM -- roughly $300 million. IBM stock tanked on the news, falling 6 percent after hours to $175.45.

Vox Day has some first hand anecdotes out of Europe: Anti-Americanism in Europe
When I explained I was originally from America, the man made a face, held his hand up to his ear like a telephone, and said, "USA? Why are you listening to my mobile phone? Why are you listening to my phone calls?" He was joking, of course, as he promptly laughed, slapped me on the shoulder, and provided directions to the field, but it really startled me to discover that in a tiny village in the middle of nowhere, the immediate reaction to an American would be to bring up the NSA.

And the more elite Europeans aren't blind to the opportunities presented by the scandal either. I spoke to several high-level investment executives over the last few weeks, and to a man, they see the scandal as being a reason for Europe to make a serious effort to break away from the technology chains of Google, Microsoft, Oracle, Twitter, Facebook, and other American companies that have dominated the world. The larger the corporation, the more determined they are to keep the US out of their emails and servers.
The great thing about the spying scandal is it allows a non-economic justification for protectionism. One point I pound over and over with regards to making socionomic forecasts is to look for the established trends, the emerging trends, the paths of least resistance. Throwing up trade barriers across the board will get a nation kicked out of the WTO and make them persona non grata at events like the G20. In contrast, claims of national security, environmental protection or health standards are excellent justifications to restrict U.S. software or Chinese food imports. A global scandal that has many nations in agreement against a single bad actor? Even better. I wouldn't short U.S. technology exporters yet, but consider this: technology companies have the largest portion of foreign revenues of any major sector in the U.S. They are the most exposed to this type of retaliation and the NSA scandal has now put them in the crosshairs. For less risk, the better approach for now is to buy native technology producers who will take market share from American companies.

NSA spying disclosures could cost companies billions
Just as the Shenzhen, China-based Huawei lost business after the report urged U.S. companies not to use its equipment, the NSA disclosures may reduce U.S. technology sales overseas by as much as $180 billion, or 25 percent of information technology services, by 2016, according to Forrester Research Inc., a research group in Cambridge, Massachusetts.

“The National Security Agency will kill the U.S. technology industry singlehandedly,” Rob Enderle, a technology analyst in San Jose, California, said in an interview. “These companies may be just dealing with the difficulty in meeting our numbers through the end of the decade.”

Internet companies, network equipment manufacturers and encryption tool makers receive significant shares of their revenue from overseas companies and governments.

Cisco Systems Inc., the world’s biggest networking equipment maker, received 42 percent of its $46.1 billion in fiscal 2012 revenue from outside the U.S., according to data compiled by Bloomberg. Symantec Corp., the biggest maker of computer-security software based in Mountain View, California, reported 46 percent of its fiscal 2013 revenue of $6.9 billion from markets other than the U.S., Canada and Latin America.

Intel Corp., the world’s largest semiconductor maker, reported 84 percent of its $53.3 billion in fiscal 2012 revenue came from outside the U.S., according to data compiled by Bloomberg.
These are serious numbers. Even a small loss in sales could make it very hard for technology companies to grow their earnings (leaving aside all other economic forecasts for a moment). Technology companies are the largest sector of the S&P 500 Index. If these losses are front-loaded, this scandal could be the catalyst that ends the bull market it stocks.

Also consider the secondary effects of foreign nations banning U.S. tech imports, especially European nations: Americans will likely respond by wanting to punish Europe. This could develop in unforseen ways, such as the U.S. deciding to reduce military expenditures in Europe. That would mean more support for candidates such as Rand Paul, who seek to curtail U.S. military adventurism.

NSA Spying Scandal Could Cost U.S. Cloud Computing Firms $35 Billion
Much of the cloud industry currently resides in the U.S., with major players including Google (GOOG), Amazon (AMZN) and Microsoft (MSFT). But the report notes that other countries are racing to seize a share of what's projected to be a $207 billion industry by 2016. And a scandal that calls into question the privacy of data stored with American companies could provide these foreign competitors with an opening.

To that point, the report quotes Neelie Kroes, the European Commissioner of Digital Affairs, who last month observed that "If European cloud customers cannot trust the United States government, then maybe they won't trust U.S.cloud providers either."

...The report estimates that the ongoing controversy could cost American companies anywhere from 10 percent to 20 percent of the foreign market, which adds up to somewhere between $21.5 billion and $35 billion in lost market share over the next three years. And those numbers aren't pulled out of thin air -- the organization notes that when the Cloud Security Alliance polled its members in June and July, 10 percent of foreign members said they had canceled a project with a U.S. based cloud service. And 36 percent of U.S. residents polled said that they were having more trouble doing business outside the country following the PRISM revelations.
The main point reiterated: stocks are priced based on forward earnings estimates. Even if firms continue to grow, missing expectations will lead to earnings forecast revisions that will bring share prices down.


Chinese Economy To Slow in 2014

Here's a look at the Canton Trade Fair and what it could mean for the economy next year.

Export Fair in China Loses Steam
For the first time in recent record-keeping, the number of companies with exhibits has declined in both the spring and autumn sessions of the 56-year-old Canton Fair compared with a year earlier. Even during the global financial crisis in 2009, the number of exhibitors dropped in the spring but rebounded in the autumn.
One major factor is the rising renminbi, which hit 6.08 per U.S. dollar this week.
The slow but steady rise of China’s renminbi against the dollar, at about 3 percent a year, is another concern among Chinese exporters. Mr. Li said his costs for plastic and other raw materials were also rising 5 to 10 percent a year, while a shortage of blue-collar labor was driving up workers’ wages 15 percent a year.
There's only so much inflation the stagnant Western economies can take, and the result is they are looking for little to now price increases. Firms that can cut costs continue selling, others exit. The big story though, is the slowdown in emerging markets:
A bigger export problem for China and its neighbors these days is that demand is now drying up in emerging markets. Economic growth in these markets, increasingly important for China in particular as the United States and European economies have slowed, has weakened in recent months as investors shifted money to industrialized countries in anticipation of higher interest rates.

China’s exports to the member countries of the Association of Southeast Asian Nations rose 9.8 percent last month compared with a year earlier, an anemic pace versus the 30-plus percent growth rates in previous months.
Bulls will tell you that slowdown is taper related, the knock-on effect of currency depreciation in Turkey, India and Indonesia. Bears believe it is the business cycle.

Here's a graph showing the change in visitors and the change in export growth.
What does the Canton Fair tell about Chinese economy?

I'm sticking to my short positions on industrial metals and copper miners.

Trouble For Israel?

Was ISRAEL behind the hacking of millions of French phones and NOT the U.S.? Extraordinary twist in spying saga revealed
Israel and not America was behind the hacking of millions of French phones, it was claimed today.

