The Uberization of Money

The familiar middlemen of 20th-century banking and investing are giving way to something very different. Are we ready for the opportunities—and the risks?

By Zachary Karabell

 Over the next decade, the familiar 20th-century modes of banking and investing will give way to something very different. We are on the verge of the Uberization of finance, which will bring multiple new opportunities but also a range of new risks.

Over the next decade, the familiar 20th-century modes of banking and investing will give way to something very different. We are on the verge of the Uberization of finance, which will bring multiple new opportunities but also a range of new risks. Photo: Getty Images    

Imagine that you want to buy a home. You might find a real-estate agent to show you around, which is a very 20th-century way of doing things. Or you might go 21st century and use the Web to research prices and available properties and to take a few virtual tours.

When it comes time to buy, however, you will probably revert to procedures that were created in your grandparents’ era. You will assemble financial documents and present them to a loan officer at a bank, who will take weeks to determine what you can borrow and at what rate and then present you with a narrow menu of costly options.

Imagine instead a simple online interface that could generate a tailored credit score for you, taking into account your future earning potential based on your education and location. It would connect you to lenders ranging from banks and credit unions to pools of individuals who want to lend privately at a negotiated rate for whatever duration you agree on. You could shop around, combine different types of financing and arrange a mortgage package that best suits you, all within a few hours.

We aren’t quite there yet, but we may be soon. Over the next decade, the familiar 20th-century modes of banking and investing will give way to something very different. We are on the verge of the Uberization of finance, which will bring multiple new opportunities but also a range of new risks.

The ubiquitous ride-sharing company uses a simple device—the smartphone—to connect people who want rides with people who want to drive them. Uber is a high-tech middleman that is making the intermediaries of the past obsolete. The financial world is one of the most mediated industries on the planet, and that is precisely what is about to change. Uberization also means using vast amounts of data to make those connections feasible.

Technology is one source of this shift, but so is legislation. The JOBS Act of 2012 contained a seemingly innocuous provision making it easier for startups to raise money from investors previously deemed too poor to dabble in such ventures. At the end of October, the Securities and Exchange Commission finally approved the rules, which will go into full effect early next year. As a result, any company or person with an idea can solicit and raise up to $1 million without most of the onerous regulatory and reporting requirements of the past.

So what lies ahead? Retail banking is the one area of the financial world that has undergone tremendous change over the past decade. Bank tellers are now scarce, and many consumers use smartphones for payments and deposits. It also has become much easier to trade shares online.

But core services such as lending money, raising capital and investing for clients still depend on a firm to act as a conduit—and as a choke point. With many promising startups already launched and with venture capital funding new ones every day, here’s a glimpse of what we can expect in the years ahead.

Hey buddy, can you spare a loan?

The most immediate change will be an explosion in peer-to-peer lending. Just as Uber returns us to a world where anyone with a car could offer a ride to anyone with a thumb, peer-to-peer lending is both new and old. Before there was a robust retail and commercial banking system, there were people with money to lend and people who wanted to borrow it. But the current wave of peer-to-peer services takes this much further, into a hypercharged virtual realm where pools of small lenders can combine online to disperse pools of small loans. And they can do it without the friction, cost or heavy regulatory hurdles of traditional banking.

There are already many players in this field, such as Lending Club and Prosper, but most are already a decade old—ancient by tech standards. With less than $7 billion in loans in 2014, they are tiny in the multi-trillion-dollar lending world. Now the sector is showing explosive growth.

PricewaterhouseCoopers estimates that it could be a $150 billion business by 2025.

The downside is that peer-to-peer interest rates are higher than at mainstream banks, sometimes well into the teens. The upside is that people who need modest sums (one site caps them at $35,000) can easily obtain funds from small individual lenders looking for a high return. What makes it attractive for lenders is that they can spread their capital over far more loans than any one peer could make to another peer, which reduces their risk.

And the options are proliferating. Venture capitalists clearly believe that nontraditional lending will be a huge market, especially for millennials who, in survey after survey, express distrust and disdain for traditional banks. New companies such as SoFi (which has raised more than $1 billion) are focusing on individual loans at even lower costs and on the student market, helping people to refinance their loan packages. SoFi is also rapidly moving into mortgage refinancing, another area where traditional banks and government have been, to put it mildly, sluggish.

If you build it, they will come.

Lending money to businesses remains a pillar of the financial sector. Yet credit standards, judging by Federal Reserve surveys of loan officers, remain much tighter than before the financial crisis of 2008-09. That may be prudent, but it has had a chilling effect on business creation. The U.S. is now 12th in the world in new business creation, according to Gallup, and significantly fewer new businesses are started today than in the 1970s, when the U.S. population was much smaller.

Loans to large companies are up over the past decade, but lending to small business has contracted, from more than $700 billion in 2008 to less than $600 billion today, according to the Small Business Administration. As for the Silicon Valley ecosystem of venture capital, it certainly doles out funds to dreamers, but it excludes many types of businesses, especially brick-and-mortar ones.

All of this explains why new funding ventures have received such a boost from the JOBS Act. Kickstarter is the most familiar, with Indiegogo close behind. These crowdfunding platforms let almost anyone announce an idea and solicit money for it, usually in chunks of $1,000 or less. No established venture-capital firm or large bank would dole out such small amounts. Their overhead alone, for due diligence and compliance, would mean steep losses on investments that size.

But the new crowdfunding sites remove those layers, and for now they have few of the regulatory burdens or scrutiny. It is the Wild West of fundraising. The most recent success was Oculus Rift, a maker of virtual reality headsets that raised $2.4 million on Kickstarter and then was bought by Facebook FB -1.53 % a little more than a year later for $2 billion.

The big hitch? A Kickstarter contribution is a donation. When people fund projects on the site, it is out of passion for the product, not any hope for a financial return.

