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[Markets] Gazing Into The Freedom Pool Gazing Into The Freedom Pool

By Michael Every of Rabobank

On 9/10 2001, my wife and I were in the World Trade Center; on 9/11, we were on a bus to DC, watching the terrible events transpire through the window. This weekend marks the solemn 20th anniversary of those attacks, and gives cause for reflection as we gaze into the memorial freedom pool on the former WTC site.

The world has changed markedly since then – and a lot more very recently. Yesterday the world met the new central bank governor of Afghanistan: a member of the Taliban carrying a rifle at his desk.

When I argued in 2017’s ‘Heaven or Hell-icopters’ and 2020’s return-of-ideology “-ism” examination that central banking would irrevocably change, this was not the ecclesiastical shift I had in mind. When one talks of this governor being hawkish or dovish; hikes and cuts; having ammunition left; keeping power dry; and using a bazooka, it takes on new meaning. The market will of course want to know what his stance is vis-à-vis QE or, more likely, money printing without the charade of asset purchases. Perhaps he could accept Bitcoin if the Taliban want cool kids’ OK?

More in keeping with the shift I described, the ECB’s Lagarde --not a terrorist, but previously convicted for negligence-- yesterday confirmed our expectations that PEPP will end after March. That said, the ECB clearly remains data-dependent, and has kept all options open for December. That desire to remain flexible was underscored by the avoidance of the word ‘tapering’, and the message that yesterday did not mark a turning point for PEPP. However, compared to the Fed, the ECB is still lagging in terms of its inflation aim, so - unlike the US - even if the ECB decides not to extend PEPP, the Bank is still a long way from ending asset purchases altogether. We expect APP (and other instruments) to take over the reins in pursuit of the inflation goal.

Lagarde paraphrased ex-British PM and notable Eurosceptic Thatcher when stating “the lady isn’t tapering, she is recalibrating”. Also following Mrs T, showing how world changes are still accelerating, and that the French have an ironic sense of humour, yesterday Mr. Barnier, who led the EU’s Brexit negotiations, and is running for president, declared: “France must reclaim its juridical sovereignty and no longer be subject to the rulings of the ECJ and ECHR. We will propose a referendum on [non-EU] immigration for September.”

But back to central banks. Economist Anne Pettifor, channelling Klein & Pettis, again critiques the ECB, Fed, et al., in underlining arguments long heard here, noting:

“The folly of relying on central bank monetary operations to tackle deep and dangerous global economic imbalances [which are] are a result of globalized, export-oriented, over-producing economies drowning in goods and services, while purchasing power at home, and worldwide, is cut.”

“The combination of excessive production and purchasing-power cuts is deflationary. Tackling deflation with quantitative easing is, as John Maynard Keynes once argued, like pushing on a string. But central banks apparently do not view their role as helping to restore balance to a very imbalanced economy, or as prioritizing the domestic economy over the globalized economy. Technocrats at central banks act to sustain and protect just one sector of the global economy: the financial sector.

Furthermore, that: “The financial sector has, in turn, abandoned the ‘free market’, and wants its risky activities to be guaranteed and protected by taxpayers. They call this ‘de-risking’ investment. It is an extraordinary distortion of a system once defined as ‘free-market capitalism.’”

Power comes from the barrel of a gun, as they say, but sometimes you don’t need guns for real power: at least until the people with guns arrive, as in Kabul. When the ECB boss has to turn up armed to press conferences, even liquidity-addled markets might start to get nervous.

Combining ‘power’ and a critique of ‘free-market’ capitalism, China yesterday released oil from its strategic reserves for the first time to try to dampen supply-side inflation, after a 9.5% y/y PPI print. Beijing has the ideological excuse to openly intervene on multiple fronts, even if it remains something the West refuses to read. Under which Western ideology are the problems noted by Pettifor being created and ‘resolved’? Marxists have an answer: this is what happens with late-stage capitalism – to which capitalists appears to have no reply other than “Can I sell you some rope?” Bloomberg explores this in more depth than usual today in ‘What Xi Means by ‘Disorderly Capital’ is $1.5 Trillion Question’. Except that it is a far larger question than $1.5 trillion.

That issue of ideology as limit to action is also in focus on another front, as US President Biden declares “The bottom line: we’re going to protect vaccinated workers from unvaccinated co-workers,” when the argument so far has been the unvaccinated are a danger to themselves. Specifically, Biden announced mandatory vaccinations for federal workers, with limited exceptions; for all private firms with more than 100 workers, or to test workers weekly, firing those who will not comply, with federal fines of $14,000 for each violation; told governors who won’t help he will use his powers to “get them out of the way”; and required 100% vaccinated staff at any medical facility that takes federal money (which is nearly all of them).

