- The Patriot Act political theater in Washington — and the perils of government “reform”
- America 2015: Tightwad consumers, sluggish manufacturers
- How a market correction is well underway, even near all-time highs
- Rationed since early 2013, this asset class is now in plentiful supply
- Counting down to Rickards’ “House of Cards” event… taking The Onion seriously, continued… no, you’re not entitled to Social Security benefits… and more!
If you’re reading this email, you’ve survived. So far.
“I don’t want us to be in a situation,” said President Obama on Friday, “in which… heaven forbid, we’ve got a problem where we could’ve prevented a terrorist attack or apprehended someone who was engaged in dangerous activity.”
The Twitterverse seemed rather less concerned, having a field day with the hashtag #IfThePatriotActExpires
To be precise, it was Section 215 of the USA Patriot Act that expired at midnight last night.
When first passed in the weeks after Sept. 11, 2001, Section 215 authorized the feds to use secret orders from a secret court to collect “books, records, papers, documents, and other items” as part of a terrorism investigation. As a practical matter, the FBI could inquire about what books you were checking out at the library… and the library couldn’t tell you about it.
Then came the Snowden revelations two years ago, and we learned the NSA was acting under a secret interpretation of Section 215. Without a warrant or probable cause, the agency was hoovering up the telephone “metadata” of you, me and everyone else — who you call, when you call, how long you talk, etc.
As a practical matter, nothing changed at midnight last night — thanks to what Shane Harris writing at The Daily Beast calls a “zombie Patriot Act.”
“Not only does the U.S. government have all sorts of other ways to collect the same kind of intelligence outlined in the Patriot Act,” writes Harris, “but there’s also a little-noticed back door in the act that allows U.S. spy agencies to gather information in pretty much the same ways they did before.”
Meanwhile, Congress is set to pass a bill as early as tomorrow called the USA Freedom Act. Hypothetically, it “reforms” the NSA’s overreach. But it’s all for show, not for go, says Kirk Wiebe — a whistleblower who worked at the NSA for 36 years.
“The USA Freedom Act alone does fundamentally very little,” he says, “in terms of significantly constraining the ability of the National Security Agency to perform bulk collection of data about anyone, U.S. citizen or otherwise.”
And so the surveillance state keeps on truckin’. We bring it up this morning not to make a political statement — more as a cautionary tale, something to keep in mind the next time you hear chatter in the news about “reforming” a corrupt government agency or the tax system or the federal budget.
The notion that the Federal Reserve will raise the fed funds rate during 2015 took three blows this morning.
The first showed up in the monthly “income and spend” report from the Commerce Department. Personal incomes grew 0.4% during April… while consumer spending was flat.
And so it’s gone for nearly every month in the last year — incomes growing faster than spending, Americans are refusing to perform their patriotic duty by spending out of an empty pocket to “get the economy moving” again.
The second blow came from “core PCE” — the Fed’s favorite measure of inflation.
It shows a year-over-year increase of 1.2%. Not only is that far short of the Fed’s 2% inflation target, it’s sliding backward after appearing to have bottomed at the start of the year.
As far as the Fed’s concerned, its herculean efforts have achieved “enough” inflation during the “recovery” for only a handful of months in late 2011-early 2012.
The third blow came from the ISM manufacturing index — a private-sector gauge of U.S. factory activity.
Numbers above 50 indicate growth; below 50, contraction. The reading for May is up a point, to 52.8. That’s a four-month high, such as it is.
Econoday says the report “may be better-than-expected but it’s still very soft. The manufacturing sector appears to be stumbling through the second quarter.”
All three of those numbers point to what our Jim Rickards has said for years now. We’re in a depression — not a total collapse, but an extended period of “below-trend” economic growth. With perhaps worse to come.
We’re now 17 days away from Jim’s “House of Cards” event here in Baltimore… where he’ll reveal the stunning results of his latest research to a select group of readers. You can hear exactly what Jim foresees in the capital markets over the next six-12 months — including specific events, dates and timelines that could soon tip the world currency system into collapse.
Jim’s research will eventually be revealed to a wider audience, but if you want first-mover access, this event is the place to get it.
That’s a 100% solid gold ticket. Click the image to learn how you can get one…
Major U.S. stock indexes can hardly scare up a reaction to this morning’s trifecta of mediocre (from the Fed’s standpoint) numbers.
As we write, the biggest mover is the S&P 500, up only a tenth of a percent, to 2,110. Gold is flat at $1,193. Crude is back below $60.
“One thing that really struck me this time around was an upswing in bearish sentiment,” writes our Jonas Elmerraji — fresh from a gathering of fellow traders and technical analysts at the Market Technicians Association in New York.
“A couple of these guys think that this rally is getting long in the tooth and a correction is on the way. Yeah, I could certainly see that.
“A couple others even think that we’ve got a sharper crash coming — I’ve got to say that one surprised me a little bit.”
“The way I see it, we already are correcting,” Jonas says.