In the latest extraordinary twist in the global eavesdropping scandal, Israeli agents are said to have intercepted more than 70 million calls and text messages a month.

Israel is also the most aggressive spy against the U.S., and a lot of the NSA's spying technology is provided by Israeli firms who make use of this access.
Why would Israelis spy in and on the U.S.? A general accounting office investigation referred to Israel as country A and said, "According to a U.S. intelligence agency, the government of country A conducts the most aggressive espionage operations against the U.S. of any U.S. ally."

A defense intelligence report said Israel has a voracious appetite for information and said, "the Israelis are motivated by strong survival instincts which dictate every possible facet of their political and economical policies. It aggressively collects military and industrial technology and the U.S. is a high priority target."

The document concludes: "Israel possesses the resources and technical capability to achieve its collection objectives."

Here are two Israeli articles about the NSA spying scandal from earlier this year.

In U.S. snooping affair, Israeli firms at risk
Controversy over government surveillance that erupted last week over the NSA's PRISM surveillance program may lead to tougher standards for telecommunications gear like that developed, manufactured in Israel.

What was the Israeli involvement in collecting U.S. communications intel for NSA?
Were Israeli companies Verint and Narus the ones that collected information from the U.S. communications network for the National Security Agency?

The question arises amid controversy over revelations that the NSA has been collecting the phone records of hundreds of millions of Americans every day, creating a database through which it can learn whether terror suspects have been in contact with people in the United States. It also was disclosed this week that the NSA has been gathering all Internet usage - audio, video, photographs, emails and searches - from nine major U.S. Internet providers, including Microsoft and Google, in hopes of detecting suspicious behavior that begins overseas.

According to an article in the American technology magazine "Wired" from April 2012, two Israeli companies – which the magazine describes as having close connections to the Israeli security community – conduct bugging and wiretapping for the NSA.

Verint, which took over its parent company Comverse Technology earlier this year, is responsible for tapping the communication lines of the American telephone giant Verizon, according to a past Verizon employee sited by James Bamford in Wired. Neither Verint nor Verizon commented on the matter.

Natus, which was acquired in 2010 by the American company Boeing, supplied the software and hardware used at AT&T wiretapping rooms, according to whistleblower Mark Klein, who revealed the information in 2004. Klein, a past technician at AT&T who filed a suit against the company for spying on its customers, revealed a "secret room" in the company's San Fransisco office, where the NSA collected data on American citizens' telephone calls and Internet surfing.


A New Internet for a New Banking System

This article focuses on NSA spying, but with a secure network of communication outside of U.S. control, BRIC nations can also launch a competitor banking system (H/T: JSMineset). The U.S. government currently controls global banking, which is why it is able to shut off money flows in and out of countries like Iran. This is why Iran ends up needing to deals in gold, or find ways around U.S. control of the SWIFT system. Even though SWIFT is ostensibly international...
On 26 February 2012 the Danish newspaper Berlingske reported that US authorities evidently have sufficient control over SWIFT to seize money being transferred between two EU countries (Denmark and Germany), since they have seized around US$26,000 which were being transferred from a Danish businessman to a German bank. The money was a payment for a batch of Cuban cigars previously imported to Germany by a German supplier. As justification for the seizure, the U.S. Treasury has stated that the Danish businessman had violated the United States embargo against Cuba

Powerful Nations and Companies Fight Back Against NSA Spying

The "de-Americanized world" is coming, and it is as much a matter of social mood, as it is a matter of U.S. overreach and financial folly, as it is America's competitors and enemies seeking a leg up.

Social Mood and the Internet

Latin America, China, India and Russia, now Western Europe are moving away from an open Internet and towards an internal network model. For those who disbelieve in socionomics, they will blame the NSA spying scandal, but this is about much more because everyone spies on everyone. Certainly, Western governments, who benefit from U.S. intelligence and military protection, would not be taking actual steps to create this type of network during a period of positive social mood.

Germany wants a German Internet as spying scandal rankles
As a diplomatic row rages between the United States and Europe over spying accusations, state-backed Deutsche Telekom wants German communications companies to cooperate to shield local internet traffic from foreign intelligence services.
This is the first step. Later, when it the goal is hard to achieve and social mood declines, they will go the route of China. Instead of having an open Internet, the will build an internal network.

If even the Internet can become closed, how can anyone have optimism for the EU and other international cooperative efforts?

SHIBOR Jumps Again, Chinese Stocks Sink

The Western markets are shrugging off the Asian selling for now, but if this trend continues, there is a sell-off coming in the near future.

Today, two week SHIBOR jumped 1% again (a 2% gain in two days, or better than 50% from the sub 4% rate two days prior), and 1 month SHIBOR also jumped 1%, to 6.4%. See yesterday's post for some background.

Two Week SHIBOR Up 1% Since Yesterday


Fractal Nature of Empires?

You may have heard of Strauss–Howe generational theory. They believe that every four generations marks a cycle and then repeats. The "fourth turning," usually marks a crisis: the American Revolution, the Civil War, and WWII, and today.

The Chinese have a saying "wealth does not pass the third generation." This is essentially the same argument, except focused on family fortunes.

Today, I came across this: The Fate of Empires
The empires Glubb studied had a lifespan of about ten human generations, or two hundred and fifty years, despite changing factors such as technology.
What's interesting about the 10 generations is that it almost lines up as the four generation model scaled up.

Two Week SHIBOR Up 1% Since Yesterday

Chinese interest rates are becoming news again.

Here is some background.

From July: China OKs plan to liberalise rates on insurance products
China sets many restrictions on interest rates on insurance products, including a 2.5 percent upper limit on pre-determined rates for life insurance products.

August: China insurance price war looms as rate cap goes
Analysts expect policyholders to be more keen to withdraw from existing insurance policies and seek higher returns from newly issued policies, pressing insurers to cut prices and diversify products in an effort to keep existing clients.

Li said the withdrawal rate would increase significantly in the first few years after the interest rate cap was removed.

Ping An Securities estimates that prices of insurance polices will be cut by 30 per cent when the predetermined rate is set at 3.5 per cent, while the value of new business, a measure of the present value of future business, will decline by 60 to 70 per cent.

Today: Market rates insurance firms battlePredetermined interest rate of 3.5% exceeded 4% of straight (险企激战费率市场化)
October 15, Ping An Life Insurance launched the company's first market-based rates for new "flat Anfu", a product that directly across the predetermined interest rate of 3.5%, is set to 4%, higher than the same kind on the market today products.
So what is the drop off in present value at 4%?

These are just the insurance companies.

From September: China unveils new steps to free up interest rates
The central bank will expand market-oriented benchmark rates from the money market to credit markets and organize big banks to offer lending rates to their high-quality clients to set the benchmark borrowing costs for the industry.