To say that this will exacerbate the already bitter US politics of vaccination is an understatement: Republican governors have already made clear they will resist these measures. Is it constitutional for the US government to force bosses to force you to be vaccinated? We will soon find out, and the boundaries of our political economy will shift accordingly.

As in the UK, where the Tories are proposing a bill that could see journalists imprisoned for up to 14 years for embarrassing the government. (Does that mean ministers have to be imprisoned as accomplices for embarrassing themselves? The UK will be ungovernable in no time if so.) As in Australia, where a new law allows the police to modify, add, copy or delete your social media posts, and where a court just ruled media can be sued for third party comments to on-line stories. As in Canada, where they are burning books.

To say that President Biden’s announcement may exacerbate the current labor market supply-demand imbalance is also an understatement. 80m Americans are still not vaccinated. If they continue to resist, and are fired, what will that do to payrolls and supply chains? Good luck trying to model any of this. And goodness me, aren’t we back to de facto arguments for more QE? How useful to have such a monetary Panopticon ready at all times!

Back on 9/11 2001, there was no social media, you could fly as easily as taking a bus, the Fed Funds rate was 3.5%, US 10-year yields were 4.84% (the previous close), and we had never heard of QE: and Afghanistan’s central bank was ruled by the Taliban.

Tyler Durden Fri, 09/10/2021 - 09:45
Published:9/10/2021 9:00:17 AM
[Society] Elizabeth Warren Asks Amazon to Ban Books, Products Spreading ‘COVID-19 Misinformation’

Massachusetts Sen. Elizabeth Warren, a Democrat, urged Amazon to remove books and other products that spread “COVID-19 misinformation” from its online marketplace. Warren identified a variety... Read More

The post Elizabeth Warren Asks Amazon to Ban Books, Products Spreading ‘COVID-19 Misinformation’ appeared first on The Daily Signal.

Published:9/8/2021 3:46:00 PM
[Markets] Is Anyone Willing To Call The Top Of The Everything Bubble? Is Anyone Willing To Call The Top Of The Everything Bubble?

Authored by Charles Hugh Smith via OfTwoMinds blog,

Can extremes become too extreme to continue higher? We're about to find out.

Is anyone willing to call the top of the Everything bubble? The short answer is no. Anyone earning money managing other people's money cannot afford to be wrong, and so everyone in the herd prevaricates on timing. The herd has seen what happens to those who call the top and then twist in the wind as the market continues rocketing higher.

Money managers live in segments of three months. If you miss one quarter, the clock starts ticking. If the S&P 500 beats your fund's return a second time because you were bearish in a bubble, your doom is sealed.

When the bubble finally pops and everyone but a handful of secretive Bears is crushed, the rationalization will cover everyone's failure: "nobody could have seen this coming."

Actually, everyone can see it coming, but the tsunami of central bank liquidity has washed away any semblance of rationality. My friend and colleague Zeus Y. recently summarized the consequences of this decoupling of markets and reality:

"I used to be with the Bears until the uncoupling was complete when the Fed started guaranteeing non-investment grade junk bonds. At that point, any semblance of sanity, much less probity, much less integrity was gone. Rinse and repeat with digital dollars going into the tens and even hundreds of trillions of dollars.

For two decades we fiscal sanity-ists have been assuming SOME baseline reality. I see none in sight and still plenty of assets to plunder and pump and still resources to suck and suckers to shake down. The system is running hot and wild on its own algorithms, and actual people are lying back and simply lapping up the "passive" income created by delusion-made-reality.

With that much will and that much corruption, that much greed and that much lust, with a strong dose of fear and opportunism to flavor this toxic brew, I do not see the entity slouching away from Bethlehem anytime soon (yes, Keats reference). The falcon has long since not heard the falconer in its widening gyre, but we have virtual falcons now that will do whatever we think it is we want (which has been force fed back to us).

Until this mass delusion and psychosis breaks by whatever means-- financial crash, rebellion against all the BS and return to simple community, we are only going to see digital currency, stocks, and pretty much everything go up as tens of trillions of concocted dollars try to find some asset to ride.

This will (continue to) drive the stock market, gold, cybercurrency, land, everything to unsustainable and giddy heights. I no longer think a Bear market is even possible. Just soaring "valuations" based on funny money and an unpredictable crash at some point in the future WAY longer than it ever should be if we had a sane world."

