....the Most Powerful Woman in the World.. Set to Replace Ben Bernanke..... ?? >>> Fed Vice Chair Janet Yellen will give the mighty policy speech this year, lending credence to the rumors that she'll take over the printing presses when Big Ben rides off into the sunset (or to a cushy university job). A recent survey of economists overwhelmingly selected Yellen as the likely candidate to take over at the Fed. She would be the first female to do so — or to chair any major central bank, for that matter...>>>.... Three quarters of the country proclaims they live paycheck to paycheck. New research from Pew shows the net worth of the average American has fallen 4.9% since 2009, when the government declared the recession over. But those aren't the only signs of "recovery."..>>> ..A new report from Sentier Research using Census Bureau data shows that median household income in June 2009 — when the recession "ended" — was $54,478. Today, after four years of "recovery," U.S. median household income stands at $52,098 — a full 4.4% lower. "Wait," you may be asking. "If the economy has been improving for four years, why is the average person making less?">.>> ..There are still 1.698 million fewer jobs than when payroll employment peaked in 2007. The "official" unemployment rate is 7.6%. If you include those who have given up working in the past year, the unemployment rate doubles to 14.3%. The only reason the unemployment rate has been "declining" is because the government moves people from "unemployed" to "discouraged worker."..>>>>>

Signs of Economic "Recovery"

Declining Income, Hidden Inflation, Unemployment Tricks

By Nick Hodge    2013-09-11

http://www.outsiderclub.com/signs-of-economic-recovery/388 

Corporate profits have never been higher. Worker wages have never been lower. 

Three quarters of the country proclaims they live paycheck to paycheck. 

New research from Pew shows the net worth of the average American has fallen 4.9% since 2009, when the government declared the recession over. 

But those aren't the only signs of "recovery."

Here are three more...

#1: Declining Incomes

Not only have wages shrunk as a percentage of GDP... and not only has middle class net worth fallen 4.9% since 2009... but incomes are also falling as a standalone measure.

A new report from Sentier Research using Census Bureau data shows that median household income in June 2009 — when the recession "ended" — was $54,478.

Today, after four years of "recovery," U.S. median household income stands at $52,098 — a full 4.4% lower.

"Wait," you may be asking. "If the economy has been improving for four years, why is the average person making less?"

Such silly questions you ask!

Look at the stock market. It's going up. Everything is fine...

#2: Hidden Inflation

Unless, that is, you take a look at inflation... which government "officials" will tell you doesn't exist.

But that's only because — and they actually did this — the methodology for the Consumer Price Index (run by the U.S. Department of Labor) has been changed.

At one time, the CPI actually monitored inflation. If an item in the index, say a lobster tail, went up in price by a few cents per pound, the index would rise so that inflation would be clearly recognized.

But "they" don't want us to recognize inflation. They want to keep us operating without worry.

So they changed how the Consumer Price Index is calculated: Today, if that lobster tail rises in price... a cheaper item will simply be substituted in its place. So one month it's lobster tail... and the next month, it's tilapia — all to hide the rising prices.

This is much more nefarious than simply sweeping inflation under the rug.

What the government has done is engineered the Consumer Price Index to monitor a deteriorating standard of living.

There's no inflation if you continually buy lower-quality products.

Of course, anyone who's been to a grocery store knows otherwise...

Remember when I told you corporations were generating higher profits, but not increasing sales; the packages are getting smaller but the price is staying the same.

And the underlying effects are far-reaching. It's one of the tools they use to keep down the masses.

Because if the CPI is used to adjust Social Security payments... and the CPI is rigged to stay low... guess who doesn't get a cost-of-living increase?

And if CPI is used to adjust retirement benefits... guess who isn't going to save enough to stay ahead of inflation?

We must be in a recovery.

#3: Hidden Unemployment

The official unemployment number reported by the government does NOT count those who have given up looking for a job because there aren't any, nor does it count those who are underemployed.

There are still 1.698 million fewer jobs than when payroll employment peaked in 2007. The "official" unemployment rate is 7.6%. If you include those who have given up working in the past year, the unemployment rate doubles to 14.3%.

The only reason the unemployment rate has been "declining" is because the government moves people from "unemployed" to "discouraged worker."

This is a trick to hide the real unemployment rate, plain and simple.

In the June 2013 report, 247,000 people were switched from "unemployed" to "discouraged worker."

More people gave up looking that month than actual jobs were created.

If you add in workers who gave up looking more than a year ago (they call these "long-term discouraged workers" in bureaucratese), the "official" unemployment rate triples to 23.4%.

If you don't have a job, you're unemployed — no matter if you're looking, not looking, or stopped looking.

Still, there's more...