In July, the PBOC scrapped the floor on lending rates but banks still price their loans based on the benchmark rates when they make loans. The one-year official rate stands at 6 percent.

The decision to remove the floor on bank lending rates was seen as a largely symbolic prelude to eventually removing caps on deposit rates, a much more difficult task that will take time.

The issuance of certificates of deposit on the interbank market and expansion of market-based pricing of debt products, will "create conditions for steady and orderly liberalization of deposit rates", Hu said.

The central bank, under the helm of reform-minded Zhou Xiaochuan, has been trying to promote the role of the Shanghai interbank offered rate (SHIBOR) as the benchmark for short-term borrowing costs, now that money-market rate are largely determined by market supply and demand.
Note the headline. SHIBOR can be volatile.

Last month I wrote: Chinese Cash Crunch Could Return in September; Why Not Spend ¥8 million to Avoid a ¥10 million Fine?

The cash crunch didn't materialize, but rates are moving higher now and the same concerns are surfacing.

Also from September, this ZeroHedge article: China: No Leverage, No Growth
That is also the reason why in early summer, China tried to conduct a mini-taper of its own to streamline its monetary pipeline which had been so filled with bad and non-performing credit, that the PBOC effectively pulled the switch on new liquidity for over a month.

What happened almost immediately after, when rates on ultra short term funding soared to 20%+, nearly destroyed the domestic banking system and resulted in a major slowdown in the Chinese economy. "Luckily" for China, its close encounter with the taper was brief, if quite painful, and following a period of shock, the Chinese central bank had no choice but to resume injecting banks with their daily dose of monetary morphine all over again.
The spurt in growth in August and September was a result of fiscal policies in July aimed at papering over this mini crisis. Now that is over. Exports fell in September and the stimulus has faded.

Also, the renminbi continues to move higher.

Fake invoicing of exports and other arbitrage tricks sent the renminbi higher in April and May and was a contributing factor to the central bank's move to tighten monetary policy. Now the renminbi is ticking higher again after export sank in September, are firms on the verge up to their old tricks? In any event, higher interest rates and a stronger renminbi are a double dose of poison for exporters and marginal producers in the Chinese economy.

Investors should keep a close eye on China in the coming weeks. It may all amount to nothing, but if there's another cash crunch, global assets are priced for a drop.


Decline and Fall of the USA

Whatever one thinks of Saudi Arabia, the Kingdom has been at least a nominal ally of the United States for decades. Their opposition to the atheist Soviet Union made them a natural ally of the U.S., and the relationship grew closer after the collapse of the Soviet Union. The American public's support for the Kingdom was strained after 9/11, but U.S. and Saudi foreign policy in the Middle East were aligned.

Most importantly is the petrodollar: the Saudis agree to export oil and accept dollars in return, instead of gold. Were the Saudis to make any move on this front, all financial hell could break loose.

For sure, President Obama's foreign "policy" is mostly to blame. His support of the Arab Spring backfired, leaving America hated by everyone in Egypt, Libya on the verge of civil war, his ambassador in Libya murdered, a total loss of face over Syria, and now the Saudis. Although the Saudis say this is about Syria, it's really the straw that broke the camel's back. All that said, this was inevitable in the long-run as the U.S. financial condition deteriorated. Unable to maintain the empire, the U.S. will pull back, and with negative social mood, there is a further push to reduce foreign commitments.

President Obama had a choice. He could do as he did, and risk losing the Saudis, or he could attack Syria and send his already low approval ratings into the 20s. Given Congressional threats over a Syrian attack, Obama would then have very likely faced impeachment charges, or at least a very serious discussion of it, damaging his ability to govern.

President Obama's lack of leadership and amateur administration pushed the accelerator, but this is where things were headed. The loss of allies such as the Saudis will give the U.S. cover (both at home and abroad) when it reduces its military commitments.

Saudi Arabia severs diplomatic ties with US over response to conflict in Syria


Signs of the Social Mood in Mid October 2013

Here are some headlines all coming across today.

EU to be destroyed? Watch out for the rise of a European Tea Party

California to be destroyed? ‘Sea Serpents’ Or Harbingers? Oarfish Washed Up Year Before Japan Quake
Fishermen in Japan reported a sharp uptick in oarfish sightings in March 2010 following the massive magnitude-8.8 earthquake in Chile that same month, which marked almost exactly one year before the country was devastated by its own magnitude-8.9 quake in northeast Japan.

...According to traditional Japanese lore, oarfish rise to the water’s surface and beach themselves to warn of an impending earthquake, a notion that some scientists have speculated could be supported by the bottom-dwelling fish being more sensitive to seismic shifts.

...Scientists, however, say there is no data to support an actual link between the two phenomena.
I'd bet on the Japanese tradition (and the Ring of Fire is increasingly active), but still, the article jumps to one of the largest disasters in decades.

Wind turbines causing illnesses? 'Wind Turbine Syndrome' Blamed for Mysterious Symptoms in Cape Cod Town
Sue Hobart, a bridal florist from Massachusetts, couldn't understand why she suddenly developed headaches, ringing in her ears, insomnia and dizziness to the point of falling "flat on my face" in the driveway.

"I thought I was just getting older and tired," said the 57-year-old from Falmouth.

Months earlier, in the summer of 2010, three wind turbines had been erected in her town, one of which runs around the clock, 1,600 feet from her home.

World to be destroyed? 'Terminator' on hold? Debate to stop killer robots takes global stage
At a UN General Assembly First Committee on Disarmament and International Security side event Monday, mission delegates from Egypt, France, and Switzerland voiced an interest in regulating "killer robots" — completely autonomous weapon systems — in warfare. They are some of the first international voices backing ideas that the Human Rights Watch and Campaign to Stop Killer Robots have been championing for about a year.

But before deliberations about regulating killer robots can take place, experts say they want more transparency from governments already using semi-autonomous systems, like the Phalanx naval weapon system, that to a degree can fire on their own, without a human "pulling the trigger."

"We are not luddites, we are not trying to stop the advance of robotics," Jody Williams, 1997 Nobel Peace Prize laureate, and one of the panelists at Monday's UN event, said. But, "I don't want to see robots operating on their own, armed with lethal weapons."

The Campaign to Stop Killer Robots launched in April this year, and calls for a ban on weapon systems that can make target and kill decisions without a human "in the loop."
As social mood declines, science and technology will increasingly be used for war and terrorism and seen as tools of destruction.

Right-wing in Europe Reaching Critical Mass; Euro Bulls Should Read Polls, Not Charts

Notice the tone of the article, that somehow the right-wing is going to screw up the EU. This is because the EU has become a left-wing institution. However, there is a strong idea of a united Europe among the European people, and it wouldn't surprise to see the EU become right-wing. It could enforce a continent-wide restriction on immigration, for example.