Well said, Zeus. 

It is now irrational to expect markets to ever reconnect with reality.

That said, if you glance at the charts below, this is about as a good a time as any for the bubble to burst. 

Recall that bubbles don't need a specific trigger-event to pop, they simply stop going up.

Regression to trend: insane extreme.

S&P 500 stocks over 10 times annual sales: insane extreme.

S&P 500 Everything Bubble compared to bubbles #1 and #2: insane extreme.

S&P 500 stocks above their 200-day moving average: insane extreme.

Billionaire wealth increasing in the Everything Bubble: insane extreme.

Are there any limits on irrationality? Apparently not. But there are still limits in the real world and central bank liquidity is distorting the real world, not just the imaginary world.

At the grave risk of twisting in the wind as the S&P 500 goes to 5,000, 10,000 and 100,000, let's call September 2021 the top of the Everything Bubble. Can extremes become too extreme to continue higher? We're about to find out.

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World (Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

Tyler Durden Tue, 09/07/2021 - 16:20
Published:9/7/2021 3:34:55 PM
[Markets] "Dear White People": NHS Lectures Brits About Their "Privilege" "Dear White People": NHS Lectures Brits About Their "Privilege"

Authored by Paul Joseph Watson via Summit News,

The NHS has published a blog on its official website called “Dear white people in the UK” which lectures Brits about their “white privilege” and says they should “be uncomfortable” about their “whiteness.”

Yes, really.

The article is written by Aishnine Benjamin, Equality, Diversity and Inclusion lead at the Nursing and Midwifery Council (not a real job).

It orders white people to read numerous far-left screeds about intersectionality and why white people should feel guilty about the color of their skin while telling them to shut up and “listen…to what black and minority ethnic people are saying.”

“Don’t say ‘I’m not political’ to excuse yourself from this conversation,” the text barks.

“Right now, ignorance isn’t an excuse. You can’t unsee what you have seen.”

That’s interesting given that all one can see in this article is outright racist hatred of white people thinly veiled in the garbled, quixotic rhetoric of social justice.

“Be uncomfortable,” the blog instructs white people, before asserting how “structurally racist systems” can only be properly understood by consuming numerous race-baiting books, videos and podcasts about how bad white people are.

The article then stresses that all of these messages should also be pushed on children before telling people to support Operation Black Vote, a leftist NGO.

“Diversity isn’t a fun to have it’s a must have,” the article aggressively ends.

While it’s easy to dismiss the blog as a meaningless exercise in performative white guilt, the situation becomes more ominous when you understand that the NHS can now literally deny health care to people it considers to be “racist” or “homophobic.”

Despite being notoriously terrible, the NHS is so venerated that it has all but replaced the church as the United Kingdom’s official state religion.

During the first lockdown, Brits were pressured to take part in a cringe-inducing weekly clapping sessions to show their appreciation for a health service that was apparently “overwhelmed,” but not overwhelmed enough to prevent nurses up and down the country performing Tik Tok dance routines for social media clout.

Some people who refused to take part were even publicly shamed by their community on Facebook.

As we previously highlighted, a prominent think tank published a report concluding that adulation for the NHS is not rational.

*  *  *

Brand new merch now available! Get it at https://www.pjwshop.com/

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Tyler Durden Tue, 09/07/2021 - 05:00
Published:9/7/2021 4:08:28 AM
[Markets] The Illusion Of Stability, The Inevitability Of Collapse The Illusion Of Stability, The Inevitability Of Collapse

Authored by Charles Hugh Smith via OfTwoMinds blog,

Beneath the illusory stability of rising GDP, the extremes of debt, leverage, stimulus and speculative frenzy required to keep the 'phantom wealth bubble' from imploding are all rising parabolically.

Imagine being at a party celebrating the vast wealth generated in the last ten months in stocks, cryptocurrencies, real estate and just about every other asset class. The lights flicker briefly but the host assures the crowd the generator powering the party is working perfectly.

Being a skeptic, you slip out on the excuse of bringing in more champagne and pay a visit to the generator room. To your horror, you find the entire arrangement held together with duct tape and rotted 2X4s, the electrical panel is an acrid-smelling mess of haphazard frayed wire and the generator is over-heated and vibrating off its foundation bolts. Whatever governor the engine once had is gone, it clearly won't last the night.

