Recession Is Here Now

Recession Is Here Now

January 20, 2016

New Recession is Here Now-John Williams

By Greg Hunter On January 20, 2016 In Market Analysis

By Greg Hunter’s

Recession Is Here Now

Recession Is Here NowEconomist John Williams says a recession isn’t on the way–it’s already here. Williams explains, “There are a number of factors here that are showing recession. Number one is industrial production. You can’t ignore industrial production; it is usually used with retail sales in timing formal recessions. It turned down last December, and it generally has not looked up since. You’ve had three out of four quarters in the last year contracting. The numbers that came out for the fourth quarter showed year to year contractions that you never see outside of recessions. This is typical of a formal recession. You are also seeing recession if you look at the housing numbers. They have turned down quarter to quarter for the fourth quarter . . . with housing starts. If you look at the stock market and the S&P 500, the revenues that are being reported for companies . . . revenues for the S&P 500 are falling off quarter to quarter. You never see that outside of a recession. That is a broad measure of economic activity. . . .The Atlanta Fed . . . their GDP number for the fourth quarter has just dropped to .6%. . . . I think it will be negative in the second reporting. With all these factors coming together, I think you will have an early call on a new recession or at least it will be viewed as a new recession in the early part of this new year.”

Williams says the main thrust of the Federal Reserve has been to prop up troubled banks that are still in trouble. Williams says, “There is very little the Fed can do now to help the economy. Actually, raising interest rates helps some because they can build a little more profit margin in their lending. . . .But if they run into trouble, if the banking system runs into trouble, they are going to do everything they have to do to keep the system from collapsing. They are going to be providing more liquidity and, if anything, they are going to be lowering interest rates. Along with that, you should see some reversal in the tremendous strength you have been seeing in the dollar. That will start to unwind all the craziness in markets like gold and silver and oil. . . . The reason why you have strength in the dollar is there is expectation here that interest rates are still going higher. The global economy, the global financial system is in enough trouble that the central banks, including in the United States, are going to go back into some sort of salvage operation, which will not mean higher rates in the United States. That will mean a reversal in the dollar’s strength. That is the primary prop behind the dollar, that and the expectation that the U.S. economy is booming along. I can tell you the economy is not booming along.”

Williams says that the Fed is still dealing with the fallout of the 2008 financial meltdown. Williams says, “They are still fighting the instabilities of 2008 that has not played itself out. When it does, they are going to be flooding the system with liquidity. It’s either that or they let the system fail. They decided in 2008 not to let the system fail. As they flood the system with liquidity, you will see weakness in the dollar. You will see a return of inflation domestically. You will see all sorts of other factors rallying such as traditional inflation hedges of gold and silver. If the dollar takes a significant hit, which I expect it will, that also will put upside pressure on oil prices. They did virtually nothing and did not address the things that led to the panic . . . now the economy is turning down anew.”

Join Greg Hunter as he goes one on one with economist John Williams, founder of

(There is much more in the video interview.)

Recession Is Here Now

Ecuador Out With Own Digital Currency

Ecuador Out With Own Digital Currency



Ecuador becomes the first country to roll out its own digital cash

In 2000, Ecuador moved to ditch its stumbling currency for the U.S. dollar. Now more than 15 years later, the South American country is revamping its monetary system again—using digital currencies.

Ecuador Out With Own Digital Currency

Martin Bernetti | AFP | Getty Images
A man buys U.S. dollars from a street money changer at the rate of 25,000 sucres to the dollar in Quito, Ecuador, Jan. 11,2000, after the directors of Ecuador’s Central Bank approved a plan to dollarize the economy.

Ecuador’s Sistema de Dinero Electrónico (electronic money system) kicked off in December by allowing qualifying users to set up accounts, and it will begin acting as a real means of transaction this month.

Once the government flips the switch, the South American nation of 16 million will host the first-ever state-run electronic payment system. (Other countries, such as Sweden, use digital currencies widely, but they’re not state-sponsored.) But the Ecuadorean government says the scheme is designed to support its dollar-based monetary system, not replace it.

Read MoreThe world’s best place to retire—Ecuador???

