Yellen’s Plan to Destroy the World’s Currency

Geese and ganders and pots and kettles and all that.

Remember all that rigmarole about the death of the euro back in the heady days of the Greek debt crisis? All that talk that the euro was doomed to fail because it wrapped its politically correct and antiseptic currency around a gaggle of nations that had little in common, save for continental boundaries.

How could a collection of random economies, in countries that have spent much of their history beating each other senseless, possibly survive under one interest-rate regime? What’s good for manufacturing-heavy Germany is horrible for tourism-dependent Greece. And what might be great for the Greeks would surely send Germans into a fit of hyperinflationary hysteria.

Well, that’s the goose.

Now, let me tell you about the gander…

We are sitting on the cusp of the Federal Reserve raising interest rates for, potentially, the second time in about a decade. “Sitting” and “cusp,” I realize, are inaccurate words. More like we’re standing on a ledge made of brittle sandstone, every footfall sending chunks of our perch into the chasm below.

No matter, the smart guys and gals with economics pedigrees tell us from their aeries overlooking Wall Street. We’re safe. Our footwork is sure. We have the dollar to guide us.

And it’s high time, they preach, for the arbiters of American monetary policy to raise rates in America! Just like American workers now demand $15 for flipping burgers and taking your order, American economists now demand 75 basis points because the millions of new jobs flipping burgers and taking your order are proof that the American economy is a brawny beast propelling our limp-wristed world ever forward.

We will easily absorb a mere 0.25-percentage-point bump in interest rates. The economy is certainly healthy enough for that. Wall Street wants it. And the Street, like any spoiled brat, always gets what it wants after throwing enough temper tantrums. So, just get on with it already.

But, see, that’s where the goose and the gander get hung up with the pot and the kettle.

The Bretton Woods Currency Hangover

Wall Street isn’t the only brat in this particular playpen. The American economy isn’t the only economy that cares what the Federal Reserve does.

Turns out that when the Allied nations gathered in Bretton Woods, New Hampshire, back in the summer of ’44 to crown the dollar king of the world, they wrote the script for the economic horror movie playing today.

The Bank of International Settlements tells us that nearly $88 of every $100 that trades hands in the Forex market these days is a greenback. We know, too, that 60% of the global economy happens in the “dollar zone,” or in currencies pegged to the buck directly or through “dirty floats” that see monetary policy makers manipulate their free-floating currencies to match or counteract the dollar in some fashion.

Sounds a lot like a euro problem…

Because what’s good for America isn’t necessarily good for a bunch of other nations who’ve tethered themselves to the buck in various ways. And what’s good for a bunch of nations tethered to the buck isn’t necessarily good for America.

But that’s where Bretton Woods has left us. It’s where it has left the Fed.

The dollar is the world’s currency, for better or worse, and the Federal Reserve is the world’s central bank – and I’m pretty sure that is for the worst. Tough spot to be in if you’re Janet Yellen – and be thankful you’re not. She’s on a no-win career path.

If she raises rates to keep America’s economists and Wall Street happy, her actions will strengthen the U.S. dollar… which will weaken every other key currency… which will make repaying dollar debts that much harder for all the foreign companies that have taken on trillions in dollar debts since the era of low-dollar rates began, but who still earn their incomes in local currencies that would be falling in value… which will beget an economic slowdown in various countries or maybe even a debt-inspired currency crisis (probably some place such as Ukraine or Brazil, maybe Southeast Asia)… which will spill over into most of the emerging markets… and circle back ’round to alight on the American economy because roughly half of all S&P profits happen overseas… and if overseas sales are plunging, then you can be pretty sure America’s largest companies are laying off workers here at home to make their profit targets for Wall Street… which means rising unemployment and even slower economic growth… forcing the Fed to then cut rates quickly and impose new forms of quantitative easing… that would ultimately lead to negative interest rates, and, potentially, something that smells of hyperinflation.

And if she doesn’t raise rates? Well, then, she risks the continued expansion of already excessive asset bubbles in stocks, bonds and real estate… which at some point must be deflated… only, as we all know, bubbles don’t deflate – they explode. And the next time they explode, they will do so with a force far greater than the Great Depression. Good reason to own gold, I should note. More specifically: physical gold.