The party is the U.S. economy, and the generator room is the Federal Reserve, its proxies and the U.S. Treasury, all running to failure. What we're experiencing in real time is the illusion of stability and the inevitability of collapse. I've prepared a few charts to illuminate this reality graphically.

Here's the illusion of stability in a nutshell: while the broadest measure of the economy, gross domestic product (GDP) has continued marching higher (in both nominal and real/inflation-adjusted terms), the amount of Federal Reserve stimulus and Federal debt required to keep pushing GDP up at the same rate has exploded higher and is tracking a parabolic blow-off.

Let's start with a chart of GDP, which I've divided into four eras. Era #1 was the period of broad-based prosperity, defined as productivity gains that increased wages faster than inflation, i.e. the purchasing power of wages rose so each hour of labor bought more goods and services. Note that the GDP was not skyrocketing in this period, as the gains in productivity and prosperity were real and not based on financial trickery, debt, leverage or Fed stimulus. This era lasted from the 1950s through the mid-1970s, at which point stagflation put an end to the era of rising purchasing power of labor / wages.

Era #2 began around 1981 and lasted until 1999: this was the era of financialization, when debt and leverage replaced productivity as the source of profits and as a result speculation, leveraged buy-outs and other financial gimmicks proved far more profitable than actually producing goods and services. A key element of financialization is globalization, as the big profits only flow when debt, risk, income streams and phantom financial instruments can be commoditized (i.e. produced, packaged and sold as commodities) and sold globally.

Era #3 was the logical extension of financialization and speculation: the U.S. economy became dependent on debt-asset bubbles for its "growth" and expansion of phantom wealth. Bubble #1, the dot-com speculative frenzy, imploded in 2000, and Bubble #2, the debt-housing speculative frenzy, imploded in 2008.

Era #4 is the logical extension of the bubbles popping: a permanent Fed-fueled speculative frenzy that requires ever greater quantities of Fed stimulus and federal and private debt, and ever larger extremes of speculative frenzy to keep from imploding.

Here's nominal GDP: it looks great until we look beneath the surface.

Here's real GDP, adjusted for official inflation (in chained 2012 dollars). Looks very similar to nominal GDP: if we look at the steady ascent of real GDP, we'd imagine the nation's prosperity is even more broad-based and solid than in Era #1, but we'd be wrong: Eras #2, #3 and #4 are characterized by rising inequality, the death-spiral decay of middle class purchasing power and total dependence on skyrocketing stimulus, debt, leverage and speculation.

Here's a glance beneath the surface: federal debt has exploded higher: in Era #2 (Financialization), federal debt rose from less than $1 trillion in 1981 to $5.7 trillion in 2000-- about a 6-fold increase over 20 years. The next 20 years saw federal debt rise from $5.7 trillion to $23.3 trillion in early 2020 (pre-pandemic), and since then, a sharp ramp to $28.5 trillion.

You see the trend: GDP rose about 7-fold while federal debt rose 30-fold--mostly in the last 13 years of Era #4.

This chart of federal debt as a percentage of GDP is enlightening: notice than in Era #1 (broad-based prosperity), the percentage declined as GDP grew at a faster rate than federal debt. In Era #2 (financialization), debt rose far faster than GDP, but the dot-com boom reduced the percentage to around 60%, double the percentage in Era #1.

Era #3, the bubble-economy, remained in the same range, but the trend changed in Era #4, after the Fed's Bubble #2 popped, almost bringing down the entire global financial system. In the era of speculative Fed frenzy (Era #4), the debt quickly rose to 100% of GDP and then made another quantum leap above 120%--a developing-world-kleptocracy level.

While prosperity was replaced by inequality and Fed-inflated speculative bubbles, debt as a percentage of GDP rose 4-fold.

Speaking of parabolic blow-offs, here's the Federal Reserve balance sheet, up 10-fold in a mere 13 years. Remarkable, isn't it, that the U.S. economy managed decades of expansion with the Fed balance sheet far below $1 trillion, decade after decade, but now the economy needs the Fed to create $7.5 trillion and throw it on the bonfire of speculative bubbles to keep the economy from imploding.

GDP in 2007 was $14.7 trillion and the Fed balance sheet was $800 billion, or 5.4% of GDP. Now the Fed balance sheet is over 36% of GDP, about a 7-fold increase in a mere 13 years. Notice the rate of expansion is near-parabolic, even as GDP has recovered to pre-pandemic levels.

Other central banks followed this same expansion of monetary stimulus. If GDP has normalized, then why the continuing panic-expansion of monetary stimulus? The only logical explanation is the system was breaking down before the pandemic and its decay has accelerated.

