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Venezuela’s Grim Reaper – A Weekly Report

August 22, 2017 Steve H. Hanke 0

Authored by Steve H. Hanke of the Johns Hopkins University. Follow him on Twitter @Steve_Hanke.

The Grim Reaper has taken his scythe to the Venezuelan bolivar. The death of the bolivar is depicted in the following chart. A bolivar is worthless, and with its collapse, Venezuela is witnessing the world’s worst inflation. 

As the bolivar collapsed and inflation accelerated, the Banco Central de Venezuela (BCV) became an unreliable source of inflation data. Indeed, from December 2014 until January 2016, the BCV did not report inflation statistics. Then, the BCV pulled a rabbit out of its hat in January 2016 and reported a phony annual inflation rate for the third quarter of 2015. So, the last official inflation data by the BCV is almost two years old. To remedy this problem, the Johns Hopkins – Cato Institute Troubled Currencies Project, which I direct, began to measure inflation in 2013. 

The most important price in an economy is the exchange rate between the local currency and the world’s reserve currency — the U.S. dollar. As long as there is an active black market (read: free market) for currency and the black market data are available, changes in the black market exchange rate can be reliably transformed into accurate estimates of countrywide inflation rates. The economic principle of Purchasing Power Parity (PPP) allows for this transformation.

I compute the implied annual inflation rate on a daily basis by using PPP to translate changes in the VEF/USD exchange rate into an annual inflation rate. The chart below shows the course of that annual rate, which peaked at 1823% (yr/yr) in early August 2017. At present, Venezuela’s annual inflation rate is 1538%, the highest in the world (see the chart below).

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Gartman: “We Are A Bit Uneasy This Morning Being Short”

August 22, 2017 Tyler Durden 0

Just two weeks after he staked his reputation that “The Bull Market Has Come To An End“, “world-renowned” commodity guru Dennis Gartman is getting nervous, and as he writes in his latest daily letter, “we
are a bit uneasy this morning being short.

Here is how Gartman is slowly but surely pivoting away from his “red-line” bearish call on stocks:

STOCKS HAVE RISEN A BIT SINCE YESTERDAY with our International Index having gained a marginal 19 points, with stocks in Asia moving sharply higher while stocks in Europe were weak. However, the markets in Asia are responding to what we perceive to be the best speech given yet by Mr. Trump last evening in which he made clear that the US will not stand down from its obligations abroad.

 

Heretofore, President Trump… influenced of course by the manifestly anti-globalist philosophies of Mr. Bannon… seemed intent upon reducing the US position of global authority, but last evening that philosophy was abandoned, and with that the Asia stock markets and the US stock index futures turned briskly higher.

 

Also, we note that the Fear & Greed Index here in the US made its way toward and below the all-important 20 level, having fallen to 15 as of the close yesterday and almost certainly to turn higher today given the strength in the stock index futures as we write. Previously, any time this index fell below 20 and turned higher, stocks which had been under pressure swiftly turned for the better and although the world’s stock market histories do not always follow the precise paths each time, they do have great and constant similarities.

And the resultant trade adjustment:

2. Short of Two Units of the NASDAQ 100; Long of Two Units of the S&P:

We began the trade Tuesday, August 1st with the ratio at 2.37:1 and we added to the position on Friday, August 11th with the ratio at precisely the same level. It closed last evening at 2.38:1.

 

We’ve reduced our “risk” point to 2.42:1 on a closing basis in New York and we’ll look for the ratio to make its way down to 2.15:1… noting that each 0.1% is a material shift in price, but we are a bit uneasy this morning being short.

It would appear that the bull market is back on again, as for Gartman’s stake reputation, well… he puts it best: 

We are out of the office today, on the road home from Cookeville, Tennessee where we witnessed the Eclipse yesterday… however, we were actually about 5 miles from the perfect dead center of the event, but what we saw was spectacular! We’ll be back in the office late this afternoon for we are driving back home rather than flying.

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Mexico’s shale-rich Burgos Basin opens to private investment for the first time

August 22, 2017 Today in Energy 0

In July 2017, Mexico’s national energy ministry (SENER) opened the onshore portion of the Burgos Basin, a shale-rich basin in northeastern Mexico, for natural gas exploration and development by private companies. This is the first time non-state entities were offered access to the Burgos Basin for development since the creation of the national oil company Petróleos Mexicanos (PEMEX) in 1938.

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Ron Paul Urges America “Oppose Fascism Of The Right & The Left”

August 22, 2017 Tyler Durden 0

Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity,
Following the recent clashes between the alt-right and the group antifa, some libertarians have debated which group they should support. The answer is simple: neither. The alt-…

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Kurdish referendum to go ahead in defiance of US

August 22, 2017 Middle East Monitor 0

Iraq’s Kurds have announced that the independence referendum will go ahead as planned on 25 September despite US demands to postpone the vote. Kurdish leaders reiterated their intention to hold the referendum on the independence of the Kurdish region from Iraq. Over the weekend, head of the autonomous Kurdish region, Masrour Barzani, denied that he told US Secretary of State Rex Tillerson that he agreed to delay the referendum. Postponing the referendum is “absolutely impossible,” Barzani told the Saudi newspaper Okaz. US officials are opposed to the September referendum believing it to be a destabilising move at a time when the fight against Daesh is ongoing. The United States and other Western governments fear the referendum could ignite a new […]