Secessionists movements in Catalonia, Scotland and elsewhere are pro-EU in that they make more sense within the EU, the same way it would make sense for part of a U.S. state to become a new state within the U.S. If the EU falls apart due to nationalism, local secessionist movements will die out.

Watch out for the rise of a European Tea Party
In the coming year, however, the big danger to the European single currency is that the political consensus that underpins the euro could come unstuck. A weak economy, weariness with austerity, anger about immigration and resentment of a remote-seeming EU are fueling the ascent of anti-establishment and nationalist political parties across the continent.

These rising political forces are gaining ground in big EU countries such as France, the Netherlands, Britain and Italy – and also in smaller nations such as Greece, Hungary, Finland and Austria. Given that the EU requires unanimity for many big decisions, even a small state that goes rogue could cause real trouble.
I have seen the euro bulls becoming more bullish now that the debt crisis has been quiet for a couple of years and the euro is back in the mid 30s. This was always a political issue though, and next year is when the idea of an EU breakup for political reasons may finally become a mainstream topic. The above article is just the beginning; if you thought the Tea Party was hated, wait until you get a load of the hate that will be directed at UKIP, FN, and other anti-EU parties. They can do far more damage to the status quo in Europe, far beyond what the Tea Party would do even in its wildest dreams. Should the euro begin selling off, bond yields will rise and the crisis will be back. Right-wing parties are pro-cyclical in this regard: they are elected as anger at the EU rises. Their victories may lead to a weaker euro and more debt crises, which will increase anger at the EU and elect more right-wing politicians. If and when the EU falls apart, the egg will be all over the faces of the left. It will not be a great a loss as the fall of communism, but the left will be seriously damaged. Extremely bitter fights are coming in the next year.


Social Mood in Europe

Specifically, Czech Republic.

A Czech artist known for his anti-communist stance has floated a huge statue of a hand making an obscene gesture on Prague's main river, days before parliamentary elections that could give the communists a taste of power almost a quarter-century after they were ousted.

The Communists are being welcomed into the government so the ruling party can maintain power.

A new bank in America?

This story is from April, about the first new bank in over two years.

De Novo Banks Need a Niche
Eighteen investors—many of them Amish—are planting the seeds for a new community bank outside Lancaster, Pa.

If the investors can convince regulators that the new institution will thrive, Bank of Bird-in-Hand would become the first de novo in the United States in more than two years.

Bird-in-Hand bank ready to sell stock
The proposed Bank of Bird-in-Hand is moving ever closer to opening this fall.

The start-up institution has received conditional approval from the state Department of Banking and Securities, the bank's leaders announced last week.

This week, Bank of Bird-in-Hand expects to start offering common stock, seeking to raise $16 million to $25 million in capital.


GOP Civil War Gets Corporate

Republican Civil War Erupts: Business Groups v. Tea Party
We are going to get engaged,” said Scott Reed, senior political strategist for the U.S. Chamber of Commerce. “The need is now more than ever to elect people who understand the free market and not silliness.” The chamber spent $35.7 million on federal elections in 2012, according to the Center for Responsive Politics, a Washington-based group that tracks campaign spending.
The Tea Party is about to be hit hard. The national media hates them, the Washington establishment hates them, and now the GOP insiders are fed up and will try to destroy them, once and for all.
Meanwhile, two Washington-based groups that finance Tea Party-backed candidates said yesterday they’re supporting efforts to defeat Mississippi Senator Thad Cochran, who voted this week for the measure ending the 16-day shutdown and avoiding a government debt default. Cochran, a Republican seeking a seventh term next year, faces a challenge in his party’s primary from Chris McDaniel, a state senator.

Cochran is at least the seventh Republican senator to face a primary in the 2014 midterms.
The targets of the Tea Party tend to be entrenched insiders who have spent a lifetime in Washington. The Tea Party is accused of extremism, but in reality they aren't as extreme in their political views as they are in terms of practice. The main targets of Tea Party primary efforts are the politicians most seen as cogs in the machine.

To put it succinctly, America is in search of a reform movement. It might be a third party, or it might be an internal movement. But as of today, the GOP is at least 6 years ahead of the Democrats in terms of throwing out the dead wood. Change can come suddenly, so having the advantage here isn't as important, but it does tilt the odds greatly in their favor.

It's too soon to tell if they're finished as a force in politics, but since there's another potential showdown in February and this one cost the GOP, it makes sense for Obama to push for another fight. He will win either way: if the Tea Party fights, they will lose in November. If they don't fight, their supporters will abandon them and they will lose in November.

America wants higher deficits, and it will get them.


Will it be inflation after all? Is the Tea Party finished?

I have been in the deflationist camp, but the one path I saw to inflation was via out of control government spending. If they can run the deficit back up over $1 trillion or even above $2 trillion (which is what is needed to kill deflation) then it is another story. The main issue in all of this is whether the Tea Party is finished or not, but the deal is definitely a total loss for them. Ironically, not winning here probably will help them in the election because they would have been blamed for any negative outcomes of spending restraint.

Deflation isn't dead, but it requires at least a roadblock in Washington. It is clear from the rhetoric and proposed spending that President Obama and the Democrats are in the camp that believes low interest rates show the market is not concerned about debt levels.

Based on the technicals, gold can still go lower, perhaps as far as $900, though the next stop is somewhere in the $1100 range. Still, buying some periodically is the best approach. If the deficit starts moving higher and the Tea Party is really spent as a political force (something that may be unresolved until the 2014 elections) then it may be the last chance to load up on gold, gold mining shares, and/or move assets out of the United States. At the very least, it will move the date of the final crisis up on the calendar.


One Path to Secession

Most people assume secession is a political act, but one doesn't have to officially leave a legal jurisdiction to secede. One can simply ignore all authority and if the cost to the state of enforcing the law is too great, de facto independence is achieved. For example, someone living deep in the mountains can ignore the law because the state will not even make an effort to locate them, let alone investigate whether they have broken any laws.

Another case is when violence is used against state or federal agents.

Pot farms in California: Too dangerous to intervene?
With parts of Northern California's scenic hillsides illegally gouged by bulldozers for marijuana grows, frustrated local officials asked the state for help to protect streams and rivers from harmful sediment and the chemicals used on the pot plants.

They hoped to charge growers under federal and state clean water regulations with tougher penalties than the infractions local officials could impose. But they were rebuffed.

It's too dangerous, the state agency in charge of protecting the region's water said in a letter to county supervisors.

"We simply cannot, in good conscience, put staff in harm's way," wrote Central Valley Regional Water Quality Control Board Executive Director Paula Creedon.