We all know what happens when the expansion of debt, leverage, speculation and central bank stimulus falter by even the tiniest bit: the entire global phantom wealth bubble pops: this is visible in the chart of total debt, public and private:

Beneath the illusory stability of rising GDP, the extremes of debt, leverage, stimulus and speculative frenzy required to keep the phantom wealth bubble from imploding are all rising parabolically. Every attempt to return to an economy that's not dependent on debt-asset bubbles and unsustainable expansions of debt and monetary stimulus has triggered a global market crash which can only be saved by doubling, tripling or quadrupling the previous levels of debt and stimulus.

This is why collapse is now inevitable. Parabolic blow-off expansions generate instabilities that cannot be suppressed by doing more of what's failing; that is called run to failure for a reason: the only possible outcome is systemic failure, i.e. the collapse of the phantom wealth bubble, a collapse which will bring down the entire machinery of bubble-blowing.

Before you pop that bottle of champagne, you better check out the generator room first. Duct tape, frayed wiring, the scent of overheated metal and rotted 2X4s are not going to keep the party lights going much longer.

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World (Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

Tyler Durden Sat, 09/04/2021 - 10:30
Published:9/4/2021 9:38:10 AM
[Markets] Huarong Is Deleveraging By Selling $58.8 Billion In "Bad Assets " In An Online Debt Sale Huarong Is Deleveraging By Selling $58.8 Billion In "Bad Assets " In An Online Debt Sale

China Huarong Asset Management Co. is about to hit the bid with $58.8 billion worth of assets in order to try and right its ship, according to new article by Bloomberg. Huarong is going to be offloading the assets via a largest-of-its-kind online debt sale. 

The distressed asset manager is preparing to offload assets that involve "more than 7,000 borrowers", the report notes, at discounts of up to 40% on the dollar. The company had said last weekend that it "planned to dispose of subsidiaries with non-core business activities in the 'near future'". 

Recall, we just wrote about Huarong's state-backed bailout this week. Citic Group, in conjunction with China's Ministry of Finance, has stepped in at the urging of the state to prevent the asset manager from becoming a massive Lehman-style blowup in China for the time being. Defaults have been avoided, according to another Bloomberg article. While bondholders can breathe a sigh of relief, equity holders likely won't be as lucky. 

The rescue of the company was announced on August 18th after months of the state trying to pin down exactly who would step in, where, to help the entity. 

“Beijing didn’t allow a systemically important financial institution directly owned by the central government to default on its debt, an event that had the potential to upend debt markets and possibly precipitate a financial crisis,” The Wall Street Journal wrote earlier this month.

The bailout took the form of a “recapitalization” with government funding, Forbes noted, calling it "a financial infusion (unspecified in form or amount) from a group of Chinese state-owned enterprises. It is a straight bailout, as per precedent (although many had feared precedent might not hold)."

 

But the bailout comes against the backdrop of President Xi reining in China's major internet and tech companies with regulations that have collectively erased more than $1 trillion in shareholder value from names like Alibaba and Tencent. 

Thanks to this shift in tone, Sergey Dergachev, a senior portfolio manager at Union Investment in Frankfurt, told Bloomberg he believes that after Huarong, the days of guaranteed bailouts are over: “This assumption is not valid anymore.”

Huarong borrowed extensively since the late 1990s to help it expand and safeguard other Chinese banks. The company's longtime chairman Lai Xiaomin eventually wound up being caught in a corruption scandal and finally left the asset manager this January. By the summer, it was obvious the asset manager needed help. From there, it became months of arguing and infighting amongst the state and private investors to try and organize a bailout. 

Citic was eventually engaged, according to Bloomberg:

For nearly two months, a Citic team pored over the books at Huarong’s headquarters. Even at Citic, a Chinese company as connected as they come, the political nature of the task raised eyebrows. Huarong’s finances were so troubled and past dealings so fraught that some members of the Citic team worried they might be blamed for the mess. They wanted assurances that they wouldn’t be held responsible should higher ups take issue with any rescue plan later on, one of the people said.

The numbers, audited by Ernst & Young, were dire. Huarong had lost 102.9 billion yuan ($15.9 billion) in 2020, more than its combined profits since going public in 2015. It wrote off 107.8 billion yuan in bad investments. 