The next wave of crowdfunding, through sites such as SeedInvest and Fundable, will offer equity ownership to those who throw money into the ring. This new model could upend the insular world of venture capital and business loans while at the same time providing new opportunities for small investors. As for a would-be innovator, if you can post an idea online, raise a million dollars for it and (most important) choose how much equity you want to part with at what valuation, why go through the gauntlet of a commercial loan application or make the rounds at the VC firms on Sand Hill Road?

The result is likely to be billions of dollars of new funding, which would spur lots of good ideas—and lots of bad ones, too. The prospect of unconventional new funding sources has already prompted comparisons to 1999, when millions of individual investors joined the IPO craze only to see their shares of become worthless. Such risks are very real, but either way, much more money will be in motion.

What’s a broker?

The traditional model for buying and selling stocks, managing a portfolio and handling assets for retirement was to pay someone else to do it. The next model will be to use Web-based technology to do it yourself or to work in conjunction with experts online.

One of the hottest areas of fundraising in the financial world is a panoply of online wealth-management companies offering a range of services. Their assets are tiny today, not much more than $20 billion. But they have attracted attention and funding because they, too, threaten to disrupt the traditional modes.

Betterment, Wealthfront, Personal Capital and other “robo advisers,” though still marginal in terms of assets, have shaken the wealth-management market. Especially for smaller accounts, they offer basic asset allocation and investing services for a fraction of the ordinary fees. Fund behemoths such as Vanguard and online brokers such as Schwab also have developed and unrolled their own digital advisory services.

Then there is the rise of exchange-traded funds, which are challenging actively managed mutual funds, especially those that charge high fees to deliver the same returns as an index. More than 1,500 ETFs now account for $2 trillion in U.S. assets.

Change will also arrive in the way that stocks and bonds are sold. The 20th-century model has already given way to the online world of ETrade and Schwab, but those models are being challenged, too. Newer digital entrants can offer fractional shares of both stocks and bonds.

Bond trading in particular is still controlled by a small number of dealers in the belly of traditional Wall Street for high, opaque fees.

Those who profit purely by facilitating simple financial transactions are increasingly hard-pressed to compete when many of those transactions can be done for nearly zero cost. The traditional investment banks are already seeing profits from their trading desks plummet.

Bond business for Goldman Sachs GS 3.72 % was down 33% last quarter, and its rivals didn’t fare much better.

The trend ahead is worse for these legacy firms. If they offer a service that is not easily automated, they can thrive. If not, look out. Why pay a broker a hefty commission if the same purchase can be done online for pennies? Why pay a human adviser who does no more than cookie-cutter asset allocation? Why pay an active mutual fund if it only offers index returns?

The developing financial landscape will include more creative ways to save and invest, more ways to buy and sell stocks and bonds, and more demand for better advice, delivered interactively online.

Stocks aren’t just for them.

For the past century and a half, every bubble that has burst in the equities market has been followed by a long period of retrenchment. Individuals get burned and then avoid exposure to future losses.

That happened after the Great Depression and after 1999, and it is happening now in the wake of the financial crisis. Equity markets have gone up and up since March 2009, but retail investors have been largely on the sidelines.

But what if the next wave of stock ownership isn’t just trading your own account, but stocks as a form of affiliation with brands? What if that Starbucks SBUX -0.50 % card came not just with a free latte after 10 purchases but a share of Starbucks after 100? And what if the maker of that cool new device, the GoPro GPRO 1.29 % of tomorrow, could offer its shares directly to its avid users instead of having to rely on investment banks to dole out the shares?

Several Silicon Valley startups are already attacking the problem. Loyal3 aims to connect public companies to loyal customers who want to buy shares as early as the IPO, while EquityZen and others do the same for private companies. The idea of directly marketing shares to customers is old, but the new wave makes it far easier—at the click of a button—and cheaper. If these novel ways of buying and distributing shares take off, it could turn stock ownership into a more universal phenomenon.

Providing financial services to the less well-off and the unbanked is also an area seeing considerable investment interest and activity. ZestFinance, founded by former Google executives and flush with venture capital, uses big data to offset the inherent risks. It is just one of many new ventures in this field, which promises to open hitherto closed spigots of capital to all classes, not just the middle and upper.

It is easy, of course, to forecast a new world of money in motion and all of the benefits it may entail. These innovations are almost all products of the last five years, after the financial crisis. They might look less promising if the tide suddenly goes out again. A large institution can survive a bad investment; an individual of modest means won’t so easily weather a complete wipeout on a peer-to-peer loan.

Whatever the risks, however, the Uberization of finance is no fad or stunt. Many of today’s startups may implode, as most do, but the spread and democratization of capital—and the proliferation and analysis of data—are irresistible trends. They will offer new opportunities to millions of people, entrepreneurs and investors alike. They also will unlock a vast amount of money, energy and talent, and to that we simply should say, bring it on.

Mr. Karabell is head of global strategy at Envestnet, a financial services firm, and the author of “The Leading Indicators: A Short History of the Numbers that Rule Our World.”

Robots may shatter the global economic order within a decade

'The pace of disruptive technological innovation has gone from linear to parabolic,' says Bank of America

By Ambrose Evans-Pritchard

 robot manufactured by China Aerospace Science and Technology Corporation performs
China International Industry Fair, Shanghai, China - 03 Nov 2015

A robot manufactured by China Aerospace Science and Technology Corporation Photo
 Robots will take over 45pc of all jobs in manufacturing and shave $9 trillion off labour costs within a decade, leaving great swathes of the global society on the historical scrap heap.
In a sweeping 300-page report, Bank of America predicts that robots and other forms of artificial intelligence will transform the world beyond recognition as soon as 2025, shattering old business models in a whirlwind of “creative disruption”, with transformation effects ultimately amounting to $30 trillion or more each year. 
“The pace of disruptive technological innovation has gone from linear to parabolic,” it said. Any country that fails to embrace the robot revolution will slip rapidly down the rankings of competiveness, and will be left behind.  

South Korea is currently in the lead with 440 industrial robots per 10,000 employees in the manufacturing industry, followed by Japan and Germany. Britain is languishing far behind at 75, one of lowest levels in the developed world, the dark side of the UK’s low-productivity labour policies.