.......Butte County Supervisor Chairman Bill Connelly — frustrated that even photos of illegally scraped and terraced hillsides in sensitive watersheds didn't convince the water quality board to act — accused the board of not applying the law equally.

"My concern is that legitimate business people get harassed (by the agency), but illegal people will not be harassed because they get a pass," he said. "They go after the timber industry and farmers."
Parts of California are already out of the state and federal government's control. And if Butte County sounds familiar, they are one of the Northern Cali counties looking to secede from California.

Can the federal government call upon the military to restore order? Maybe not.

U.S. soldiers accepting cash, drugs for Mexican drug cartel contract hits
Mexican drug cartels are recruiting American soldiers to act as clandestine hit men in the United States, paying them thousands of dollars to assassinate federal informants and organized crime rivals, law enforcement experts tell the Daily News.
The United States is losing control over the Southwest.


Russian Government Responds to Anti-Immigration Riots

Migrants arrested in Moscow raids
Police in Russia have arrested more than 1,200 people in a raid targeting migrants after major riots in Moscow.

The "preventative raid" targeted workers at a vegetable warehouse, which was attacked by demonstrators on Sunday, Russian news agencies reported.

More on the FN Victory

This article comes from a U.S. right-wing viewpoint, but it is a pretty good summation of how the media and political establishment react to anything on the right.

Something Smells Vichy in France
t seems that in the twinkling of an eye, France’s “far right” has become its center, which may throw Europe’s entire political checkerboard off-balance. Time to recalibrate everything. It might even be time to panic.
This article is written humorously, but there is a lot of truth. I don't think the left is as paranoid as he portrays them because if the right were to win power, the social mood induced shift in politics would put a party such as the National Front squarely in the center of the political mainstream. It is today's establishment who will be in the position of the radical outsider. Even today, Hoover wears the stain of the Great Depression, but the coming decline in social mood will be far greater.

The modern triumphalist leftist mindset, despite its arrogant gloating that history is on its side and that their ideological opponents have been forever crumpled up and banished to history’s dumpster, remains comically paranoid that the slightest victory from anything deemed remotely “right-wing” will immediately usher in a Fourth Reich and a sequel of the Holocaust. It might even bring the Hitler mustache back in style overnight.

Therefore, news that the National Front is polling ahead of the pack and winning regional victories led to hysterical op-eds about an “ominous” and “frightening” resurgence of fascists, racists, xenophobes, neo-Nazis, and all the other two-dimensional murderous cartoon goblins that haunt leftist fever dreams.
The establishment ideology is very extreme when looked at across time. It is only over the past 50 or so years that it appears mainstream. Since the establishment holds power (and thus the center), they do not realize their position is so far from the center. The Soviets collapsed rapidly when change swept through Russia, even though Gorbachev tried to begin a reform process. The Chinese communists have changed with the times and maintained power. Today, the elite of the West are moving against the tide, becoming increasingly disconnected from the center.
France is the country that originated the practice of using the terms “left” and “right” to denote political orientations. But by modern standards, its national hero Charles Martel would be a far-right extremist serving time for Islamophobic hate crimes. And people who merely want to keep France, well, somewhat French are demonized as barbarians at the gates rather than the gates’ defenders. That’s a complete inversion of reality. It’s not far right or even far out—it’s completely upside down.
The term "far right" does include some actual far rightists, but it also includes the historic and traditional center. It is because the mainstream today is so far to the left that even centrist ideas appear to be extremely far right. This is why the political process is at risk of great volatility, because when the public demands a return to the center, they cannot tell the difference between the parties on the right. France is lucky to have an established alternative party that has worked its way into the mainstream. In Greece, the public elevated a young party with little experience and ended up with Golden Dawn.

Right-wing Rumblings in Europe

Over 380 detained after anti-migrant riot in southern Moscow
Moscow police detained some 380 people during the mass rioting in a southern district of the city. A mixed crowd of nationalists and locals attacked a warehouse run by natives of the Caucasus, blaming a migrant for the fatal stabbing of a local.

...Residents of the Biryulyovo district in southern Moscow took to the streets following the fatal stabbing of Egor Shcherbakov, a Muscovite, earlier in the week. Late on Thursday evening, when Shcherbakov and his girlfriend were on their way home, the young couple were attacked by an unidentified man who stabbed Shcherbakov with a knife.

Shcherbakov’s girlfriend described the attacker as a male native of the Caucasus and said that he had assaulted her boyfriend after trying to harass her.

On Saturday a group of about 40 people gathered for a protest in the area, urging the police to find and punish the attacker. They demanded that the district’s police chief resign, and that a local vegetable warehouse, where many migrants work, be closed.
This is part of a general trend of xenophobia during declining social mood. Russia hasn't seen huge amounts of immigration, but the nation is already very diverse and the native populations have plenty of reasons for conflict.

French far right sweeps to victory in local election
In the decisive second round of the poll for a departmental council seat representing Brignoles, a town in the south of France, the FN candidate comfortably defeated his rival from the UMP, the party of former president Nicolas Sarkozy, by 54 per cent to 46 per cent.

The knockout blow came despite calls from President François Hollande’s Socialist party for its supporters and other leftist voters to rally behind the UMP candidate in a bid to block the FN.

...The FN, riding on a wave of recession-fuelled disaffection with the two mainstream parties, is mounting its biggest campaign to date to make gains in both the local elections and the European elections that follow in May.

Last week an opinion poll for the first time put the FN ahead in the running for the European poll, with 24 per cent backing the party, giving it a two-point lead over the UMP and five points over the Socialist party.
Anti-euro and anti-EU parties start off by winning seats in the EU parliament and build off that base, UKIP being the best example. This increases the odds that when the party does obtain power, it will not be a flash in the pan that loses supporters quickly, but rather becomes a long-lasting political force by growing deep roots in the political establishment.


As Goes The Trade Surplus, So Goes The Renminbi

If China does not have a steady stream of incoming U.S. dollars, it cannot engage in credit creation and money printing unless it is willing to devalue the renminbi. Based on current trends and recent comments by Chinese leaders, in which they say China must accept slower growth in order to reform, China is probably going to opt for deflation (or disinflation) and slower GDP growth.

China's September export growth in surprise slide
China's exports dropped 0.3 percent in September from a year earlier, the Customs Administration said on Saturday, sharply confounding market expectations for a rise of 6 percent, and marking the worst performance in three months.
Imports fared better, rising 7.4 percent in September from a year ago, better than forecasts for a 7 percent increase, shrinking China's monthly trade surplus to $15.2 billion.