Then, in August, the company's bailout was officially announced:

At last, terms were drawn up and the State Council, long silent about Huarong, gave its blessing to a rescue that combines a government bailout with a more market-driven recapitalization. Huarong will get about 50 billion yuan of fresh capital from a group of investors led by Citic, which will assume the Ministry of Finance’s controlling stake, people familiar have said. Huarong is expected to raise 50 billion yuan more by selling non-core financial assets. On August 18, Huarong went public with its huge losses and quickly followed up with news of its rescue.

Recall, in April we had noted that China's central bank was considering a plan to "assume more than 100 billion yuan ($15 billion) of assets from China Huarong Asset Management, helping the state-owned company clean up its balance sheet and refocus on its core business of managing distressed debt."

With Huarong out of the way, China Evergrande Group now becomes to the country's largest worry...

And for those who think these entities are all too big to fail, David Loevinger, a former senior coordinator for China affairs at the U.S. Treasury, concluded:

“Now, you cannot say that with 100% certainty,”

Tyler Durden Fri, 09/03/2021 - 13:25
Published:9/3/2021 12:43:02 PM
[Markets] Nasdaq books record close as U.S. stocks end mostly higher Nasdaq books record close as U.S. stocks end mostly higher Published:9/1/2021 3:28:01 PM
[Entertainment] Washington Post hardcover bestsellers A snapshot of popular books. Published:9/1/2021 7:46:42 AM
[Entertainment] 13 Books to Read This September E-Comm: September booksWe love these products, and we hope you do too. E! has affiliate relationships, so we may get a small share of the revenue from your purchases. Items are sold by the retailer, not...
Published:9/1/2021 5:18:33 AM
[Markets] The War In Afghanistan Is What Happens When McKinsey Types Run Everything The War In Afghanistan Is What Happens When McKinsey Types Run Everything

Authored by Matt Stoller via BIG Substack,

Welcome to BIG, a newsletter about the politics of monopoly. If you’d like to sign up, you can do so here

"The Pervasiveness of Over-Optimism"

An Afghan General blames defense contractors for the collapse of the Afghan army. A government inspector blames the "the pervasiveness of overoptimism" by U.S. generals. It's all that, and more.

In 2017, Netflix put out a satirical movie on the conflict in Afghanistan. It was titled War Machine, and it starred Brad Pitt as an exuberant and deluded U.S. General named Glen McMahon. A fitness fanatic nicknamed ‘the Glanimal’ by his crew of adoring frathouse henchmen, McMahon is modeled on the real-life military leader Stanley McChrystal, who ran the surge in Afghanistan before being fired for saying disparaging things about Obama administration officials (including then VP Biden) on the record to Rolling Stone magazine.

In War Machine, McMahan comes to Afghanistan with a spirited can do attitude and a frat house of hard-partying yes-men, after having ‘kicked Al Qaeda in the sack’ running special operations in Iraq. He is obsessed with inspirational speeches and weird bureaucratic box-ticking, under the amorphous concept of leadership. This kind of leadership, though, isn’t actually working with wisdom and foresight, but is more like management consulting. Prior to arriving in Afghanistan, for instance, McMahan created a system, with the acronym SNORPP to coordinate military assets. At night, he cozies down to read books on management excellence, the kind that Harvard Business Review publishes as sort of Chicken Soup for the Executive’s Soul. He is also the author of a fictional book with the amazing title, “One Leg At a Time: Just Like Everybody Else.”

And yet his mission is unwinnable, which everyone seems to understand except him and his small team. McMahan constantly makes awkward speeches that make no sense, with the tone used by untrusted executives at corporate retreats. “We are here to build, to protect, to support the civilian population,” he told his troops. “To that end, we must avoid killing it at all costs. We cannot help them and kill them at the same time, it just ain’t humanly possible.” His character reflects what the actual government watchdog charged with overseeing the war in Afghanistan called one of the central problems with the U.S. effort, "the pervasiveness of over-optimism:"

If McMahan himself is a naive fool, he is surrounded by cynical bureaucratic opponents. As he seeks support for his new strategy of putting troops in Taliban-held provinces, he is gently ignored by the President of Afghanistan, who is a drug-addicted hypochondriac, and mocked by State Department and national security apparatchiks, who are striving cynics urging McMahon to just falsify numbers to make the war look a little better and not embarrass President Obama. Troops on the ground are demoralized and confused. No one actually believes in the mission, but dammit, McMahon is gonna get it done, whatever ‘it’ is. When McMahon tries to give an inspirational speech to ordinary Afghanis in Taliban-controlled territory about how the U.S. is going to bring them jobs and schools, one responds by saying he like jobs and schools, but please go away so the Taliban won’t retaliate. “The longer you are here the worse for us. Please go.”