The report said the demand for automation is “skyrocketing” as the world’s population ages – with the number of people over 60 expected to rise from 841m to more than 2bn by the middle of the century – and as the once limitless supply of cheap labour dries up in Asia.

The price of an advance robotic welder fell from $182,000 in 2005 to $133,000 last year, and its sophistication is increasing all the time. The standard Baxter collaborative "cobot" that works side by side with people on the factory floor – fixing bolts on a conveyor belt, for example – costs just $22,000.

We are coming close to the crucial “inflexion point” when it is 15pc cheaper to use a robot than to employ a human worker.

Manufacturing wages in China have jumped ninefold since 2000, and the country’s workforce is shrinking. China is already the world’s biggest buyer of robots, making up a quarter of the global market. 
The costs of robots, "care-bots" for the elderly, "agribots" to plants seeds or pick fruit, commercial drones and artificial intelligence have, on average, dropped by 27pc over the past 10 years, and are expected to fall a further 22pc by 2005.
The price of an advance robotic welder fell from $182,000 in 2005 to $133,000 last year, and its sophistication is increasing all the time. The standard Baxter collaborative "cobot" that works side by side with people on the factory floor – fixing bolts on a conveyor belt, for example – costs just $22,000.
We are coming close to the crucial “inflexion point” when it is 15pc cheaper to use a robot than to employ a human worker.

This threshold has already been crossed in the American, European and Japanese car industries, where it costs $8 an hour to employ a robot for spot welding, compared to $25 for a worker. Hence the eerie post-human feel of the most up-to-date car plants. “We are facing a paradigm shift, which will change the way we live and work,” said the report's author, Beijia Ma.
The social effect is to squeeze out those at the bottom of the employment ladder, rendering them almost unemployable without re-education. Bank of America describes this as the “displacement of human labour”, estimating that almost half of US jobs could be at risk.
Productivity will soar but wages will not rise at the same pace, if at all. The owners of capital will take an even bigger slice of global income, pushing inequality to yet greater extremes.
Labour’s share of the pie peaked at 65pc in 1975 in the rich countries and has already dropped to 58pc.

The workforce will split yet further into the "haves" at the top of education scale and the "have-nots" with just high school qualifications, not to mention the 800m illiterates in the world. It is easy to imagine the explosive political consequences if governments fail to take action to mitigate the effects, yet this may be almost impossible in a borderless, globalised world.
Nor are the middle classes invulnerable. Bank of America said "robo-advisors" using algorithm-based systems will “disrupt” 25m workers in financial and legal services. The Millennial generation – now 18-34 years old – will be the first to switch en masse to these post-human services. This rising cohort already holds $7 trillion of liquid assets and is likely to inherit another $30-$40 trillion from Baby Boom parents.
Not everybody accepts this overall hypothesis. Professor Charles Goodhart, from the London School of Economics, wrote a paper recently for Morgan Stanley making the opposite argument, contending that the demographic crunch across the Northern hemisphere will overwhelm the effects of technology and lead to an acute labour shortage.

Under his scenario, workers will take their revenge and claw back the lost share of income as wages rise. The return on capital will fall, and the global deflationary supercyle will end in a bloodbath for the bond markets.


There have always been fears of mass destitution with each sudden shift in technology, whether it was the 18th century wool weavers of Yorkshire and the West Country displaced by cotton, or the machine-breaking Luddites in the 19th century threatened by the power loom, or dozens of other such episodes across the world throughout history.
The losers – or their children, at least – are eventually absorbed back into new industries. Human ingenuity has always prevailed. Larry Summers, the former US Treasury Secretary, warns that history is non-linear and it may be different this time.
The proportion of those in the US aged 25-54 and not working has tripled since 1965, suggesting that a chronic effect is already taking hold.
They cannot migrate to textile mills and the manufacturing hubs of the cities, as they did in the 18th and 19th centuries to escape the effects of the agricultural revolution.  

There is nowhere to go. Labour-saving devices are sweeping everything, everywhere. A single professor can teach a course to 150,000 students through digital technology.
We may achieve the dream of prosperity without toil as robots take over, but find ourselves living in a jobless dystopia.

Germany and Europe

The indispensable European

Angela Merkel faces her most serious political challenge yet. But Europe needs her more than ever

LOOK around Europe, and one leader stands above all the rest: Angela Merkel. In France François Hollande has given up the pretence that his country leads the continent. David Cameron, triumphantly re-elected, is turning Britain into little England. Matteo Renzi is preoccupied with Italy’s comatose economy.  

By contrast, in her ten years in office, Mrs Merkel has grown taller with every upheaval. In the debt crisis, she began as a ditherer but in the end held the euro zone together; over Ukraine, she corralled Europeans into imposing sanctions on Russia (its president, Vladimir Putin, thinks she is the only European leader worth talking to); and over migration she has boldly upheld European values, almost alone in her commitment to welcoming refugees.

It has become fashionable to see this as a progression from prudence and predominance to rashness and calamity. Critics assert that, with her welcoming attitude to asylum-seekers, Mrs Merkel has caused a flood that will both wreck Europe and, long before, also bring about her own political demise. Both arguments are wrong, as well as profoundly unfair. Mrs Merkel is more formidable than many assume. And that is just as well: given the European Union’s many challenges, she is more than ever the indispensable European.

Why Mutti matters
Mrs Merkel’s predominance in part reflects the importance of Germany—the EU’s largest economy and its mightiest exporter, with sound public finances and historically low unemployment. She is also the longest-serving leader in the EU.

Her personal qualities count for much, too. She has defended Germany’s interests without losing sight of Europe’s; she has risked German money to save the euro, while keeping sceptical Germans onside; and she has earned the respect of her fellow leaders even after bruising fights with them.

Most impressively (and alone among centre-right leaders in Europe), she has done this without pandering to anti-EU and anti-immigrant populists. For all the EU’s flaws, she does not treat it as a punchbag, but rather as a pillar of peace and prosperity.