So, getting back to the goose, the gander, the pot and the kettle…

At Least They Share a Border

If the euro must die as a pancontinental currency incapable of managing the disparate economic needs of 27 nations that, at the very least, share borders and a mutual history of managing their problems (even if it required guns)… why mustn’t the dollar die as a global currency incapable of managing the disparate economic needs of 60% of the world economy that generally shares no borders and has no meaningful history with one another?

Just a thought.

A REAL Wellness Case for Eliminating Tax Exemptions for All Religions

When people donate to religious groups, it’s tax-deductible. Churches don’t pay property taxes on their land or buildings. When they buy stuff, they don’t pay sales taxes. When they sell stuff at a profit, they don’t pay capital gains tax. If they spend less than they take in, they don’t pay corporate income taxes. Priests, ministers, rabbis and the like get ‘parsonage exemptions’ that let them deduct mortgage payments, rent and other living expenses when they’re doing their income taxes.

Source: Garry Linnell, Religions Should Lose Their Tax-Exempt Status, The Age, October 1, 2016.

Introduction: Australia – Few Believers But Lots of Favors for Religion

Australia is a nation of non – believers. The Age article stated that two-thirds of the population do not believe in a god(s). Furthermore, only eight percent of Australians regularly attend church and 84 percent strongly believe that religion and the state should be kept separate. (Immigration policies are somewhat friendly toward Americans – something to keep in mind if the Deplorables have their way on November 8.)

In Australia, annual subsidies/tax-exempt supports for religion are estimated to cost all taxpayers $30 billion annually. Yearly income by the religion sector in Australia was $104 billion in 2014; the chief purpose of more than a third of this sum was the advancement of religion.

In America It’s Much Worse

The situation Downunder mirrors the reality in America. Our laws and other government policies blatantly require secular society to pay a large share of the costs of religions. That in itself is horrific, but what makes it grotesque for most secularists is the sense that political religion is a baleful element. It promotes discrimination, intolerance, restrictions on personal freedoms, constant incursions of dogma and rituals upon the public square and schools, all while undermining science (e.g., creationism) and reason. To think that secularists, now estimated to constitute at least a third of the adult population, are paying for toxic superstition and dreadful social ills, seems preposterous and outrageous.

And no wonder: it IS preposterous and outrageous.

The REAL Wellness Connection

Three years ago, subsidizes to the faith-based among us cost all taxpayers at least $71 billion. This, however, does not include local income and property tax exemptions, the sales tax exemption and – most importantly – the charitable deduction for religious giving. The estimated value of religious properties is at least $600 billion, but probably much more because the above figure does not include properties owned by religions besides actual churches, mosques, etc.

Source: Dylan Matthews, You Give Religions More Than $82.5 Billion A Year, Washington Post, August 22, 2013.

Enthusiasts for and practitioners of REAL wellness, which promotes reason and liberty, will want to do what little they can to repair and defend the battered wall of separation that malicious politicians pandering to the faithful have undermined in this country for more than a century.

Besides the blatant unfairness of taxation policies that compel non-believers to bear substantial costs of our national religiosity, this situation is outrageous for two other principal reasons:

Religious leaders (i.e., devout politicians in Congress/the states and local levels, televangelists, political activist organizations, etc.) continuously seek to lower the fragile wall of separation between church and state and complain relentlessly about imagined threats to their freedoms while advancing discriminatory policies, intolerance and restrictions on reproductive and other freedoms.
Religions undermine reason and promote nonsense, which does nothing to advance, and plenty to undermine, mental well being and national harmony. Whereas science uses logic, research and experiments to shed light on the nature of the cosmos, religions offer myth, fear and childhood exploitation (AKA indoctrination of the young). Religions advance many beliefs that cloak natural realities in the darkness of superstitions while compromising an accurate appreciation of life on Earth.