It’s a hilarious, and extraordinarily dark movie. It also rang true, because it was based on the work of no-bullshit journalist Michael Hastings, who was perhaps the most honest reporter about the military establishment. And, as life is true to fiction, McChrystal, the general who Hastings profiled in Rolling Stone with an embarrassing story that led to his resignation, is now a management consultant (and board member of defense contractors). He runs inspirational ‘leadership training’ at the McChrystal Group, which is McKinsey with military branding.

In fact, McChrystal and much of our military leadership is tight with consultants like McKinsey, and that whole diseased culture from Harvard Business School of pervasive over-optimism and finance-venture capital monopoly bro-a-thons. McKinsey itself had involvement in Afghanistan, with at least one $18.6 million contract to help the Defense Department define its “strategic focus,” though government watchdogs found that the "only output [they] could find" was a 50-page report about strategic economic development potential in Herat, a province in western Afghanistan.” It turns out that ‘strategic focus’ means an $18.6 million PowerPoint. (There was reporting on this contract because Pete Buttigieg worked on it as a junior analyst at McKinsey, and he has failed upward to run the Transportation Department.)

I bring War Machine up because of today’s debate over Afghanistan. While there is a lot of back and forth about whether intelligence agencies knew that the Taliban would take over, or what would happen if we left, or whether the withdrawal could be done more competently, all you had to do to know that this war was a shitshow based on deception and idiocy at all levels was to turn on Netflix and watch this movie. Or you could read any number of inspector general reports, leaked documents, articles, talk to any number of veterans, or use common sense, which, polling showed, most Americans did. (Marine vet Lucas Kunce gives a nice rundown of the problem in this interview). I mean, it’s not like a major international media outlet printed a multi-part expose, which became a handy book, detailing the fact that everyone running the show knew it was an unwinnable mess nearly a decade ago. Oh, wait

In other words, the war in Afghanistan is like seeing management consultants come to your badly managed software company where everyone knows the problem is the boss’s indecisiveness and cowardice, except it’s violent and people die.

I mean, U.S. military leaders, like bad consultants or executives, lied about Afghanistan to the point it was routine. Here are just a few quotes from generals and DOD spokesmen over the years on the strength of the Afghan military, which collapsed almost instantly after the U.S. left.

In 2011, General David Petraeus stated, “Investments in leader development, literacy, marksmanship and institutions have yielded significant dividends. In fact, in the hard fighting west of Kandahar in late 2010, Afghan forces comprised some 60% of the overall force and they fought with skill and courage.”

In 2015, General John Campbell said that the the Afghan Army had “proven themselves to be increasingly capable,” that they had “grown and matured in less than a decade into a modern, professional force,” and, further, that they had “proven that they can and will take the tactical fight from here.”

In 2017, General John Nicholson stated that Afghan security forces had “prevailed in combat against an externally enabled enemy,” and that the army’s “ability to face simultaneity and complexity on the battlefield signals growth in capability.”

On July 11, 2021, Pentagon press secretary John Kirby said that the Afghan army has “much more capacity than they’ve ever had before, much more capability,” and asserted, “they know how to defend their country.”

Basically, look at this photo below, imagine them in camouflage, and that’s the U.S. military leadership.

The Withdrawal Anger Is *Embarrassment*

There are significant recriminations over the embarrassing media stories on the withdrawal from Afghanistan, tremendous anger that political leaders like Trump and Biden made significant mistakes in how they withdrew U.S. forces. Many of these critiques, coming from Europeans as much as American elites, are in bad faith.

Nonetheless, rather than weighing in on the merits of these arguments, I think it’s better to look at how the establishment observed a stark portrait of Afghanistan before the withdrawal, to show that the current critiques have nothing to do with operational choices.

To that end, let’s look at a review of War Machine in Foreign Policy magazine, written by one of McChrystal’s aides, Whitney Kassel, who now works at private intelligence firm The Arkin Group. In this review, Kassel noted the movie made her so upset that she started cursing, because, while there were of course mistakes, the film was totally unfair to McChrystal and demeaned the entire mission of building a safe Afghanistan. Kassel, like most of these elites, didn’t get the joke, because she is the joke.