Mrs Merkel is far from perfect. She is not given to great oratory or grand visions. She can be both a political chameleon who adopts left-wing policies to occupy the centre-ground, and a scorpion who quietly eliminates potential rivals. Her natural caution has given rise to a German neologism, merkeln (“to merkel”, or put off big decisions). Her timidity in handling the euro’s woes deepened the crisis unnecessarily; she has spurned the risk-sharing that the euro area needs to thrive.

Ironically it is boldness, not timidity, that has brought Mrs Merkel the greatest challenge of her time in office. Her staunch refusal to place an upper limit on the number of refugees that Germany can absorb has caused growing consternation at home and criticism abroad. As German municipalities protest, her political allies are denouncing her and eastern European countries are accusing her of “moral imperialism”. With Willkommenskultur fading, there is even talk of her losing power.

The doubts are overblown. Critics are wrong to assume that Mrs Merkel is about to be toppled.

Grumbling aside, she remains the dominant figure of her Christian Democratic Union (CDU). A recent poll found that 82% of CDU members approve of her leadership and 81% want her to run for a fourth term as chancellor at the election due in 2017. The electoral maths favours another CDU-led government. Mrs Merkel is unlikely to go unless she chooses to.

And the naysayers are wrong to suggest she has lost her way on migration. Quite the opposite. During the crisis the Lutheran pastor’s daughter has found a forceful political and moral calling. Mrs Merkel did not cause the onrush of migrants, as her critics maintain. The migrants were coming anyway: she acted to avert a humanitarian disaster. Fences will not hold back the flow. Mrs Merkel can neither stop the wars that drive people out of their homes nor set the policies of the countries they pass through. Her critics offer no plausible alternative. Short of overturning international and European law, and watching refugees drown or die of exposure, EU countries must process the claims of asylum-seekers. The question is: will the process be orderly or chaotic?

Under Mrs Merkel, a four-part policy is taking shape: unapologetically absorb refugees at home; share the burden across Europe and beyond; strengthen controls and the processing of asylum-seekers at Europe’s external borders; and negotiate with transit countries.

This approach is principled and, in the long run, it is the only one that can work. Of course it comes with drawbacks and risks. There are likely to be less-than-principled deals, particularly with Turkey: turning a blind eye to the erosion of civil liberties and the disturbing election victory of President Recep Tayyip Erdogan’s ruling Justice and Development (AK) party, and other concessions, in the hope that he will agree to act as Europe’s gatekeeper.

And there is no denying that the mass influx of refugees is aggravating many of Europe’s other looming problems: it is fraying relations between Germany and eastern European countries just when solidarity is vital to contain Russia’s aggression; it is adding to the burdens of Greece, already crushed by years of austerity and never far from leaving the euro; it is bringing Brexit from the EU closer, too, by giving voters more reasons to leave in Mr Cameron’s promised in/out referendum; and it is stoking populism everywhere.

Stormy weather
This is Europe’s biggest crisis in a generation. If integration once seemed inexorable, the pressing question now is how to stop the EU from fraying. Mrs Merkel did not cause this grim reality, but she is the continent’s best hope for dealing with it. It is in Europe’s best interests to help the chancellor rather than leave her to confront the crisis alone. After a decade in power, politicians usually retire, lose touch or are overthrown. But, without Mrs Merkel, it is hard to see Europe mastering its destructive forces.

Gold And Silver - Deception, Not Fundamentals Rule PMs

By: Michael Noonan

There are two things we know for certain about gold and silver: 1. Fundamentals do not apply [currently], and 2. There are no signs to indicate an end to this half-decade old bear market.

There have been many calls for a turnaround in gold and silver since 2013. In fact, the calls were not just for a turnaround, but also calls for $10,000+ gold, and $400+ silver, starting in 2014. It became apparent to us in the first half of 2014 that it would end with a whimper, just as 2013 did, and as 2014 continued, it seemed equally as likely that 2015 may not fare much better, and it not only did not, but it got worse with lower prices and the prospects for still lower prices to come. This puts the first part of 2016 in question.

We chose to comment on the Syria situation over the past few weeks because it seemed to address the fact that gold and silver would not show any signs of a turnaround for as long as situations like Syria exist with zero fear impact to move gold higher. We say fear impact because there is a greater probability that the Middle East, and Syria in particular could ignite WWIII.

It makes no sense to discuss fundamentals as applied to PMs because they are inoperative at the present time, thanks to globalist US central bank manipulation, [throw in the UK].

It is taking far longer than most expected for gold and silver to reflect the incredible world imbalance between issuing endless fiat, corrupting bonds, and hiding everything behind a shadow derivative market. There can be no doubt that ownership of physical gold and silver will reward their holders. It has been proven so throughout time, and it will prove to be the case this time around, as well. Keep buying, keep holding.

The Obama administration is doing everything it can to create the potential for eminent disaster on top of the disaster it has created in creating ISIS as a means of unlawfully getting rid of an elected president in Assad. Saudi Arabia, Qatar, and Turkey are also doing their part to make a bad situation worse to make sure Shiites do not gain any more power or control in that trio's backyard.

If these unfolding events cannot bring to bear any impact on the price of gold, then gold and silver will remain as mired down at low levels as much as the US has remained mired down in its failed policies throughout the Middle East in its destabilization efforts to being about change. Russia's support of Assad has exposed both the duplicity and ineptness of the US trying to get rid of the Syrian president.

Americans live in a media bubble that precludes them from hearing what is actually going on in Syria, even Yemen. Let us back track about 6 or 7 months ago. Russia had proposed a UN Security Council resolution prohibiting the use of Space/Cosmos for military purposes. Guess which country vetoed it? A few weeks later, Russia renamed its Air Force to Air-Cosmic Force.

There was zero media coverage. Absolutely none! Then, just 2 weeks later, a US satellite was blown up, ostensibly because of a "sudden temperature increase."