..."The strong renminbi has eroded China's export competitiveness," ANZ Bank said in a note. It said there were risks that China's economic growth may miss market forecasts this year, but predicted 2013 growth would hit 7.6 percent.

Gold may see another smash on Monday due to this news.

Here is background for why I believe a slowdown is coming:

September 4: Xi Says China Chose Slowdown to Allow Economic Adjustment
October 7: China's Xi says economy on a smooth, controlled slowdown

The Fear Market Is Booming


A Vision of the Future: A World Filled With Robots and Religious Fundamentalists?

Mish has a post up: Dark Vision for Jobs: Jobless Future? Is It Different This Time?, in which he discusses automation. Some analysts are starting to predict major job losses due to automation hitting all levels of jobs, from complex to the simple.

The most likely future path I see unfolding, if there really is no future innovation that requires large numbers of workers, is one where people are plugged into immersive games and entertainment. In a world of automation, what will be the cost of providing the average citizen with a basic existence? Think about how many people are going on disability, how many are already happy on food stamps and welfare. Now consider that the trend is for young people to drive less and to entertain themselves digitally. Entertainment costs could plunge and people will be plugged in all day. Imagine how many people would accept a life of no work and no responsibility.

Many Westerners already choose a hedonistic lifestyle and do not have children. If there was an even easier path to this lifestyle, one could imagine a highly automated world functioning with a very low birthrate. Charles Murray has proposed the minimum income to replace all welfare, and Switzerland may vote it in. Under the Murray proposal, if people have children they will receive no cost of living increase. Therefore, there will be a great incentive for people not to have children, because having children will mean the need to work (at all, let alone harder). And while it is tossed around as a joke, there really may be some issue once the sex industry develops authentic sex bots. At that point, the fertility rate may plunge for real because in the automated society, where's the incentive for government to reverse a decline in fertility? The Catholic Church and other traditional religions will oppose it, but their sphere of influence will be reduced to a small number of reactionaries who refuse the easy life. They will be people who still choose to do manual labor even for no pay (like Benedictine monks) and have multiple (or any) children.

Over enough generations, everyone who doesn't want to work will have voluntarily remove themselves from the gene pool. This could lead to a future with a large population of religious people (though a population far below today's world population) who maintain the automated systems and do the jobs, with an elite creative/entrepreneurial class who eventually reach stable fertility.

That's not really a prediction, but I think it's most plausible than some of the dystopian visions of over population. From a Christian perspective, this future world would be a dystopia (or at least the path arriving at it), but many people might willingly choose this lifestyle if it were offered. Instead of a government imposed Brave New World of genetic engineering, it would be a voluntarily chosen Brave New World. The wide gate will be offered, and many will willingly pass through it.

In fact, I expect people will find jobs. It may require a lot of people to keep the machines running and if automation really takes off, total production could soar. Freed up labor will be redeployed. With higher profits, businesses that find ways to do more with cheaper labor will out-compete their rivals. In the short-run, energy bottlenecks will slow automation. In the intermediate term, new jobs will be created. In the very long-run though, when science fiction starts becoming a reality, then we might see some type of future where machines can outperform the majority of humans at most tasks—but that day is still quite a ways off.

Russia Gets Physical

Moscow Exchange Plans Gold to Silver Trading to Broaden Appeal
OAO Moscow Exchange will introduce trading of gold and silver as early as this month as part of plans to make metals more accessible to smaller banks by reducing transaction costs.

The exchange will quote gold and silver in Russian rubles per gram, with minimum trades starting at 10 grams of gold and 100 grams of silver, the bourse’s Deputy Chief Executive Officer Andrey Shemetov said in an e-mailed response to questions yesterday. Platinum and palladium contracts will start trading in the first half of 2014, he said. Russia is the world’s largest developing-nation producer of gold after China.
This sounds like a normal business development, but it isn't.

It’s an “unusual move” for the stock and currency exchange to list physical metals, and has the potential to affect the gold market as trading volume grows, Marcus Grubb, managing director of investment research at the World Gold Council, said in an e-mailed response to questions on Oct. 9.

The exchange will quote prices and enable traders to settle contracts via delivery to and from unallocated metals accounts at its National Clearing Center. Banks can deposit or withdraw precious metals in the form of physical bullion bars, and delivery and collection will occur at a nominated Moscow vault, the bourse said. The contracts are also likely to appeal to brokers, producers, jewelers and private investors in the long run, it said.
Russian is aiming to create a physical trading market attractive to even the average investor.

Spain Turning Hard Right?

Greece saw the rise of Golden Dawn and the ruling parties had to use anti-democratic methods to shut it down, in part because Golden Dawn draws a lot of support from the police and the military.
Opinion polls show Golden Dawn’s popularity has plunged since the stabbing from 11-13 per cent to around 7 per cent, the percentage of the vote it won at last year’s general election when it entered parliament for the first time. Nevertheless, it is still the third most popular party behind the governing New Democracy and Panhellenic Socialist Movement.

Yet the government has not gained from the crackdown. It is still polling at the previous 20-22 per cent level, neck-and-neck with Syriza, the radical left opposition. And some commentators have questioned whether the move against Golden Dawn might backfire if it is seen to be a politically motivated vendetta by the government.

Analysts say Golden Dawn’s voter base is mainly among people hit hard by the country’s economic crisis, both young Greeks trying to join the labour market and the over-40s, who feel angry and frustrated at losing their jobs.

After Greece, Spain can credible claim to have the worst fiscal situation. Spain already has a full blown secessionist movement in Catalonia. Spain has high rates of youth unemployment, just like Greece. In the 1970s, Spain had a military government, as did Greece. And now, reports say Spain is also seeing a rise of the right.

Franco-fascism on the march in Spain: Is the government doing enough?
But experts worry that the real fascist concern in Spain is not from small extremist groups, but rather from growing public displays of fascist sympathies by a small part of the conservative government's constituency – and even among elected officials.

“Spain has not been ‘de-Francoized,’ as Germany has been de-Hitlerized,” explains Félix Ortega, a sociology professor and expert in public opinion in the Universidad Complutense de Madrid. “There are still Franco symbols even in my university!”

An alliance of radical right groups – including violent neo-Nazi ones – have mobilized to travel from around the country to Barcelona to protest Catalonian nationalism on the October 12 "Día de la Hispanidad," or "Hispanic Day," holiday. Authorities said Thursday they plan to prevent violent groups from entering Catalonia.
Taking the latter first: interesting that the right opposes the separatists? This is a road map for Spanish politics. There is a well developed secession movement, and the far right is stepping up to oppose it. Where is the left? They are falling from power, and as in Greece, they are using undemocratic methods to fight the right, which may only end up helping the right achieve a victory down the road:
Five groups – including violent neo-Nazi cells and a political party that the Supreme Court is considering banning – in July formed a common platform called "Spain on the March." Its leaders have warned they will resort to violent acts if required to preserve Spain’s territorial unity, which they feel threatened especially by regional independence aspirations.
And here's something you will increasingly see across Europe and eventually in America:
Catalonian secessionist plans have united the traditionally fragmented nationalist forces and radical fascist groups. And the extreme right is part of the constituency of the conservative PP, with some experts estimating as much as 10 percent of the party sympathizes with radical ideology, although it’s impossible to contrast.