“Electronic money is designed to operate and support the monetary scheme of dollarization,” economist Diego Martinez, a delegate of the President of the Republic to the Board of Regulation and Monetary and Financial Policy, wrote to CNBC in a comment provided by a central bank spokesman.

Martinez said that Ecuador law expressly states that economic transactions are conducted in U.S. dollars.

Electronic money will not only help the poor, he added, but will act as a cost-saving mechanism for the government: Ecuador spends more than $3 million every year to exchange deteriorating old notes for new dollars, Martinez said. There would presumably be less wear and tear on the currency if much of it was stored at the central bank while citizens relied on mobile payments.

“They keep linking it to their frustration to being on the dollar standard.” -Lawrence White, professor of economics, George Mason University

Still, others both inside and outside Ecuador have speculated that the country has broader goals. Claiming that there’s no plausible reason for Ecuador to provide “an exclusive medium for mobile payments,” Lawrence White, a professor of economics at George Mason University, wrote in a recent paper that “it is hard to make any sense of the project other than as fiscal maneuver that paves the way toward official de-dollarization.”

White told CNBC that the government’s bitcoin ban in July and its barring of competing e-money systems demonstrate Quito’s intentions. Although Ecuadorean officials haven’t publicly said they view electronic money as a potential exit from the U.S. currency, “they keep linking it to their frustration to being on the dollar standard,” White said.

Read MoreChina’s new playground: America’s backyard

A digital currency would, in theory, allow Ecuador’s central bank to issue new money that isn’t directly tied to its U.S. dollar reserves. But Ecuadorean officials have repeatedly denied that there are any such plans.

In a letter posted in Spanish on the Banco Central del Ecuador website in August, officials said the proposed payment system is not intended to address the country’s bills, that it will not be used to pay government workers and contractors, and that it will not lead to capital flight.

Ecuador Out With Own Digital Currency

The dollar system has been good for the country’s relatively low inflation and low interest rates, White said, adding that it would be difficult to start a new currency without ruining the economy. Ecuador’s most recently reported monthly inflation rate of 3.67 percent is lower than neighbors including Mexico, Chile, Costa Rica and Bolivia.

At the very least, White said, the government is looking to turn a profit from holding a monopoly on all electronic payments—and if they really wanted to benefit the poor, Quito officials would allow for competing private-sector systems to drive down costs.

Read MoreBeijing still lending to Venezuela—for now

The Central Bank of Ecuador announced earlier this week that it had signed a deal with a 60,000-member taxi organization to accept the electronic money. The project’s second phase—in which users will be able to pay for select services and send money between individuals—will begin in mid-February.

Jorge Calderón, the taxi organization’s president, praised the electronic money system as potentially improving service, since it will not require drivers to stash as much coinage.

“I think quite rapidly people will be using it all over the place…The plan is quite aggressive—they really want the whole population to use it as soon as possible.” -Paul Buitink, instructor, Universidad San Francisco de Quito

A third phase of the electronic money system will begin in the latter half of this year, according to government announcements, and will allow users to pay for public services like taxes through mobile payment.

Fausto Valencia, who is overseeing the project for the central bank, said the government expects about 500,000 people to sign up in 2015, according to several Ecuadorean reports.

Read MoreThe new Chavez? Oil trumps rain forest in Ecuador

“I think quite rapidly people will be using it all over the place,” said Paul Buitink, a cryptocurrency expert who teaches at Universidad San Francisco de Quito. “The plan is quite aggressive—they really want the whole population to use it as soon as possible.”

Buitink said the project has been relatively well received by the Ecuadorean public. There are some concerns about privacy, he said, but it has generally been seen as a positive step.

Not to be confused with bitcoin

Despite several headlines to the contrary, Ecuador’s electronic money system is dissimilar from bitcoin. While the world’s most popular cryptocurrency is a digital token running on a decentralized (yet cryptographically secured) electronic network, Ecuador’s new project would be controlled by the government and tied directly to the local currency—the dollar.

The project initially created buzz in in the bitcoin blogosphere, but that interest faltered once it was clear that Ecuador’s project would not present a competing alternative. Not only is the technology importantly different, but Ecuador’s electronic money system currently can be accessed only by qualifying citizens and residents.