We will never know what the purpose of the satellite was, but it is odd that this happened, and it is an example of the subsidiary events that do not seem directly linked to the Middle East, yet the common denominator linking the US is Russia. The globalists want Russia subdued into submission, and Obama is doing what he can in the service to the globalists to bring Russia to her knees, but Putin has become an embarrassing thorn in the sides of the globalists and Obama.

Recently, Laura Seal, spokeswoman for the US State Dept, said Russia was bombing Syrian hospitals and killing civilians. When pressed by two reporters, one from RT [Russia Today], she refused to give any specifics. [Hard to justify lies when pressed for the truth.] However, the US has admitted, on record, to bombing a hospital in Afghanistan, a Doctors Without Borders hospital, killing 30. Further, civilians fleeing the hospital on foot were shot down by the planes, according to surviving witnesses.

Not only has there been no US media coverage keeping the American public [un]informed of events, there has been no accountability for the Nobel Peace Prize recipient Obama's failed intervention in Syria being responsible for the loss of over 300,000 lives and the displacement of over 4,ooo,ooo refugees. Instead of trying to defeat ISIS, which the US claims is one of the worst imaginable terrorist organizations, [created, financed, and armed by the CIA], Obama is ramping up ammunition drops to ISIS and other terrorists and sending more troops to Iraq to halt Putin's momentum. The chance of a major war increases everyday.

Syria has officially asked for Russia to intervene, and Syria has also told the US it is neither wanted nor needed. That has not stopped Obama as he and his neocon advisers have decided to put 30 - 50 special ops advisors in Syria, aka boots on the ground, something Obama promised not to do on at least 16 recent occasions. Of course, Obama has an unblemished record for not keeping any of his promises.

[Neocons are all for curtailing civil liberties, free markets, and want to see national identity cards introduced in the US to easier track people].

It is no coincidence that just a few weeks after Russia began bombing ISIS strongholds and killing large numbers, embarrassing the US again, a Russian commercial jet airliner mysteriously exploded in mid-air, killing all aboard. Interestingly, it was the US that was first to claim that a bomb had been placed on board the flight. As another aside, it should be noted that Israel is in charge of Egypt's airport security. [What could go wrong there?]

What led the US to express that conclusion? It had a satellite thermal image of a bright flash occurring just as the plane was destroyed in the air. How interesting the US would be following by satellite a Russian commercial flight out of Egypt that happened to capture the explosion in real-time.

Why would the US be following a routine commercial flight out of Egypt by satellite?

Recall how last summer, 2014, when Malaysian flight MH-17 was shot down while flying over Ukraine. You can bet that the US was closely following this war region by satellite in an area where it had an active interest, yet for some reason, it never spoke out about having satellite images of that flight when actual thermal images existed. For those with short memories, the day after the downing of flight MH-17, Obama announced that the plane was downed by Russia, accusing Putin of being involved. There is a reason why Obama never uttered another accusatory word since, and he certainly never retracted his accusation against Putin.

With the downing of the Russian jet, killing all aboard, how does Obama respond?

On Tuesday November 3rd, U.S. Defense Department spokesperson Laura Seal announced that twelve F-15C air-to-air combat planes are being sent to the Incirlik Turkey Air Base for deployment in Syria against Russia's Su-30 air-to-air combat planes. Neither the F-15C nor the Su-30 can destroy ground-targets, only air-targets -- enemy planes.

It is important to understand that the F-15C planes cannot destroy ISIS ground targets.

Rather, the planes are solely for air-to-air combat. Guess which is the only country authorized to fly in Syrian air space? Yes, Russia. So Obama is deliberately sending in planes that may eventually be used against Russia's Su-30 fighters.

Can there by any doubt in anyone's mind that the US and the Obama regime are deliberately interfering in another sovereign country's affairs, especially after being told the US was not welcome there? The US has been doing everything possible, for decades, to subdue, and destroy, if necessary, Russia? Why else would the US be doing everything possible to place NATO bases as close to Russia as posible?

If, and everyone hopes it remains "if" and not when, WWIII is started, it will be from the direct actions taken by the most aggressions/suppressive nation on the planet, the corporate federal UNITED STATES, owned and directed by the globalists.

Many, if not most Americans still believe the federal government is there to protect them, in some way. We always advocate that people do their own due diligence and not take our word for anything said in these commentaries. Every US citizen was declared to be an enemy of the federal government by an amendment to the Trading With The Enemy Act in 1933. It is harder to verify now on the internet because a lot of information is being "sanitized," but persistence will pay off. The federal government is not why people think.

It was a matter of time before the Federal Reserve fiat issue "dollar" would renew its upward pressure. The Fed is irretrievably caught in its web of fiat self-destruction, at least for the US and a good part of the EU. More than likely, the globalists are grooming the Yuan to replace the "dollar," but China is not prepared to take over that role of the world's reserve currency.

It is not impossible to say China may never take over that role, but if it is to be the globalist's Special Drawing Rights [SDRs] that become the next de facto world currency, China will want to and will play a more important role and have a greater say. Russia and its Ruble remain a question mark.

As we have noted all year, the currency correction has been relatively weak, and weak corrections auger for higher prices. There is no way to know how much higher the deception of the fiat "dollar" will go.

US Dollar Index Weekly Chart

In any/all TRs, a resolve is reached as price moves farther and farther along the RHS of the TR [Right Hand Side]. There will inevitably be signs of some form of ending action that declares the down trend to be finished. We have not yet seen any such sign. The sooner price can make a new recent lower low, the greater the probability that the down trend will end. In that regard, everyone who wants to be bullish should cheer on lower prices, for now.

Gold Weekly Chart

If the daily chart conveys any message at all, it says the down trend is not over, and the probability of a new recent low is greater, as of last week. The EDM [Ease of Downward Movement], since the mid-October high is an overt statement that sellers remain in full control, and buyers remain unable to help their own cause.