America: Increasingly Secular, Except for the Political Class

The tax exempt custom became official in America in 1894, though churches were unofficially tax-exempt since the founding. All 50 US states and the District of Columbia exempt churches from paying property taxes. Donations to churches are tax-deductible. Clery pay nothing for their homes provided by religious institutions. Justice William Douglas, in a 1970 dissent in the case of Walz v. Tax Commission of the City of New York, stated: If believers are entitled to public financial support, so are nonbelievers. A believer and a non-believer under the present law are treated differently… (by virtue of) a financial benefit to religious institutions, government is supporting religion.

There is nothing in the U.S. Constitution that grants tax exemption to churches. It is considered a privilege, owing to a once unchallenged belief that religion makes a positive contribution to every community. That, of course, is a fertile topic for a national discussion, followed by periodic referenda. (Personal forecast of what would result if there were such a national discussion: For a while, religious privilege would survive, but in time, as educational systems improved, the public might, in the works of Richard Gere’s shyster lawyer character Billy Flynn, catch wise.)

A few additional concerns about the gross subsidy of religions can be briefly noted:

Churches get automatic tax exemption; other non-profits must file for exemptions. Unlike secular tax-exempt 501(c)(3) charities, churches need not file reports, a loophole that facilitates fraud and lesser misuses. (Look up the Rev. Jim Jones and Jonestown, Catholic pedophile priests, or any of the richest televangelists – and remember – you helped pay for it all.)
Religions are active in the public square, injecting their ideas about moral questions (e.g., abortion rights and marriage equality) based upon sacred creeds derived from medieval holy books.
George W. Bush’s faith-based initiative, continued during President Obama’s two terms, allows religious welfare organizations to use public funds to proselytize clients with their assorted dogmas.
In 1991, TIME Magazine described Scientology as a thriving thriving cult of greed and power and a hugely profitable global racket. Yet, the religious organization was granted federal income tax exemption in 1993 which, according to a Times article, saved the church tens of millions of dollars in taxes.
The Alliance Defense Fund, a Christian legal group, organizes what it calls Pulpit Freedom Sunday every October. The purpose? To encourage pastors to defy IRS non-partisanship rules by endorsing (nearly always Religious Right) candidates from the pulpit. In 2011, more than 500 pastors did so. None of the churches involved lost exemption status.
The Freedom from Religion Foundation (FFRF) has shown that tax subsidies mean all Americans pay for the extravagantlifestyles of megachurch pastors. When U.S. Senator Chuck Grassley, (R-IA) investigated pastors with private jets, Rolls Royce cars, multimillion-dollar homes, trips to Hawaii and Fiji and similar lavish indulgences, nothing happened. The preachers ignored him and there were no consequences. (Source: Pro/Con – Should Churches Remain Tax-Exempt?)

What’s a Secular Wellness Promoter To Do?

The Supreme Court has fielded challenges to most if not all of the subsidizes lamented in this essay and, lamentably, said in so many words, Oh well, we do love our cults and superstitions, don’t you know? Yeah, it’s constitutional enough, for our tastes.

Whether you are affiliated with a religion or not, if you care about a healthy, fair and rational society, you might want to think of doing what little you can to support candidates for public office who recognize the problem with massive religious subsidizes. Start with your vote on November 8.

On that topic, let me recall what John F. Kennedy said to an audience of Protestant clergy in Houston, Texas in 1960:

I believe in an America where the separation of church and state is absolute; where no Catholic prelate would tell the President — should he be Catholic — how to act, and no Protestant minister would tell his parishioners for whom to vote; where no church or church school is granted any public funds or political preference, and where no man is denied public office merely because his religion differs from the President who might appoint him, or the people who might elect him.

I believe in an America that is officially neither Catholic, Protestant nor Jewish; where no public official either requests or accept instructions on public policy from the Pope, the National Council of Churches or any other ecclesiastical source; where no religious body seeks to impose its will directly or indirectly upon the general populace or the public acts of its officials, and where religious liberty is so indivisible that an act against one church is treated as an act against all.

