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Daily Readings 02-19-2018

By: The Cynical Economist
Published: February 19th, 2018

The playboy who got away with $242m – using ‘black magic’ – 

One day in August 1995 a man called Foutanga Babani Sissoko walked into the head office of the Dubai Islamic Bank and asked for a loan to buy a car. The manager agreed, and Sissoko invited him home for dinner. It was the prelude, writes the BBC’s Brigitte Scheffer, to one of the most audacious confidence tricks of all time.

Liberals write off $200M in student loans feds will never collect

The federal government is writing off more than $200 million in outstanding student loan payments that officials will never be able to collect.Recently released spending documents show the government won’t collect $203.5 million in debts from 34,240 students

Germany edges toward Chinese-style rating of citizens

China is experimenting with a dystopian “social credit system” which grades every citizen based on their behavior. The head of an expert panel argues that Germany is sleepwalking in the same direction.

How Russia turned the internet against America

Some who value the online world’s freedoms are ‘at a loss’ after Friday’s indictment offered new details about how trolls exploited its weaknesses.

Putin’s chef, a troll farm and Russia’s plot to hijack US democracy

The plot against America began in 2014. Thousands of miles away, in a drab office building in St Petersburg, Russia, a fake newsroom was under construction with its own graphics, data analysis, search engine optimisation, IT and finance departments. Its mission: ”information warfare against the United States of America”.

This Is What $1.25 Million Dollars a Month Bought the Russians

On Friday, the Department of Justice announced criminal charges against 13 Russians for interfering in the 2016 U.S. presidential election. Special counsel Robert Mueller accused the 13 — plus three Russian entities, including the infamous Internet Research Agency “troll farm” — of carrying out a wide-ranging disinformation campaign that involved stolen identities, fake social media accounts, and even a bizarre White House birthday subterfuge.

The operation, according to the indictment, was backed by Yevgeny Prigozhin, otherwise known as “the chef,” a Kremlin associate who once served caviar and truffles to former President George W. Bush — and dished out trouble to U.S. domestic politics. Prigozhin is accused of using his companies, including Concord Management and Consulting and Concord Catering, to fund the operation.

 

Three Crazy Things We Now Accept as “Normal”

By: The Cynical Economist
Published: February 19th, 2018

From Off Two Minds

How can central banks “retrain” participants while maintaining their extreme policies of stimulus?

Human habituate very easily to new circumstances, even extreme ones. What we accept as “normal” now may have been considered bizarre, extreme or unstable a few short years ago.

Three economic examples come to mind:

1. Near-zero interest rates. If someone had announced to a room of economists and financial journalists in 2006 that interest rates would be near-zero for the foreseeable future, few would have considered it possible or healthy. Yet now the Federal Reserve and other central banks have kept interest rates/bond yields near-zero for almost nine years.

The Fed has raised rates a mere .75% in three cautious baby-steps, clearly fearful of collapsing the “recovery.”

What would happen if mortgages returned to their previously “normal” level around 7% from the current 4%? What would happen to auto sales if people with average credit had to pay more than 0% or 1% for a auto loan?

Those in charge of setting rates and yields are clearly fearful that “normalized” interest rates would kill the recovery and the stock bubble.

2. Massive money-creation hasn’t generated inflation. In classic economics, massive money-printing (injecting trillions of dollars, yuan, yen and euros into the financial system) would be expected to spark inflation.

As many of us have observed, “official” inflation of less than 2% does not align with “real-world” inflation in big-ticket items such as rent, healthcare and college tuition/fees. A more realistic inflation rate is 7%-8% annually, especially in the higher-cost regions of the US.

But setting that aside, there is a puzzling asymmetry between low official inflation and the unprecedented expansion of money supply, debt and monetary stimulus (credit and liquidity). To date, most of this new money appears to be inflating assets rather than the real world. But can this asymmetry continue for another 9 years?

3. Stock markets are soaring but sales and profits are stagnant. Everyone knows central banks are still pumping billions of dollars per month into the financial system, and this (coupled with central bank purchases of stocks and bonds) has been pushing stocks sharply higher for the past 9 years, with only a few hiccups along the way.

This is pushing valuations out of alignment with traditional metrics of valuing assets such as sales and profits–a process known as “price discovery.” In essence, traders and investors have habituated to central banks driving private-sector markets higher, not because the assets are generating more value or profits. but simply as a function of centralized money creation and asset purchases.

All of these extremes generate mal-investment, diminishing returns and perverse incentives for ramping up unproductive and risky speculation, leverage and debt. Yet the central banks have trapped themselves in this risky trajectory because they’ve pushed the accelerator to the floorboard for 9 years. Any extreme held in place for 9 years has long slipped from “temporary” to permanent.

Participants have now habituated fully to central banks extreme stimulus of financial markets, and in a sense they’ve forgotten how to price assets based on real-world private-sector measures.

How can central banks “retrain” participants while maintaining their extreme policies of stimulus? The only possible answer is: they can’t.

 

Waymo’s “Uber-Killer” Robo-Taxi Set For Arizona Rollout

By: The Cynical Economist
Published: February 19th, 2018

Waymo, a unit of Alphabet, is set to launch a ride-sharing service similar to Uber, but with no human driver behind the wheel. Officials in Arizona granted Waymo a permit to operate as a transportation network company (TNC) across the state on Janurary 24, following the company’s initial application on Janurary 12, Bloomberg  reported.

The imminent release of a robotic fleet of fully autonomous Chrysler Pacifica minivans could be flooding the highways of Arizona, causing major headaches for Uber.

Since April of last year, Waymo has been experimenting with its self-driving fleet on the human guinea pigs of Phoenix, offering residents 24/7 access to the free ridesharing service. TNC status is a significant step for Waymo, because it now authorizes the company to start charging its passengers.

Waymo’s vehicles in the Phoenix area have driven more than 4 million miles on public roads. In November, the company said a portion of its cars in the Phoenix area were operating in fully autonomous mode, what’s known in industry parlance as level four autonomy.

So You Want To Buy Cryptocurrencies???

By: The Cynical Economist
Published: February 10th, 2018

 

The Four Stages Of  Bubbles

(The Four Stages Of Bubbles)

 

 

The Housing Market Bubble

(It took about 8 years to bubble up and burst)

Housing Market Bubble

 

 

The Japan Stock Bubble

(It took about 20 years to bubble up and burst)

Japan Stock Bubble

 

The Internet Bubble

(It took about 3 years to bubble up and burst)

Internet Bubble

 

Tulip Mania Bubble

(It took about 3 years bubble up and burst>

Tulip Mania Bubble

 

The Bitcoin Bubble

(It took less than 1 year to bubble up and WILL BURST SPECTACULARY SHORTLY)
Bitcoin Bubble

Hello world!

By: The Cynical Economist
Published: February 9th, 2018

Yes… The Cynical Economist is Up Again and That is because The Economy Is Turning For The Worst Again…

The Old Website Was Lost Because of a Database Crash…..

SOOOOOOOOOOOOOOOOO……………

Here We Go Again From Scratch…………..

(if you want to see the old site go to The Web Archive)

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