Over 12% of the U.S. workforce — 17 million Americans — are temps or contract workers that are not considered permanent employees. These people don't get medical benefits, retirement plans, raises, or severance.

They're part time. They're not paid enough. They have no benefits (another way corporations are keeping profits up), but they aren't discouraged. No. They have jobs.

"Throw them in the employed column," says the government.

If you add those part-time and underemployed workers into the "official" unemployment rate, the total suddenly rises to 43.4%.

Almost half of the American workforce, unemployed or not, are not making enough to make ends meet.

Only 43.7% of U.S. adults have full-time jobs:

And the implications are dire.

Think of the recent trend of contracting or "1099-ing" an employee to avoid paying him or her benefits.

It's rampant in all sectors. Take the random university, for example, that has shifted budgets from teaching to administration. They now hire "adjunct" professors to teach classes once reserved for tenured professors. The number of tenures is on the decline.

Now think about the broader implications of that on the broader economy...

If the trend is to hire contract employees that earn less, the trend will also be toward more and more people with less and less discretionary income.

It's a temporary fix to a long-term problem.

As Paul Craig Roberts, former assistant secretary of the U.S. Treasury, recently wrote in the Trends Journal:

These deteriorations in consumer purchasing power and economic security are called "innovations" by their apologists. In the short-run they benefit Wall Street, shareholders, and executives who are awarded "performance bonuses" for paring employee costs and raising profits. In the long-run they destroy the domestic consumer market and the value of a college degree.

Who will the corporations sell to when consumers are unemployed or have no disposable income? Who will take on student loan debt in order to gain a degree that cannot lead to remunerative employment? The end of U.S. science is in sight. Who will commit to an advanced degree when universities pay adjuncts peanuts?

Where will Wall Street be when chasing the bottom line has eroded the bottom line of all its customers?

What's left to fuel their massive hunger for huge profits made of poorly understood financial products now that the middle class they once used to fuel it has lost their homes, their jobs, and their wage growth?

I love the smell of recovery in the morning. 

Call it like you see it,

Nick Hodge

@nickchodge on Twitter

Nick is the Founder and President of the Outsider Club, and the Investment Director of the thousands-strong stock advisory, Early Advantage. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.

*Follow Outsider Club on Facebook and Twitter.

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How NOT to Launder a Billion Dollars

Government Cracks Down on Digital Currencies

By Jimmy Mengel    2013-05-31

http://www.outsiderclub.com/how-not-to-launder-a-billion-dollars/109 

In this country, there are two ways to operate a criminal enterprise: totally underground or hiding in plain sight. 

Liberty Reserve has learned the hard way that if you want to launder billions of dollars for criminals, you had better choose the latter.

The currency company just got nailed for washing $6 billion worth of criminal funds through their secretive online currency.

In case you're wondering, theirs was a relatively simple scheme...

Here's how it worked: You opened an account with Liberty Reserve using a fake name and email address. You sent your U.S. dollars to an unregulated currency exchange in Russia, Nigeria, or Vietnam, where the unscrupulous currency exchanger coverts your dollars to LRs, Liberty Reserve's online currency.

Those LRs were then transferred to another Liberty Reserve member in return for drugs, stolen credit card numbers, or any other type of illegal item or service. The recipient was then sending their ill-gotten gains to the unregulated currency exchange, who converted the LRs back into dollars.

Liberty Reserve made its money by charging users 1% transaction fees and $0.75 "privacy fees" to facilitate the exchanges. This scheme allowed “the bank of choice for the underworld” to conduct 55 million transactions for its one million users before getting busted.

This is one of the biggest money-laundering schemes ever hatched — and the founders of Liberty Reserve, Arthur Budovsky and Vladimir Kats, now find themselves facing what could be decades in prison.

Some of the their more clownish clients actually opened up accounts with names like “Russian Hackers” and “Hacker Account.” Cute.

Here's the type of criminals that were using Liberty Reserve:

• Traffickers of stolen credit card data and personal identity information
  
• Peddlers of various types of online Ponzi schemes
  
• Computer hackers for hire
  
• Unregulated gambling enterprises
  
• Underground drug-dealing websites
  
• Child pornographers
  

Not necessarily the most endearing of folks, to be sure...

However, these thugs don't look so bad when compared to the actions of “legitimate” superbanks like HSBC.

Too Big to Jail

Here's a rundown of HSBC's crimes:

• Illegally conducted transactions on behalf of Mexican drug lords and terrorists
  
• Moved tainted money for Saudi banks tied to terrorist groups
  
• Illegally catered to customers in Cuba, Iran, Libya, Sudan, and Burma — countries that are all blacklisted by U.S. sanctions
  

And these mega-laundering schemes weren't the work of some renegade HSBC employee...