The political heirs of Franco merged with the PP, which is ideologically a center-right party. And amid the eurocrisis, they could gain more political clout that could be significantly more dangerous than the violent groups, experts warn.
The far right is so ostracized from mainstream politics, particularly in the United States, that they represent the only alternative to the existing political structure. By forcing them into the wilderness, the mainstream has not defeated the traditional right, but given in the opportunity to reemerge as something new, even though most of their ideas are quite old, even ancient.

However, pause on that bolded statement. The non-violent far right is more dangerous than the violent extremists, expert warn. Who are these experts? They are the left. Of course, the left does not fear a rightist movement with no chance at winning elections; they fear a rightist movement that stands a good shot at winning.
The crisis has brought an unprecedented public display of Franco nostalgia, with some public officials and members of the PP openly making the Nazi salute, displaying the former regime’s flag and other memorabilia, and posting pro-Franco messages on social media sites.

Municipal, regional, and even country legislators have reminisced about Franco’s era, mostly subtly, though some have openly said those killed by Franco’s forces deserved it.
What is crucial to understanding the coverage of politics is that the left won. Franco is a historical anachronism, one of the last remaining right-wing governments that lasted late into the grand supercycle. The U.S. has been a revolutionary power from the beginning, opposing monarchies and then giving soft support to left-wing movements.
Similarly, American historians overlook the obvious fact that Alger Hiss could have done nothing without FDR's personal permission, and mistake the Hiss-Hopkins backchannel to the KGB for a case of "espionage" - not even considering the idea that FDR, the New Deal, or America as a whole could be seen as generally guilty for our collaboration, concealment, and general complicity with Stalin's enormous crimes.
This is now 70 years ago. Today, the left has consolidated power and leftist ideas are mainstream ideas. Old right ideas are lumped together with the Nazis, even if the ties are loose.

So where did Franco and Spain's right-wing government come from?
The Red Terror in Spain is the name given by historians to various acts committed "by sections of nearly all the leftist groups"[4][5] such as the killing of tens of thousands of people (including 6,832[6] members of the Catholic clergy, the vast majority in the summer of 1936 in the wake of the military rising), as well as attacks on landowners, industrialists, and politicians, and the desecration and burning of monasteries and churches.[6] News of the military coup unleashed a social revolutionary response and no republican region escaped revolutionary and anticlerical violence - though in the Basque Country this was minimal.[7]

...Some estimates of the Red Terror range from 38,000[11] to 72,344 lives.[12] Paul Preston, speaking in 2012 at the time of the publication of his book The Spanish Holocaust, put the figure at a little under 50,000.
The role of the Catholic Church in this story cannot be ignored:
Franco's tactics received important support from Adolf Hitler and Benito Mussolini during the civil war. He remained emphatically neutral in the Second World War, but nonetheless offered various kinds of support to Italy and Germany. He allowed Spanish soldiers to volunteer to fight in the German Army against the USSR (the Blue Division), but forbade Spaniards to fight in the West against the democracies. Franco's common ground with Hitler was particularly weakened by Hitler's propagation of Nazi mysticism and his attempts to manipulate Christianity, which went against Franco's fervent commitment to defending Christianity and Catholicism.
There's the real threat to the left. The Spanish right is not pro-Nazi, but pro-Catholic and pro-tradition. Nearly all right-wing movements are labeled as Nazi or fascist because these terms essentially mean bad or evil, they are not accurate representations of political ideology. Since the left controls the microphone, it is easy for them to paint their enemies as evil, whether or not it is justified.

If you doubt the argument that the left won, consider Russia today. Putin is raising the Russian Orthodox Church and pushing a pro-Christian cultural agenda because as a former KGB agent, he knows exactly the strategy of the left: destroy the Church and traditional culture to pave the way for revolution. Only now, ironically, since the socialist West defeated the communist East, the East is now redeploying its forces to the right in order to fight Western domination.
I have been following the Pussy riot story for some time and have done some digging. Its is pretty clear that America is sponsoring a myriad of organizations via NGO’s to try to undermine and destabilise Russia.

Specifically GOLOS, which in turn funds numerous organisations within Russia including Pussy Riot. In my article Russian Spring cancelled NYET to NGO’s I examined new legislation that Russia has just introduced to curb the influence of foreign NGO’s in Russia.

My observations seem to indicate to me that by using LGBT and Feminist groups they (USA & co) are seeking to sow dissent internally and externally against Russia. Already this week we have seen Madonna take up the “Pussy Riot case” and try to imply that it is somehow a human rights issue….
Even if you are completely cynical about Putin's religious beliefs, having lost a left-left battle to the West, it makes sense for Russia to turn to the right and use tradition to fight the encroachment of the West. The anti-gay propaganda law and other issues are hitting Western efforts head on. While Russia is a different case altogether from Spain, the same political forces are at work.

Compared to Greece, in Spain there is an even greater chance of a right-wing victory. The debt problems and high unemployment rates create the same fertile environment for political radicalism. The secessionist movement in Catalonia favors the far right because they are the strongest opponents. Since secession is also destined to become a larger issue, it will work to elevate the political right as the voice of opposition, whether the secession succeeds or fails. Unlike in Greece, the more centrist political parties show some affinity for the far right, which will likely moderate it and increase the odds of political victory. Finally, Spain appears a case where the left may be exposed for crying wolf, if this movement remains a non-violent one. The key point, I believe, is that the left does not oppose any ideas of the far right head on, they dismiss them as Nazis, threats, etc. Thus, if the non-violent far right breaks through anywhere in a major European power, they face almost no credible opposition. Once people see a far right regime in power failing to meet leftist stereotypes, their ideas will move into the mainstream of debate. And since they have been shut out of debate for so long, many people will find their ideas new. If the right comes to power, this is the path they will take.


GOP Civil War About to Explode

From county chairmen to national party luminaries, veteran Republicans across the country are accusing tea party lawmakers of staining the GOP with their refusal to bend in the budget impasse in Washington.