Sad to say, the present Democratic candidate for president, Hillary Clinton, is no Jack Kennedy, any more than was Dan Quayle. (Millennials unfamiliar with this forgettable candidate might want to Google the video of the VP debate when Mr. Quayle compared himself to JFK.

Back to Hillary: At the 136th annual National Baptist Convention on September 8, the good woman passed around large slices of Pander Pie in assuring the Baptists that, we need a president who understands the powerful role that faith-and communities of faith-have always played in moving our country toward justice… A president who will pray with you, and for you… a president who will do justice, love kindness and walk humbly with our God.

Oy vey!

Well, at least she didn’t promise more tax subsidies (e.g., free college tuition if you take a pledge attesting that you truly love the Lord.)

Even if she said that, I’d still vote for her because Trump is worse beyond belief on every imaginable issue. (In fact, I fear if he reads this AWR, he might adopt the facetious idea I offered as a jejune example in the preceding paragraph.)

If all else fails and this bloviator gets elected, I’m going to act on a rumor I just started that Australia has a quota for very old people into REAL wellness who favor no taxpayer subsidies for religions.

All the best. Good wishes, be well and consider putting the elimination of subsidies for religions on your bucket list.

Collapsing Global Trade Growth Foreshadows Crash

The other week I took my son out to fly a drone we got him for Christmas – an aerial device that can hover and record video as it flies through the air.

We didn’t get him a top-of-the-line model – after all, he is just 7 years old – but it can still fly about 100 yards before you have to follow.

My son had flown the drone before, so I assumed he had piloting it down well enough to land it before entering the nearby woods… I was wrong.

I turned my back for literally 30 seconds, and he had already flown the drone as high as it could go, allowing it to drift directly over a wooded area about 50 yards from where he was standing. And, as if on cue, the drone plunged right into the middle of the woods.

At this point my son was pretty upset, as was I.

But I could only imagine how he felt as one of his favorite Christmas presents slipped farther and farther away before it was gone…

That feeling of seeing something you really enjoyed unexpectedly crashing is something I think central banks around the globe can relate to right now…

Global central banks have used every scrap of available monetary power to help the global economy take flight… yet nothing has gone quite according to plan.

The economy is now in the process of crashing back to earth, and central banks have no control and no buffer to even slow the situation down.

The result of this dangerous mix is a dire outcome for the global economy that will send us plunging into a stock market crash.

Into the Woods

As proof that the global economy is already on a downward spiral, the World Trade Organization (WTO) lowered its trade growth forecast for the year to just 1.7%, down from previous expectations for growth of 2.8%. The WTO also lowered its 2017 growth expectations.

Sure, 1.7% is still growth, but it’s modest and fading.

Trade growth is important to the global economy because it’s a signal of how healthy things really are. If trade is expanding, it leads to economic growth as countries buy more goods, thus creating new jobs and providing more money for corporations.

With trade growth slowing, we see yet another sign that the bull market is running out of steam.

But the important part that truly reveals how the situation has slipped out of central bankers’ hands is that trade growth is now less than global gross domestic product (GDP) growth, which is expected to come in at about 2.2%.

A five-tenths-of-a-point difference doesn’t sound like much, but it marks the first time global trade will grow at a slower pace than world GDP since 2001 – and that’s a big deal.

Don’t forget that when this same situation last occurred back in 2001, the S&P 500 shed 30% during the year and the Nasdaq Composite (tech stocks) plunged 50%.

Out of Options

It’s highly likely we will see a similar scenario play out really soon.

The markets are at the tail end of an eight-year bull market, and instead of major economic indicators pointing to overheated growth, we are experiencing modest growth at best… and even that is slowing.

What’s more, central banks have literally thrown everything at their disposal at the economy over the past few years in order to prop up growth – quantitative easing, low interest rates, negative interest rates, etc. With interest rates at all-time lows (and even negative in many places), central banks have left themselves with practically no room for additional accommodative policies. In other words, they have run dry on ways to help in times of economic turmoil.

So, as global central banks sit back and watch the buttons they have pressed fail to deliver the robust economic growth they were meant to create, it’s only a matter of time before the stock market experiences one of its worst plunges in history.