Dear Reader, Our PM recently found himself swept up in a rising tide (or, perhaps sea level) of emotion at the recent Pacific Islands Forum. The myth of sinking Pacific Islands was actually sunk last year by researchers at the University of Auckland. In a research paper published in Nature Communications on 9 February 2018, the research abstract stated… ‘…we present analysis of shoreline change in all 101 islands in the Pacific atoll nation of Tuvalu. Using remotely sensed data, change is analysed over the past four decades…Results highlight a net increase in land area in Tuvalu of 73.5 ha (2.9%), despite sea-level rise, and land area increase in eight of nine atolls. Island change has lacked uniformity with 74% increasing and 27% decreasing in size. Results challenge perceptions of island loss…’ When it comes to climate change, never let the facts get in the way of the money or the need for constant adulation from fellow cult followers. According to The Australian on 15 August 2019, Kiwi PM Jacinda Ardern… ‘…has put climate change at the centre of her international agenda. At the UN General Assembly last year, she urged other countries to put self-interest aside to help save Pacific nations from being swamped.’ And what’s Ms Ardern’s climate change agenda? According to the NZ Ministry for the Environment… ‘New Zealand is on the path to a low emission, climate resilient future; the Government aims to reduce our emissions to net zero by 2050.’ All very virtuous, until you realise… ‘To achieve her carbon-neutral pledge, Ms Ardern has excluded agriculture and methane, which contribute about half of New Zealand’s greenhouse gas emissions.’ To phrase this oh-so-virtuous pledge differently…my New Year’s resolution is to become a teetotaller, but consuming beer and wine doesn’t count. And people are naive enough to be taken in by these meaningless gestures. Amazing. According to NASA, the rising sea levels threatening Pacific Islands can be contributed to melting ice… ‘When ice on land, such as mountain glaciers or the ice sheets of Greenland or Antarctica, melt, that water contributes to sea level rise’. And it’s true, the ice sheets do melt. This is an extract from a report written by a highly regarded patron of science… ‘…a considerable change of climate, inexplicable at present to us, must have taken place in the circumpolar regions by which the severity of the cold, that has for centuries past enclosed the seas in the high northern latitudes in an impenetrable barrier of ice, has been, during the last two years, greatly abated. ‘Mr. Scoresby, a very intelligent young man, who commands a whaling-vessel from Whitby, observed last year that 2000 square leagues of ice, with which the Greenland seas between the latitudes of 74 degrees and 80 degrees N[orth] have been hitherto covered, has in the last two years entirely disappeared.’ Over a two year period, a change in climate has melted 10000 square kilometres (the equivalent of 2000 square leagues) of ice in the Greenland seas. That’s alarming…until you find out when the report was written. 20 November 1817. The author of and reason for the report? The world renowned botanist, Sir Joseph Banks was informing his Lordship Robert Saunders Dundas, the 1st Lord of the Admiralty, of his findings from a recent expedition. If only Sir Joseph had known about the dire consequences that awaited the world from ‘a considerable change of climate’, he could have been the Al Gore of his time. But in all likelihood, no one would have cared. Why? Because the climate was, is and will continue to change…so what’s the big deal. ..............................Advertisement.............................. READ THIS BOOK BEFORE WE ENTER A BEAR MARKET History shows us that some kind of crash is coming. And we may have just seen the first murmuring. But how big and brutal could it be? This survival guide by Vern Gowdie makes the case for a correction of over 65%. He believes investors are going to see decades of gains blown away in a very short period. If you cannot afford to see your wealth shrink, possibly by two-thirds in value, you need to prepare for that potential snap NOW. You can’t wait. The five protection steps Vern outlines in his book will be of no use to you when this potential avalanche begins to cascade. You need to initiate these steps now. To download your copy, click here. | .......................................................................... The ice must have come back, otherwise why write a story about it melting (again). The article is a classic case of extrapolating a trend into the future…what has melted will continue to melt. Here we are sixty years later and the ships are still turning left, not right, outside the Narrows. Why else would they spend 10 years and US$5 billion on building new infrastructure? As Wikipedia notes: ‘The Panama Canal expansion project also called the Third Set of Locks Project, doubled the capacity of the Panama Canal by adding a new lane of traffic allowing for a larger number of ships, and increasing the width and depth of the lanes and locks allowing larger ships to pass…The expanded canal began commercial operation on 26 June 2016.’ The climate has been changing (warming and cooling) for millions of years and will continue to do so. Yet, against all common sense and logic, the cult of climate change has managed to indoctrinate people into believing that somehow ‘this time is different’. That what we’re witnessing has never happened before and if it has, well it’s not the same as before. Bureaucracies love this sort of populous stuff that captures people’s imaginations. More paperwork. More red tape. Remember the media coverage and hysteria whipped up over the Y2K bug? Planes would fall out of the sky. Lifts would stop, trapping people inside. Banks would lose our records. The world was on the brink of shutting down. Back then, I was a holder of an Australian Dealers Licence. For compliance purposes, ASIC required a signed declaration stating we’d taken all necessary steps to mitigate the risks of Y2K. The business community spent countless millions (lining the pockets of computer specialists who should have known better and most probably did) to protect systems from this completely fabricated risk. And here we go again. The very institution that has created a very real risk in society — a property bubble caused by its accommodative interest rate policy — should be the last one to lecture us about ‘this time its different’. But they do. This is an extract from the 12 March 2019 edition of The Sydney Morning Herald (emphasis is mine)… ‘The Reserve Bank has warned climate change is likely to cause economic shocks and threaten Australia's financial stability unless businesses take immediate stock of the risks. The central bank became the latest Australian regulator to tell business that they must analyse their investments… ‘In a speech to the Centre for Policy Development in Sydney, the Reserve's deputy governor Guy Debelle said challenges for financial stability may arise from both physical and transition risks of climate change. ‘We need to think in terms of trend rather than cycles in the weather. Droughts have generally been regarded as cyclical events that recur every so often. In contrast, climate change is a trend change.’ Economic shocks. Threats to financial stability. Challenges for financial stability. If these passages were in an RBA statement warning about the perils of too much debt in the system — resulting from the RBA keeping rates too low for too long — then I would stand and applaud our central bank’s honesty. But alas, our central bank ignores the clear and present danger of the greatest asset bubble of all time and instead turns its furrowed brow to…a change in weather trend. If you believe the RBA, cycles are out and trends are in. I’m really looking forward to hearing what they have to say when the current debt cycle turns nasty. The only trend I can see, is the populous trend of playing follow the clueless leader. When the RBA tells ‘business that they must analyse their investments’, then analyse them they must. As the Guardian reported last month: ‘A declaration by the head of BHP that tackling the climate crisis will require “the biggest global mobilisation since World War II” has prompted claims the world’s biggest miner is more serious about the problem than the Australian parliament.’ How magnanimous of the corporate sector to mobilise shareholder funds to wage an offensive against a fictitious enemy. Truly inspiring. I wonder whether board members will follow the example of Greta Thunberg and sail to their next board meeting? Probably not. They’ll keep flying at the pointy end and most likely use shareholder funds to buy carbon offset credits Oh the warm and fuzzies of being a corporate climate change warrior. Our corporate regulator is also upping its agenda on climate change. Here’s an edited snippet from what ASIC now expects… ‘in RG 247.66, highlight climate change as a systemic risk that could impact an entity’s financial prospects for future years and that may need to be disclosed in an operating and financial review (OFR);’ What if you don’t believe the changing weather patterns are a systemic risk, but just Mother Nature going about her business? Word of advice…don’t even think about bucking the trend. Go with the flow. Employ an in-house climate change ‘professional’. Seek counsel from a ‘climate change’ consultant. Fill the disclosure report with all the ‘airy fairy’ feel good rubbish they want to hear. Put it all on the shareholders tab. But what about dealing with the very real risk to personal wealth from poor advice given by the big banks and insurance companies? This is from the Banking Royal Commission Interim Report released in September 2018… ‘Much more often than not, when misconduct was revealed, little happened beyond apology from the entity, a drawn out remediation program and protracted negotiation with ASIC of a media release, an infringement notice, or an enforceable undertaking that acknowledged no more than that ASIC had reasonable ‘concerns’ about the entity’s conduct.’ The inconvenient truth is the real change we should be concerned with is a change in our economic fortunes. The RBA and its central banker mates, with their ultra-low interest rate policies, have actively encouraged people to do three things: Borrow an additional US$100 trillion since the GFC Go in search of higher yielding investments Spend NOT save These factors have made the world a far more dangerous place than coal fired power stations. When the economic cycle turns from positive to negative, here’s a trend you can bank on: central bankers denying any culpability for the wealth destruction caused by their inane policies. Regards, | Vern Gowdie, Editor, The Rum Rebellion |
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Start the Presses, Let the Good Times Roll By Bill Bonner in Poitou, France Good news for investors. The economy is limping…staggering…and buckling. And you know what that means — cheaper credit…and more money for speculators! Yesterday, the Dow rose 240 points in anticipation. Steven Ricchiuto at MarketWatch probably captured the gamblers’ mood best in his open letter to the Federal Reserve. The headline is all you need: ‘The Fed needs to radically change policy and start printing money’ So, start up the presses. Laissez les bons temps rouler! Appeal to lunacy But let’s back up and look at the circumstances that make this appeal to lunacy so popular. Here’s MarketWatch again, reporting that the economy is not nearly as strong as had been thought: ‘The economy had about 501,000 fewer jobs as of March 2019 than the Bureau of Labor Statistics initially calculated in its survey of business establishments. That’s the largest revision since the waning stages of the Great Recession in 2009. ‘The newly revised figures indicate the economy didn’t get a huge boost last year from President Trump’s tax cuts and higher federal spending. They also signal the economy is a bit weaker than previously believed and could give the Federal Reserve even greater reason to cut interest rates in September.’ The feds’ finances are in worse shape too. Here’s The Washington Post: ‘America’s federal deficit will expand by about $800 billion more than previously expected over 10 years, primarily because of two legislative packages approved this year, pushing the nation further into levels of debt unseen since the end of World War II, the Congressional Budget Office said Wednesday. ‘The United States was already expected to hit about $1 trillion in annual deficits next year, an unusually high number, particularly given that deficits normally contract during sustained periods of economic growth. ‘But that shortfall will expand by $1.9 trillion in new spending over the next decade because of a budget deal to avoid the spending cliff reached by congressional Democrats and Trump and an emergency spending package for the crisis at the U.S.-Mexico border.’ The Fiscal Times elaborates: ‘The president and Republican and Democratic congressional leaders have just agreed on a two-year budget that would hike federal spending $320 billion above the fairly strict spending caps of the Budget Control Act of 2011, which is obviously no longer controlling the budget. Curiously, over the two years, a Republican president just agreed to add $46.5 billion in defense spending and even more – $56.5 billion – in domestic spending. ‘To state the obvious, neither party cares about yawning federal budget deficits… [and] the unfunded liabilities for the entire nation are estimated to be a staggering $150 trillion.’ Bold prediction And here, we offer another bold prediction. Before 2030, US deficits will hit $2 trillion per year and total federal debt will go over $40 trillion. Here’s why. Sometime in the months ahead, a stock market crash and a recession are inevitable. This will not be met with grace and courage, but will cause an unseemly panic on both ends of the Washington-Wall Street corridor. Faced with the third debt crisis of the century, the feds will follow the script of the previous two. But in 2001 and in 2008, the Fed had at least 500 basis points (5%) it could trim from its key lending rate. This next time, it will be lucky to have 100 basis points. Remember, when you are in a funny-money debt trap, you only have two choices: you add more funny money…or the fake boom