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Egypt constitutional amendment to increase presidential term retracted

August 22, 2017 Middle East Monitor 0

An Egyptian lawmaker who called for the constitution to be amended to extend the president’s term by two more years has retracted his comments following growing opposition to the idea. Lawmaker Ismail Nasreddine’s comments were published in Egyptian daily Al-Shorouk and stated that the idea to amend the constitution would not apply to President Abdel Fattah Al-Sisi’s current four-year term but to the next president. Once Al-Sisi completes his term in office in 10 months’ time he will be barred by the constitution to serve more than two four-year terms. Al-Sisi is expected to run in next year’s elections despite declining to state whether he would run for a second term and has urged Egyptians to vote next year. Read: […]

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Somali forces retake key town in Al-Shabaab stronghold

August 22, 2017 Middle East Monitor 0

African Union and Somali forces have captured a strategic town in Somalia, All Africa reported yesterday. The town of Bariire, 27 miles from Mogadishu, was retaken along with a strategic military base in the Al-Shabaab stronghold. A fierce gun-battle with Al-Shabaab forced the group to retreat after the African Union and Somali national army attacked from three different sides of the town. Seven civilians were killed and four injured in the operation to recapture the town of Bariire. There were no reports of involvement by the United States Special Forces. Read: Turkey to open largest military base in Somalia Baiire was a key town to retake for the African Union and Somali troops as Al-Shabaab was using the strategic military […]

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Are We Fiddling While Rome Burns?

August 22, 2017 Tyler Durden 0

Authored by Charles Hugh Smith via OfTwoMinds blog,

Solutions abound, but they require the retirement of obsolete systems that defend entrenched interests and soul-crushing inequalities.

It turns out Nero wasn’t fiddling as Rome burned–he was 60 km away at the time. Did Nero Really Fiddle While Rome Burned?

The story has become short-hand for making light of a catastrophe, either out of self-interest (one theory had Nero clearing a site he desired for a palace with the fire) or out of a mad detachment from reality.

Are we fiddling while Rome burns? I would say yes–because we’re not solving any of the structural problems that are dooming the status quo. Instead, we’re allowing a corrupt, corporate mainstream media to distract us with fake “Russians hacked our election” hysteria, false “cultural war” mania, and a laughably Orwellian frenzy over fake news which magically avoids mentioning the propaganda narratives pushed 24/7 by the mainstream media–narratives that are the acme of fake news.

The media is only half the problem, of course; the audience doesn’t want to hear about structural problems that can only be fixed by disrupting the status quo. If we don’t accept that the financial system we inhabit is imploding, maybe all the problems will go away.

The system is coughing up blood and we still want to believe it is “recovering” from a cold.

Here’s a short list of structural problems we should be tackling:

1. Soaring inequality and the institutionalization of economic privilege. Systemic economic privilege doesn’t exist in a vacuum–it’s enforced by a centralized hierarchy, a dynamic I describe in my book Inequality and the Collapse of Privilege. Systemic inequality doesn’t just undermine the economy–it also undermines the social and political orders.

2. The central state (government) has one default setting: endless expansion into every nook and cranny of daily life. There are no mechanisms for contraction and no institutional memory of government reducing its control of every aspect of life.

As I explain in my book Resistance, Revolution, Liberation: A Model for Positive Change, this concentration of power attracts concentrations of wealth which then buy the machinery of governance: democracy is reduced to an auction that excludes the bottom 99.9%.

3. Finance has detached from the real-world economy, distorting every function via financialization, which concentrates income and wealth in the hands of the few. As I have often explained in the blog (and in my book Why Our Status Quo Failed and Is Beyond Reform), if we don’t change the way we create and distribute credit-money, we change nothing.

4. Our educational system is obsolete but the the current system is incapable of transformation for structural reasons. These include high sunk costs, bureaucratic sclerosis, self-serving fiefdoms that fear disruption of their gravy trains, a lack of understanding of the emerging economy, a dysfunctional centralized hierarchy and the state-funded exploitive machinery of student-loan debt.

I explain all this and present a model that would cut costs by 90% in my book The Nearly Free University and the Emerging Economy.

5. The economy and thus our society (i.e. our mode of production) are changing beneath our feet in dramatic ways. Highly centralized hierarchies (government, corporations) are the wrong unit size and structure to manage this transformation to the benefit of all rather than to the benefit of the few.

I present a decentralized non-state, non-corporate, non-financialized model in my book A Radically Beneficial World: Automation, Technology & Creating Jobs for All.

For individuals navigating these disruptive forces, I wrote an overview guide to the emerging economy, Get a Job, Build a Real Career and Defy a Bewildering Economy.

Solutions abound, but they require the retirement of obsolete systems that defend entrenched interests and soul-crushing inequalities. The world is changing rapidly, and centralized systems that worked well in the past are failing because they are optimized for a world that no longer exists.

The status quo is coughing up blood, and the situation is dire. Denial won’t fix what’s broken, and neither will magical thinking (the economy is “recovering,” symbolic gestures and virtue-signaling will fix everything, etc.) Clinging to the absurd hope that the status quo just has a nagging cold will only increase the disorder when the system breaks down.

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