Read MoreCNBC Explains: How bitcoin works

In fact, Ecuador’s project is more similar to M-Pesa, a mobile phone-based money transfer service started by Vodafone, according to Pete Rizzo, the U.S. editor for cryptocurrency site CoinDesk.

In many ways, the new system will be a government-run version of Venmo—users will be able to make payments with the aid of a cellphone and store value in their accounts. But unlike the popular smartphone application, the Ecuadorean version will be able to run on “dumb” mobile devices too.

The electronic money system does not require Internet access or an account with a financial institution, and it can be redeemed for physical money at any time, the central bank’s website said.

Correction: This version corrected the spelling of Fausto Valencia’s name.

Ecuador Out With Own Digital Currency

Reporting Your Foreign Bank Account To IRS

Reporting Your Foreign Bank Account To IRS

We warned you on the home page and mission statement that you may encounter information on this website that is not necessarily mainstream and would be somewhat contrarian.

Well as promised, here is a helpful article on Reporting Your Foreign Bank Account To IRS posted by Simon Black (a very interesting source that you may wish to bookmark).

The US government just made it easier for you to confess

Foreign Bank Account To IRS

Reporting Your Foreign Bank Account To IRS


One of the many experiences uniquely endured by Americans is having to confess your sins once a year to the federal government.

Specifically, Uncle Sam requires most individuals with foreign bank and financial accounts to fess up and disclose on an annual basis.

In fact, these offshore account disclosures must be submitted not once, not twice, but three times, and sent to two different departments.

This is classic government thinking.

For anyone with a foreign financial account, the first form you need to know about is Schedule B of your IRS form 1040.

In fairness, this one’s pretty easy. You check the appropriate boxes in part III of the form and list the foreign countries where you hold financial accounts.

The second is the relatively new IRS form 8938, which came out of the 2010 FATCA legislation (often misspelled as FACTA).

This one is more comprehensive; you’ll need to provide more details on a wider variety of foreign financial assets in addition to bank and brokerage accounts.

For example, shares of private foreign companies, foreign partnership interests, and foreign hedge funds must be reported on form 8938.

Both of these two forms are filed with your taxes to the IRS each year, typically by April 15th.

The last one is FinCEN 114– the Report of Foreign Bank and Financial Accounts, commonly known as the FBAR. This must be filed by June 30th each year.

The FBAR is required by any US person or domestic entity if the total value of their foreign financial accounts exceeded $10,000 at any time during the previous calendar year.

Example: Let’s say last year you had a bank account in Hong Kong whose maximum value during the year peaked at $15,000.

Last year you also had a Canadian brokerage account whose maximum value was $7,500, and some precious metals at GoldMoney which maxed out at $9,000.

ALL of the accounts would need to be reported on the FBAR by June 30, 2015.

(Note- if any of your accounts were denominated in a foreign currency, the government provides an official FBAR exchange rate to convert to US dollars.)

The FBAR is submitted electronically, and you now have two options to file.

The first option is to register at a government website and fill out the form online.

The second way is even easier– it’s a brand new option they just released a few days ago.

Now you can simply download this form, fill it out at your leisure, and upload it whenever you’re ready.

Remember, though, the FBAR is not submitted to the IRS.

Even though the information is similar to the other forms, the FBAR goes to an entirely different department– the Financial Crimes Enforcement Network.

This has always struck me as bizarre– even though it’s perfectly legal to hold money abroad, it must be reported to an agency that specializes in financial crimes.

It really gives you a sense of how the US government views people who don’t have confidence in their failed system.

Naturally, they do treat it as a crime if you don’t file the form.

The severity of the penalties is absurd. They’ve thrown senior citizens in jail and levied enormous fines, simply for failing to file.

And it gets worse every year. This is one of the greatest indicators of how bankrupt and desperate the US government is becoming.

You don’t see wealthy nations doing this sort of thing. Hong Kong doesn’t incarcerate its residents for some innocuous financial oversight.

Only broke countries have the need to threaten people with imprisonment and force them to disclose the precise whereabouts of their savings.

Yet despite the reporting inconvenience, moving at least a portion of your funds offshore is one of the best financial insurance policies there is, particularly when there’s so much risk in the system.

 Reporting Your Foreign Bank Account To IRS