The Republican establishment also is signaling a willingness to strike back at the tea party in next fall's elections.
This will not be won by the establishment. The party establishment is going to be destroyed in the 2014 election as the GOP tears itself apart and swings to the right. This is good news for Democrats in 2014 and 2016, but bad news for 2020 and beyond because it means the GOP is likely to turn increasingly radical. That makes them more likely to win at what will eventually turn into musical chairs. Voters will be fed up with all of the establishment, and the small radicalized GOP will be able to reshape politics. That, or the GOP split up leads to a third party, and that third party would then have the inside track to winning the electoral lottery when voters next are fed and vote not for a candidate, but against the establishment.

Social mood and politics; Obama already has Nixonian poll numbers

Poll: Americans find little to like in Washington
Negativity historically hurts the party in power - particularly when it occurs in the second term of a presidency - but this round seems to be hitting everyone. More people now say they see bigger differences between the two parties than before Obama was elected, yet few like what either side is offering. A big unknown: possible fallout from the unresolved budget battle in Washington.
Unless the stock market tanks and the economy weakens, voters will be calm by next November and vote for more of the same. Changes will occur at the primary level, and the net result will be to make things "worse" in the eyes of the "moderate voter," as Republicans and Democrats cull their centrists.
A bad sign for Democrats is that Obama has bled support among independents - 60 percent disapprove of the way Obama is handling his job, while only 16 percent approve. As he began his second term in January, independents tilted positive, 48 percent approved and 39 percent disapproved.
Obama's overall support is down to 37%. Considering about 10% percent of that is African-American voters who support him no matter what, Obama is already in Nixon territory.


Socionomics and Space Ships

Guess what? Even space ships are impacted by social mood.

A nerd compiled all the space ships in science fiction into one giant poster, and another nerd calculated the size of all the ships. He found that the size of the ships changes over time.

What The Nerdiest Chart of Sci-Fi Ships Says About Our Dreams of Space
From Dirk’s chart, the average length of a spacecraft in the 70s was 1,487 meters. In the 80s and 90s it was 3,273 meters and 3,383 meters, respectively. Most recently, the average ship length for the 010s was 1,736 meters. Like our universe, the size of sci-fi ships looks to have gone through a period of inflation before making it into the 21st century. But why?
Social mood is the why. When people are optimistic they dream big. This is why sci-fi is more popular during rising social mood, and fantasy, with its roots in history and myth, is more popular during negative social mood.

Additionally, consider the economic growth projections needed to build a spaceship out of a sci-fi movie or novel. Today, only the United States, the European Union, and soon China, have economies large enough to build and support large passenger jet manufacturing. One needs a very optimistic long-term population and economic growth forecast in order to have an economy large and complex enough to support this type of industry. During negative social mood, sci-fi turns dark and dystopian, with many stories filled with Mad Max post-industrial wastelands.


Another Science Magazine Gets Political

At least Nature isn't shutting off their comments. Instead, the have a poll asking:
Should scientists refrain from studying the genetics of intelligence?
Should scientists refrain from studying the genetics of race?
Should scientists refrain from studying the genetics of violence?
Should scientists refrain from studying the genetics of sexuality?

These poll questions are in an article about scientists researching genetics: Ethics: Taboo genetics
Probing the biological basis of certain traits ignites controversy. But some scientists choose to cross the red line anyway.

And then the editorial for Nature on the topic is titled: Dangerous work

The editorial is a political screed against genetic science, telling scientists that they must toe the party line when reporting their results, and work hard to make sure results are not "minsinterpreted." You can research it (but you shouldn't), but don't engage in any crimethink or report any hatefacts.

You can very clearly see the line between science and the "science establishment" or what I'd call "political scientists."

On of the quoted scientists in the article had this to say about it: Deemed Naughty by Nature
The first quote refers to the discovery power of our sample of 2000 gifted individuals. We would be quite happy to find even one genome-wide significant hit. The second quote refers to my prediction for what will be possible eventually (perhaps decades from now). Juxtaposing the quotes this way is deliberately misleading.

If you thought the attack on global warming skeptics is big, wait until the geneticists discover a hatefact.

Science has mainly become a political tool of the establishment and the growing authoritarianism is a response to the loss of control. The Internet plays some role (as far as giving dissenters a platform), but this goes well beyond the destruction of gatekeepers that we see in media. The rise of China and other emerging markets means these nations can fund advanced scientific research and provide a safe haven for scientists. There is irony in an authoritarian scientific establishment being outmaneuvered by an authoritarian government, and some critics are quick to draw parallels between Chinese genetic research and Nazi science programs. However, this is more political rhetoric against a growing area of scientific research.

Genetic research, I expect, will be far more contentious than global warming and climate models. The long march of the Enlightenment has elevated equality above nearly every other political goal, and it has elevated materialism over religion. Genetic science is in some ways the perfect weapon to disrupt the status quo. It is superficially materialistic, but it's findings could potentially stick a dagger into the heart of Enlightenment thinking and the concept of equality. In America, at least, the opponents of equality are usually painted as racist and sexist, but if one reads the critics of equality (you can now read them on Google books, they will not be taught in school) one finds their arguments often rest on observed inequality, on the inherent differences between men and women, different races, religions and cultures. They did not argue against equality out of hate or their social standing (though some surely did), but out of the differences they perceived. This is why Nature is telling these scientists to be so careful. Their work will have implications well beyond the science itself. Equality is an idea, not a reality. The observed reality is that there are differences. It took 300 years of effort to push the idea of equality to the top of the ideological heap, and now these genetic scientists may destroy all that work with one or two discoveries. It is also a recognition by the establishment that they have no argument against the science. if calling scientists racist or sexist doesn't make them stop, they will be unable to prevent a major blow to the idea of equality.

It may seem a contradiction that genetic science (which seems very materialistic and deterministic) will rise alongside religion, but this is also due to the peak social mood and rise of Enlightenment thinking, which separated science and religion. In any event, the focus is the decline of the ruling ideology. Genetic science and religion could be 100% opposed, but they are also opposed to the establishment.

The decline in social mood and the major political/cultural shift (which will unfold over decades and centuries) underway is not a smooth or even transition. In the near term of years though, the actions of the scientific, political, media and cultural establishment against genetic science, against religion, and against enemies yet to emerge, will appear as a growing authoritarian response as social mood declines. Later, the establishment may survive by shifting its ideas and incorporating science. Some have speculated that if genetic science does find a major genetic role in human differences, instead of destroying equality, it may lead to the idea that the government must intervene to balance the differences between groups—much as it does today. Instead of destroying the idea of wealth redistribution and affirmative action policies based on assumed racism and sexism, it could mean these programs continue based on the accepted scientific research that shows actual differences exist. That is a long way off, if it even happens. Many scientists are still skeptical about the ability for scientists to understand how genes interact, but you can tell the weak position that the "political scientists" find themselves in by their authoritarian response to the research; they would rather these questions not be asked.