Investigations all pointed to senior bank officials complicity in the activities. Hell, one HSBC exec actually argued that they should continue working with the Saudi Al Rajhi Bank, which has knowingly supported Al Qaeda!

Now I don't want to split hairs here, but doesn't the whole funding terrorism thing AUTOMATICALLY require a jail sentence for somebody?

If you or I so much as donate money to a charity that is found to have ties to terrorism, we'd be stretched over the rack quicker than you can say "Patriot Act"...

"Given that over 35,000 people were brutally slain in Mexico at the hands of drug traffickers while HSBC laundered at least $880m of their money, it's shocking that the current system of sanctions does not include senior executives being held personally responsible for the actions of their institutions,” Stuart McWilliam of Global Witness told the Guardian.

“Is HSBC too big to jail?" McWilliam asks. It certainly seems that way. HSBC has around 7,200 offices in 85 countries around the world. They cater to roughly 89 million customers and claims assets of $2.69 trillion.

As of last year, it was the world's sixth-largest public company and the single largest bank in terms of assets, according to Forbes. These guys make Liberty Reserve look like a child's piggy bank.

And yet not one person involved went to jail.

In fact the Justice Department came out and straight up admitted that their hands were tied.

U.S. Attorney General Eric Holder made this maddening confession to the Senate Judiciary Committee:

I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large.

In a delicious bit of irony, the Wall Street Journal, while describing the Liberty Reserve case, contended: “Law enforcement officials are concerned about criminals ability to move around money outside of the regulated world of banks.”

What they really mean is if you want to launder money, you had better give the big banks a large enough cut in order to protect your identity.

Paying for protection: an old school racket if I ever saw one.

The Italian mafioso called it pizzo... We call it international finance.

Bitcoin, We're Coming for You

My first thought when I heard about the Liberty Reserve case?

Bitcoin, you'd better watch out. 

“I think is just another giant, flashing warning light to bitcoin exchanges: If you are not compliant, there are some serious risks, both at the federal and state levels,” said Patrick Murck, legal counsel for the Bitcoin Foundation.

The government actually tapped the Patriot Act for the first time in such a case in order to take Liberty Reserve down. It may allow them to set up a precedent for eventually taking down Bitcoin.

But Bitcoin does have some crucial differences working in its favor...

For one, it is a decentralized organization — so while the Feds could easily target Liberty Reserve founder Arthur Budovsky, there's no head to chop off at Bitcoin.

From Timothy Lee at the Washington Post:

There’s also at least one important difference between Bitcoin and Liberty Reserve: If the authorities concluded that Bitcoin were a money laundering scheme, it’s not clear whom they’d prosecute. There’s no Budovsky for Bitcoin. Rather, the online currency was created by “Satoshi Nakamoto,” widely regarded as a pseudonym. Bitcoin transactions are processed in a distributed fashion by thousands of “miners” around the world. It would be difficult for the United States to indict all of them, and doing so would likely drive Bitcoin mining underground — which could make it even more attractive to criminals.
That sprawling, decentralized network would create a dilemma for federal regulators if former Liberty Reserve users switched to Bitcoin. The crypto currency doesn’t fit well into existing money-laundering laws, and there’s no one who can be required to reform the network to bring it into compliance. Trying to shut down Bitcoin could prove futile — the feds can make life hard for individual Bitcoin users but likely could not destroy the network altogether.

So keep your eyes peeled, bitcoin holders. It looks as though you'll be the ones taking the brunt in the face of another government crackdown.

Dirty Laundry

The moral of this story is if you want to launder money, for whatever purpose, you had better do so with a too-big-to-jail bank. Otherwise, the long arm of the law will come down swiftly.

While Liberty Reserve's owners and operators will most certainly meet the business end of a judge's gavel in the coming months, HSBC's higher-ups are made in the shade...

HSBC's investors just reelected chief executive Stuart Gullivar as a director by a 99.7% margin. Gulliver also raked in $3 million in annual bonuses while nailing down a sweet incentive plan that would net him another $4.5 million over the long term.

Sure beats a concrete prison cell.

Alas, it's just another day in the international criminal cartel we call the banking industry.

As it turns out, liberty is reserved for the Insiders.

Godspeed,

Jimmy Mengel for Outsider Club

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Meet the Most Powerful Woman in the World

Janet Yellen Set to Replace Ben Bernanke

By Jimmy Mengel    2013-06-20

http://www.outsiderclub.com/janet-yellen-bernanke-replacement/157 

Obama has pushed Ben Bernanke out of his infamous helicopter...

The president just made a surprising claim that Bernanke has "already stayed a lot longer than he wanted or he was supposed to."

Upon hearing the announcement, one Fed governor said Obama basically fired Bernanke on the spot.

It just adds to the evidence that the Fed Chairman will be replaced sooner rather than later.