dies. In the next crisis, monetary policy will be unable to do the job. So tired and desperate eyes will turn to Congress and the president. ‘Help us; heal us; give us more of that magic elixir,’ they will plead. And no matter who is in the White House, the call will be answered with the most aggressive fiscal boost the nation has ever seen. The Fed will print the money. Congress will spend it. Deficits will double. And debt will expand to more than $40 trillion. Make America smart again In our view, America peaked around the turn of the century. Since then, it has been downhill. Just about everything has degraded and degenerated. The lies have gotten bigger. Deficits larger. Politics nastier and stupider. Prices wackier. And the public has become more gullible and credulous than ever. Overseas, America tries to bully the world. At home, Americans try to bully each other. And at home and abroad…the US spends money that no American ever earned and no American ever saved. This money is fake. But it is available in such quantity and at such low cost that it makes real money — money that represents real time and resources — irrelevant. Who wants to save real money when it earns nothing? And who wants to borrow real money from a real saver when you can borrow the Fed’s fake money and pay nothing for it? And who wants to take the risk and go to the trouble of building factories, training workers, and satisfying difficult customers when you can get wealthier simply by buying stocks — even your own stocks? Hounds of Hell US stocks are up 26 times since 1980…and now, corporations spend 100% of their free cash flow buying their own shares. All of this cheap, fake money has practically obliterated the two things capitalism most needs: real savings (aka capital)…and honest prices. And now, in this beautiful, late, Fin de Bubble period…the president of the US is demanding the Fed to lend at 100 basis points BELOW the level of consumer price inflation… …while his wannabe Democratic opponents come up with fantastic new ways to spend money we haven’t got on programs no sensible person would want. And so, the hounds of Hell run wild — greed, corruption, lies, and claptrap. And if there is any real capital or integrity left, surely it is in hiding. More to come… Regards, | Bill Bonner, For The Rum Rebellion |
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Rising Temperatures Are Real By Harry Dent Climate change has continued to be a big topic in the news, especially with record temperatures again this summer. Are humans the primary cause? When this first became a major issue many years ago, I initially was more sceptical of the human impact. I had studied long-term climate cycles and saw how much they’ve varied simply from natural trends. Were we big enough to impact substantially? The first wake-up call I got was when I looked back at the key very predictable longer-term cycles. Every one of them, from very long to shorter, were pointing towards moderate cooling. Even the shorter-term sunspot cycles keep coming in lower intensity since 1959 — and more so since 1990, which has a cooling effect — and temperatures keep rising anyway! That’s when I realised that we must be driving that rising CO2 trend and its correlation with temperature that has held throughout history. Global urbanisation the biggest driver In my most macro analysis of all the global trends, the biggest is simply accelerated urbanisation since 1920. Developed countries urbanised fully since the mid-1800s, but emerging countries are only starting to in the past several decades — and who are the big polluters now? China, and increasingly India. Look at this chart. It shows a correlation between urbanisation and CO2 on a 40–50-year lag. Here, 50 is used. Urbanisation roughly triples GDP per capita, and then people use a lot more energy. But why the lag? The scariest part about CO2 (and methane) emissions in the atmosphere is that they are cumulative. They last a long time and build upon each other like compound interest. Hence, a 40–50-year lag makes total sense to me. That means that even when global urbanisation is predicted to slow down again near 80% urban around 2110, the damage to the atmosphere and warming will continue for another 40-50 years…damn! I know this is a politically sensitive topic that divides largely on partisan lines. But my forecasting techniques do not — except in shorter-term scenarios. I came into this issue a sceptic…I am not now. This is a serious issue and will become more so…another reason I’m glad I’m in mountainous Puerto Rico rather than flat Florida. We’re lucky that the sunspot trends are working in our favour and will likely continue to do so for at least the next 10 years. | Harry Dent, For The Rum Rebellion |
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