The trend is down, and knowledge of any trend is a one of the most important pieces of information one can have. We have been making this point for the past few years and will continue making it until a change has been confirmed.

Never fight the tape, an old saw that will always remain true.

Gold Daily Chart

Compare the TR section from June 2013 through October 2014, with the lower TR from November 2014 to date. The latter, lower TR has smaller ranges and is more compact. This is the market advertising the fact that sellers, while still in control are finding it more difficult to push price lower and faster over the past year. It may be a clue that the end of this protracted TR gets closer to ending.

All that is needed is a form of ending action, and there is none.

Silver Weekly Chart

The false breakout, 8 TDs ago, looked promising because of the relatively weak correction following the rally at the start of October. We took a small position on the breakout and experienced a small loss. No one can be blamed for getting long, based on developing market activity that had a positive formation, for there was really no way to anticipate the manner in which price did ultimately reverse so quickly.

The use of stops kept exposure at a reasonable level, and stops are a necessary requirement. Anyone who trades without stops is asking for a shortened trading life.

More patience is required in holding gold and silver. Buying and holding still makes sense. The fiat "dollar" cannot and will not survive.

Siver daily Chart

jueves, noviembre 12, 2015



Tax evasion

The mega-haven

An index of financial secrecy highlights American hypocrisy


THE world is becoming less welcoming to tax dodgers. That is the conclusion of the latest Financial Secrecy Index, published every two years by the Tax Justice Network (TJN), an NGO. It looks at various measures of financial transparency and information-sharing in more than 90 countries, then weights them according to the level of financial services each country provides to non-residents.

Most countries’ scores have fallen since 2013, indicating greater transparency. Among the biggest improvers are the Cayman Islands, once a notorious tax haven, and Luxembourg, which tax campaigners used to call Europe’s “death star” of financial secrecy.

The reason for the shift is the global, austerity-era push for countries to share more information on tax arrangements. Under the fast-spreading, OECD-sponsored Common Reporting Standard, countries will routinely exchange data on each other’s citizens so they can be taxed appropriately in their home countries. Rules on the registration of corporate ownership are being tightened, too, in order to reduce opportunities to hide dirty money in anonymous shell companies.

But America, the country that has arm-twisted so many others to join the transparency revolution, is dragging its feet. It is now the third most secretive jurisdiction, behind Hong Kong and, inevitably, Switzerland (where rumours of the death of bank secrecy have been exaggerated).

America was in the vanguard in the fight against tax havens, first targeting the Swiss, then passing the Foreign Account Tax Compliance Act, or FATCA, which forces financial firms all over the world to spill the beans on their American clients. While demanding concessions from others, however, Washington has made few itself. It has, for instance, failed to engage with the OECD’s data-sharing scheme. Worse, anonymity-friendly incorporation regimes at the state level mean America is unmatched in corporate secrecy.

This matters, because America hosts a lot of offshore business—just ask a billionaire from Caracas or Cairo where he buys property or sets up the shell companies that hold it. The TJN offers a solution: it reckons Europe should mimic FATCA by imposing a stiff withholding tax (it suggests 35%) on payments from Europe to American financial institutions, until America gives as much data as it takes. That would induce wry smiles in Zurich.

The Pharaoh's Dream

Sisi Wants a New Capital City for Egypt

By Nicola Abé

Egyptian President Sisi would like to build a new capital that is easier to control than Cairo.    

Scott Nelson/ DER SPIEGEL
Egyptian President Sisi would like to build a new capital that is easier to control than Cairo.

Cairo is an unruly urban sprawl that has spun out of control. Now, officials want to build a new capital in the desert -- a potent symbol of President Sisi's regime. But will it ever happen?

The road ends abruptly. The search for Egypt's new capital city leads into the desert, primrose beneath the hazy sky. Workers speed past a white container in the midday heat, a crane rises into the air, and tire marks can be seen in the sand. "You can't get any closer," says Sayyad al Sabagh, pointing into the distance. "From here it's about 25 kilometers (15.5 miles) to the right." A dune swells on the horizon.

Sabagh is 60 and has worked as a civil servant with Egypt's Building Ministry for the past 24 years. He is sitting inside a red pickup truck, map in hand, and says the highway leading to the new Cairo will eventually have four lanes. "Inshallah," God willing. For now, the asphalt covering the ground will have to suffice as proof. But it is clear the dream has begun. Getting out of the vehicle is forbidden, as is photography.

'A Global Capital'

The Egyptian government has decided to build a new capital city east of Cairo, smack in the middle of the desert. "A global capital," the building minister announced at a conference on the Red Sea in March. At the event, investors from the Gulf states, China and Saudi Arabia gathered around a model of the new metropolis, admiring the business quarter, with its Dubai-style skyscrapers, the small residential homes in greenbelts and the football stadium. The city is to be situated on 700 square kilometers of land, with an airport larger than London's Heathrow. President Abdel Fattah el-Sisi even wooed investors himself. He recently announced that construction would begin in January.

It is to be a capital created in accordance with the wishes of the country's leadership elite. It may not fit well with the country as it currently exists, but it will conform to their vistions of Egypt's future -- a planned, manageable city conceived from the top down in the same way the pharaohs once created the pyramids. The new Cairo will be a beautiful place, an "innovation center," environmentally sustainable, with a high quality of life, city planners are pledging.

They want it to be a city where people can breathe without having to cough.

The old Cairo is an ugly city, an affront to the senses. Even as you begin heading into the city from the airport, the buildings are already blackened from pollution. The cacophony of car horns is painful to the ears and during winter months, the smog hangs like thick fog over the Nile. The city suffers from thrombosis, with streets so crammed with cars they're like clogged arteries. Yet women in high-heel shoes saunter along the banks of the Nile smiling. Even though the place seems unbearable, Cairo is loved.