True, the S&P 500 is only 1% below its record close less than two weeks ago… but it’s also only 5% above where it was six months ago.
“This grinding 2015 price action threw a bucket of cold water on investors after the last couple of hot and heavy markets,” Jonas explains. “People just don’t know what to make of stocks right now. A big driver of that sideways price action in stocks is the Federal Reserve. The Fed has been reeling in liquidity lately – since 2014, in fact, excess reserves have been decreasing as the central bankers try to see what happens if they try to pump the brakes.
“What I think a lot of market watchers are missing right now is the fact that we’re in an environment with very few individual market participants and exceptionally low volatility. A correction here isn’t necessarily going to look like the sort of correction (or crash) you’d expect to see in an exuberant stock market.”
Jonas’ near-term outlook: Expect the sideways grind to last well into the summer. “Mr. Market isn’t going to make his next move obvious.”
The supply squeeze on U.S. Silver Eagles is over — at least for now.
For most of the last 2½ years, the U.S. Mint has been rationing supply to its dealer network. Sales set records in 2013, and again last year — when just over 44 million Silver Eagles exited the Mint’s doors.
As of this morning, the rationing is over. Not coincidentally, demand is down this year. The total sold during the first five months of 2015 is just shy of 17 million. At that pace, the year-end total will reach 40.6 million.
How many times need it be repeated? The Onion is satire.
Over the years, The 5 has chronicled several instances of people getting tripped up by thinking Onion stories are for real. Our favorite remains China’s People’s Daily picking up an Onion story about North Korean leader Kim Jong Un being named 2012’s “Sexiest Man Alive” — complete with 55-image slideshow.
Now comes one of the indicted former officials of soccer’s global governing body FIFA citing an Onion article in his defense.
Jack Warner, FIFA’s former vice president and a member of parliament in Trinidad and Tobago, took to social media on Sunday — posting a video in which he holds up a printout of an Onion article posted the day after U.S. prosecutors indicted 14 people for bribery.
The lead to the story: “After the Justice Department indicted numerous executives from world soccer’s governing body on charges of corruption and bribery, frantic and visibly nervous officials from FIFA held an impromptu press conference Wednesday to announce that the United States has been selected to host this summer’s 2015 World Cup.”
Somehow, Warner thought it was for real. “If FIFA is so bad, why is it the USA wants to keep the FIFA World Cup?”
How to humiliate yourself on social media.
Warner pulled his rant from Facebook, YouTube, etc., and posted an edited version, sans the Onion reference, later. But a YouTube user reposted the original.
So… not only does Warner think The Onion is for real, he fails to remember nothing ever disappears from the Internet. Heh…
“I know this will not sit well with many who read this publication daily,” a reader writes, “but the Social Security tax we pay with every paycheck is not a down payment on a retirement plan.
[We knew someone would bring this up eventually in light of our special report on how to “piggyback” the Canada Pension Plan, which is run far more responsibly than Social Security.]
“This was argued before the Supreme Court of the United States, in the case Helvering v. Davis, and in 1937, Associate Justice Cardozo wrote the opinion for the court.
“Social Security is a tax that Congress can spend however it chooses for the general welfare of the country. There is no requirement that Congress must pay anything to anyone in any given year. Social Security is a budget item they fund every year, no different than any other department in the U.S. government.
“FDR campaigned for the Social Security program and made promises that people still believe today. But when he had to defend the program in court, he retreated to the basic analysis the program was a tax to be used for the general welfare of the country that Congress had levied on the American worker and his employer, which the Supreme Court upheld in 1937. This can all be verified by using a search engine and the words ‘Social Security’ and ‘Cardozo.'”
The 5: And don’t forget Flemming v. Nestor — the 1960 ruling which made matters even more explicit: “To engraft upon the Social Security system a concept of ‘accrued property rights’ would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands.”
Flexibility and boldness. Those are blank-check words for Congress.
“If Social Security paid out $863 billion last year, and I think I read the average payout is $1,300 per month, or $15,600 per year, that would mean that 55,320,512 people are getting Social Security.
“How many of these people are retirees that ever paid into SS? And how many are not even retirees?
“Then there is the next question: Where did the money that doubled the national debt in the last six years go?”
The 5: The number of Americans collecting Social Security benefits is more than 59 million, according to the Social Security Administration.
Of those, 38 million are retired workers and another 2.9 million are their dependents. About 8.8 million are on Social Security disability; another 2 million are their dependents. And about 6.2 million are collecting survivor benefits.
To be precise, it’s taken nearly eight years for the national debt to double to its present $18.1 trillion… although we’re compelled to point out the Treasury is once again resorting to “extraordinary measures” to stay under the debt ceiling.
See why we’re so skeptical about “reform” measures from Washington?
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. No wonder we’re so high on the Canada Pension Plan when compared with Social Security. It’s professionally managed, it runs a surplus and its reserves are set to quadruple by 2040.
And it’s so easy to collect “benefits” of hundreds or even thousands a month. Three simple steps and you’re on your way: Check it out right here.