When the Fed holds its notorious annual meeting in Jackson Hole, Wyoming, Bernanke won't be there to hold court. He has decided not to attend perhaps the most important economic meeting of the year, one at which he's given the keynote speech each and every year since he took his post as Fed Chairman in 2006.

The fact that he won't be appearing may finally signal the end of the Bernanke era. It could also signal a changing of the guards...

Bernanke has asked someone else to deliver the speech, which serves as a massive driver of economic policy around the globe.

So, who is this woman who could step into arguably the most powerful position in the world?

Fed Vice Chair Janet Yellen will give the mighty policy speech this year, lending credence to the rumors that she'll take over the printing presses when Big Ben rides off into the sunset (or to a cushy university job).

A recent survey of economists overwhelmingly selected Yellen as the likely candidate to take over at the Fed. She would be the first female to do so — or to chair any major central bank, for that matter.

Bernanke swearing in Yellen

Yellen has spent most of her professional life amongst ivory tower intellectuals, traveling in and out of the revolving door of academia and the Fed:

• While pursuing her Ph.D. at Yale, Yellen's mentor was James Tobin, the Nobel Prize Winner and Keynesian hero. Tobin was a huge advocate of using government intervention to stabilize financial markets. His interventionist philosophy was a powerful influence on Yellen as a student.
• After securing her doctorate at Yale, Yellen cut her teeth as an assistant professor at Harvard University, which would certainly endear her to the president, who has littered his appointments with fellow Harvard alum. (Obama has previously anointed ex-Harvard President Larry Summers as the director of his economic council and Harvard economist James H. Stock as the Chief Economist for the Council of Economic Advisers within the Executive Office.)
• She joined the Federal Reserve Board of Governors in the late 1970s as an economist before moving on to the Haas School of Business at the University of California, Berkeley, where she is now a Professor Emeritus.
• Yellen was appointed to the Federal Reserve System's Board of Governors, where she served from 1994 to 1997.
• In 1997, Bill Clinton chose Yellen to chair his Council of Economic Advisors.

In 2004, Yellen was named President and CEO of the Federal reserve bank of San Francisco, a position she kept until 2011. She now holds the title of Federal Reserve Vice chairwoman, serving as Bernanke's second in command.

One thing that seems to crop up in any discussion of Yellen is her tolerance — even desire —  for some degree of inflation. She's well-known as the biggest dove in the Fed's ranks, valuing unemployment numbers over inflation fears.

The American Enterprise Institute's Kevin Hassett, who was on staff at the Fed when Yellen was a governor there, warns that having a "dove" in the Fed chair could be disastrous for inflation: "I think that there are folks that have a genuine concern that unless you have a real inflation hawk at the fed, inflation could spin out of control as it did say in the 70s," he told the New York Times.

A hawk she is not.

Yellen has even hinted that she would tolerate above-average inflation until unemployment hits the Fed-targeted 6.5%. She told a group of business writers, "Progress on reducing unemployment should take center stage for the FOMC, even if maintaining that progress might result in inflation..."

With inflation at the lowest level since the 1960s, she may have the political support needed to continue the Fed's bond buying until she hits that magic number, and maybe even beyond that. That makes many of her hawkish contemporaries uncomfortable...

"I am worried that the approach that she and many others favor does over time allow the Fed's anti-inflation credibility to erode," Alfred Broaddus, a former president of the Federal Reserve Bank of Richmond, told the Wall Street Journal. 

As far as political support goes, the rumors are Yellen would be a popular choice for the president. Hassett noted that "if the Obama administration is going to pick a Fed chair that thinks the way they do, then Janet Yellen would be the best possible choice."

If you aren't the least bit scared that inflation will eat away at your purchasing power, then have no fear of Yellen taking the helm. If you are comfortable with what Obamanomics has done to the economy, you can continue to sleep well at night.

But if you —  like us — are skeptical that the economy can stand on its own feet after getting drunk on the Fed's spiked punch for the last few years, well, you may have cause for concern...

With a combination of total faith of government intervention in the markets and an appetite for inflation, Yellen is forging a dangerous path. If she keeps that punch bowl filled for too long, she may just get the inflation she desires.

We think she should be careful what she wishes for...

In the meantime, we'll be watching everything "the most powerful woman in the world" is doing leading up to her prime-time debut at the Jackson Hole meeting.

Godspeed,

Jimmy Mengel

 @mengeled on Twitter

Jimmy is a managing editor for Outsider Club and the Investment Director of the personal finance advisory The Crow's Nest. You may also know him as the architect behind the wildly popular finance and investing website Wealth Wire, where he's brought readers the stories behind the mainstream financial news each and every day. For more on Jimmy, check out his editor's page.

*Follow Outsider Club on Facebook and Twitter.

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