It is a city of contradictions, created from the bottom up, even though that had never been the intention. It has been growing wildly since the 1960s -- from 3.5 million back then to 18 million now -- against the will of the country's rulers. Fully 11 million people live in structures that were built illegally and new residential districts continue popping up around the city like weeds in a field. The city center is becoming increasingly dense, to the point that, in one of the city's largest cemeteries, people have even converted burial chambers into their living quarters. Cairo is dirty and chaotic, and, of course, it's a city that gave birth to a revolution.

A Capital for 5 Million People

On the drive back, Sabagh, the Building Ministry representative, a small man who wears a pen in his shirt pocket, explains the trouble with Cairo: "Too many Egyptians." The more people there are, the more trouble. In the coming decades, the population is expected to double to as many as 40 million people, which is why officials want to move people out of the city. The new capital is being planned for up to 5 million people, and all government ministries and embassies are expected to make the move.

There's a logic behind Sisi's fondness for major projects. Only recently, a new Suez Canal was christened with considerable hoopla after being completed in record time, even though experts question whether it will ever be profitable. The government largely financed the project by selling sovereign bonds, with money flowing into a fund called "Long Live Egypt." Historian Khaled Fahmy calls it "something to play around (with) for Sisi," since the funds don't have any parliamentary controls attached to them. But given that Egypt's poor economic situation is weighing on all Egyptians, such mega projects bolster the government's reputation and increase its legitimacy.

The people no longer appear to be important in the country now that it has fallen back into its old patterns following the revolution. Parliamentary elections are currently underway, and yet few are bothering to vote. Turnout in the first round was initially reported at 2 percent, despite the government giving civil servants a half a day off so they could cast their ballots -- though in the end, the official figure given was 27 percent. Sisi, the former military leader who was elected president by an overwhelming majority, changed the election law after entering office.

Now, two-thirds of the new parliament will be comprised of individual candidates who are running as independents and have their own money to bankroll their campaigns. The new rules favor the rich elite, which tend to be pro Sisi. Important opposition movements, such as the Muslim Brotherhood and the revolutionary April 6th Movement, have been banned.

Regardless whether or not Sisi ever goes ahead with construction, it is clear that Cairo itself will remain the city of the people. The idea of building a new capital from the top down alone jibes well with the logic of a dictatorship.

A Top-Down Tradition

The idea of rethinking the country on the drawing board is hardly novel. Indeed, Sisi is simply following a long tradition. As far back as the 1970s, autocratic Egyptian governments began building satellite cities in the desert. They carried names like Sadat City or Sixth of October City. A New Cairo has existed since 2000. Officials seemed to believe that the construction of new cities could solve all their problems. More than 90 percent of all Egyptians are packed into the Nile Valley, which represents just a fraction of the country's total land. The official aim had been for a quarter of the population to live outside the Nile Valley, but today less than 2 percent do, says American economist and urban planner David Sims, a researcher who has written several books about Cairo. Because billions flowed into these projects, there was little left over to invest in old Cairo.

On the drive back from the new capital, the red pickup truck drives past several unfinished construction sites and office buildings in places where new suburbs are popping up that, it is hoped, will one day actually be inhabited by people. There are signs to the left and right of the road with names like Hyde Park, Sharouk Gardens or CityGate. Other signs advertise shopping centers with palm tree-lined promenades. "Urban life redefined," proclaims one billboard. But that can be seen are fenced in vacant lots or estates with "for rent" signs in front of them. The red pickup truck is driving down a boulevard of unfulfilled dreams.

Are all the buildings here empty, I ask?

"Most," says Sabagh.


"Many people can't afford the homes. Besides, they want to live where they work, in Cairo."

So what's the point of building a new capital city?

"That's not my responsibility," he says. You'll have to ask somebody higher up.

'I Love My Neighborhood'

Or perhaps lower down. In a narrow alley in the actual capital, a man sits on a plastic chair.

The district is called Ramlet Bulak and it has the reputation of being one of the worst parts in the center of Cairo, a real slum. Karam Ahmad is drinking a tea and smoking a cigarette. His blacksmith shop is located just across the street, and next to it, the entrance to his apartment.

His grandfather lived here, his father and his brothers lived here and now his own children call it home. When asked if he can imagine moving to the desert, he Ahmad answers, "Never."

The plaster is crumbling, the window bars are bent, a street vendor sells fruit and vegetables from a donkey cart. "The homes here may be a little bit run down," Ahmad says, "but I love my neighborhood."

One street away, trash is piled up in a rear courtyard, while due to the lack of space, structures are being built on the roofs of buildings. Ahmad says the neighbors here have agreed not to throw their trash out into the streets and, if need be, he's also perfectly willing to pick up a broom to do some cleaning. While we talk, a cluster of people has grown behind him. "We're lacking the simplest of things," a man in the crowd calls out. "All we want are good streets and schools."

Particularly on the periphery of Cairo, unplanned illegal residential districts are growing rampantly, with millions of people living there. The government largely ignores them and invests little in public infrastructure. Although most of those who live in such slums have access to electricity and water, few other services are offered and sewage and garbage collection are insufficient. Still, Cairo's impoverished districts aren't directly comparable to those in other major cities because there is less crime and less filth here -- in part because local residents have come together to address some of the problems on their own.

'Economic Renaissance' or 'Fiasco'?

But community efforts to organize solutions aren't given much support by the government -- on the contrary. Cairo residents don't even have the right to elect their own mayor. Under the Egyptian system, the office is appointed by the government. "There are not too many people in Cairo nor is there a lack of funds" says historian Khaled Fahmy. He says the problem is a lack of good management and efficient democratic institutions. He argues that building a new capital would be a "fiasco" and that it is exactly the wrong thing to do. "The idea is an expression of contempt for the people and history of Cairo," he says.

The government says the new Cairo will trigger an "economic Renaissance," with the primary aim being that of attracting foreign investment into the country. Egypt is currently suffering from an acute financial crisis because it has used up a large share of its foreign currency reserves. Investments tend to serve the wealthier class, major construction companies and the many companies belonging to the powerful military. Historian Fahmy refers to it as "legal corruption," that is of little benefit to the populace at large.

Cairo, meanwhile, continues to exude a revolutionary air. Despite policies of repression that have resulted in the arrests of thousands, students still continue to protest in front of government buildings. And although the masses of protesters, drums, tents and political graffiti at Tahrir Square have disappeared, the urbane, unruly and well-networked populace here still poses a threat to any autocratic ruler. That's what makes the escapist dream of a desert capital so alluring. Sisi needs a more secure city, one that can be brought under control more easily. He can't leave a behemoth like Cairo to its own devices.

In the evening, the streets in central Cairo are clogged with thousands of cars. Even though only 14 percent of the city's residents own vehicles, traffic remains one of Cairo's greatest unresolved problems. The public transportation system is far from adequate and the city's metro system desperately needs additional lines, but there is currently no concrete plan to build them.

A security guard shakes his head, saying the minister isn't in and hasn't been since this morning. The minister hadn't answered interview requests for weeks and when I ask the guard if anyone can provide me with information about the new capital, he calls a higher-level official.

"I'm not authorized to speak," he says.

"I can't talk about a fish in the sea," says the next.

In the end, a spokeswoman for the minister agrees to talk. In the internal courtyard, a convoy of black Mercedes can be seen parking while inside, cats roam the corridors. Wafaa Bakry's office is ice cold. In hot Cairo, an official's spot in the hierarchy can largely be determined by the intensity of air-conditioning in the office -- and Bakry must be pretty close to the minister.

She keeps anti-bacterial spray on her desk.

Bakry twists in her office chair. "The media," she grumbles, "have misunderstood everything."

She says there will be a bidding process and that no decisions have been made. She runs her finger under her pink headscarf and scratches her forehead. Then she adds that the project is expected to cost about €40 billion ($43.4 billion) during the first stage.

When asked if money has already been found for the project, she says, "None whatsoever so far." She says she also has no idea where it might come from.

Asked if she thinks the new capital will ever actually get built, she responds, "Absolutely. One-hundred percent. The president has announced it, so it will happen."

When the Cult of Central Banking Collapses…

Justin Spittler

Billionaire power broker Paul Singer thinks easy money policies have failed miserably...

Singer founded Elliot Management, a hedge fund that manages $27 billion. He generated an average annual return of 14% from 1977 to 2012. Remarkably, he only had two down years during that thirty-five year stretch.

Like us, Singer is a big critic of easy money policies. Last month, he said the Fed’s easy money policies have “levitated” stock and bond prices. And this week, Singer warned that reckless monetary policies have set us up for another serious financial crash…

In a letter to his clients, Singer criticized the “obvious failure of monetary extremism” to grow the economy. He warned of “the risks that may exist either in the continuation of the monetary experiment or in its ultimate unwinding.”

Casey readers know the Federal Reserve has been conducting a “monetary experiment” since the last financial crisis. The Fed has held its key interest near zero for the last seven years. This has never been done in modern U.S. history.

The Fed has also launched three rounds of quantitative easing (QE) since 2008. QE is when a central bank pumps cash into the financial system. It’s basically another term for money printing. At this point, the Fed has used QE to inject $3.5 trillion into the U.S. financial system.

• Singer is watching the crises in emerging markets very closely...

China’s economy just had its worst quarterly growth since the Great Recession. Brazil’s currency and stock market have imploded. And while it’s not an emerging market, the bad news we got yesterday from South Korea’s manufacturing sector is signaling a global recession.

Singer thinks these problems could reach the U.S. soon. If that happens, he’s worried about the government’s response.

They will not remain passive in the face of a renewed global recession and/or financial crisis... What policymakers will do, in all likelihood, is hope and pray, and when that fails, they will likely double down on monetary extremism. This landscape is essentially baked, unless you think that sometime in the near future the global economy will turn higher…

Since interest rates in the U.S. are already near zero, doubling down on “monetary extremism” can only mean one thing: more QE. At this point, it’s the only way to keep the easy money flowing.

• Three rounds of money printing have already made many assets absurdly expensive…

The S&P 500 has gained 211% since bottoming in March 2009...U.S. commercial property prices hit a new all-time high in August...and prices for Treasuries, municipal bonds, and corporate bonds are also near record highs.

Nevertheless, the Fed’s easy money policies haven’t helped the actual U.S. economy.

In many ways, the economy is now in worse shape than it was before the last crisis. The real median annual income in the United States has dropped from $57,795 in 2008 to $55,218 today. There are also twice as many Americans on food stamps today than before the financial crisis.

To the average Joe, this doesn’t feel at all like an economic recovery...

Easy money policies have only benefited people who own significant amounts of stocks, bonds, and investment property. In his recent letter, Singer said easy money policies are actually designed to serve the rich.

It is very odd and dangerous that governments, satisfied with policies which, by raising asset prices (stocks, bonds, real estate, high-end art), are seemingly designed to make the rich richer…

• Seven years of easy money have encouraged all sorts of reckless financial decisions…

Americans have borrowed trillions of dollars to buy stocks, bonds, houses, cars, and college educations.

The Bank of International Settlements reports U.S. household, corporate, and government debt jumped from 218% of gross domestic product in 2007 to 239% last year.

Like us, Singer thinks this financial experiment will end badly. He’s on record saying that investors today think central bankers can cure every economic problem…a phenomenon he calls the “cult of central banking.”

However, investors will eventually lose confidence in the cult of central banking. When that day comes, Singer expects the fallout will be disastrous. markets could collapse in a flight from paper money; stock markets could collapse...commodities markets could drop further (in recession) then soar (with a flight from paper money); inflation could plunge, and then prices could spike.

• Like us, Singer thinks gold prices could skyrocket because gold is “real money”...

It’s also the ultimate form of wealth insurance.

People have used gold as money for thousands of years. It has protected wealth through every kind of financial crisis imaginable. It can do the same thing for you when the next crisis hits.

This is why every investor should own physical gold. It’s the first step every person should take to safeguard his wealth. But there are many another straightforward strategies you can use to make sure you weather the next financial storm.