I see the discourse on the withdrawal as a super-sized version of this Kassel’s review. The ‘Blob,’ that loose network of diplomats, ex-diplomats, generals, lobbyists, defense contractors, fancy lawyers, famous journalists, and insiders see the obvious desire for withdrawal as similar to how Kassel saw the truth-telling of Hastings and the Netflix movie. They are angry and embarrassed that they can’t hide their failures anymore. Their entire sense of self was bound up in the idea of an illusion of an unbeatable all-powerful America, even when they, like General Glen “the Glanimal” McMahon were the only ones who believed it.

And their embarrassment covers up something even more dangerous. None of these tens of thousands of Ivy league encrusted PR savvy highly credentialed prestigious people actually know how to do anything useful. They can write books on leadership, or do powerpoints, or leak stories, but the hard logistics of actually using resources to achieve something important are foreign to them, masked by unlimited budgets and public relations. It is, as someone told me in 2019 about the consumer goods giant Proctor and Gamble, where “very few white-collar workers at P&G really did anything” except take credit for the work of others.

Defense Monopolies and the Afghan Army

It’s fun to act like it was always thus, that this is how empires behave. But in fact, that’s not true. The current Blob is relatively new. And believe it or not, Western forces used to be able to actually win wars.

Going back to the last significant victory, the allies won World War II in large part for two reasons. First, the Soviet Union sacrificed 27 million people defeating the Nazis, and second, the U.S. military, government, labor, and business leaders were exceptionally good at logistics. The U.S. military had at least a dozen suppliers for each major weapons system, as well as the ability to produce its own weaponry, the government had exceptional insight into the U.S. economy, and New Dealers had destroyed the power of the Andrew Mellon and J.P. Morgan style short-term oriented financiers and monopolists who had controlled the industrial sinews of the country.

Today, this short-termism has taken over everything, including the military, which is now dominated by McKinsey-ified glory hounds without wisdom and defense contractors with market power. And this leadership class hasn’t just eroded our strategic capacity, but the very ability to conduct operations. Two days ago, Afghan General Sami Sadat published a piece in the New York Times describing why his army fell apart so quickly. He went through several important political reasons, but there was an interesting subtext about the operational capacity of a military that is so dependent on contractors for sustainment and repairs. In particular, these lines stuck out.

Contractors maintained our bombers and our attack and transport aircraft throughout the war. By July, most of the 17,000 support contractors had left. A technical issue now meant that aircraft — a Black Hawk helicopter, a C-130 transport, a surveillance drone — would be grounded.

The contractors also took proprietary software and weapons systems with them. They physically removed our helicopter missile-defense system. Access to the software that we relied on to track our vehicles, weapons and personnel also disappeared.

It’s just remarkable that contractors removed software and weapons systems from the Afghan army as they left. Remember, U.S. generals constantly talked about the strength of the Afghan forces, but analysts knew that its air force - on which it depended - would fall apart without contractors. The generals probably hadn’t really thought about the logistical problems of what dependence on contracting means. It’s just stunning that NATO forces would be trying to stand up an independent Afghan army, even as NATO contractors disarmed that army due to contracting arrangements.

I suspect the problem isn’t simply related to Afghanistan, because these kinds of problems are not isolated to the Afghan army. Last month, I noted that American soldiers are constantly complaining that bad contracting terms prevent them from fixing and using their own equipment, just as Apple stops consumers from repairing or tinkering with their iPhones. In 2019, Marine Elle Ekman noted that these problems are pervasive in the U.S. military.

Besides the broken generator in South Korea, I remembered working at a maintenance unit in Okinawa, Japan, watching as engines were packed up and shipped back to contractors in the United States for repairs because “that’s what the contract says.” The process took months.

With every engine sent back, Marines lost the opportunity to practice the skills they might need one day on the battlefield, where contractor support is inordinately expensive, unreliable or nonexistent…

While a broken generator or tactical vehicle may seem like small issues, the implications are much larger when a combat ship or a fighter jet needs to be fixed. What happens when those systems break somewhere with limited communications or transportation? Will the Department of Defense get stuck in the mud because of a warranty?

No one is invading the U.S., so these problems aren’t immediately obvious to most of us. Yet, with the collapse of the Afghan army, now we see an example of what happens when a military is too dependent on contractors, and that support system is removed (which adversaries could do to the U.S. military if they pursue certain strategies.) It turns out that the cost of not being able to repair your own equipment is losing wars.

More fundamentally, the people who are in charge of the governing institutions in our society are simply divorced from the underlying logistics of what makes them work. Everything, from the Boeing 737 Max to the opioid epidemic to the waste inside most big corporations to war, has been McKinsey-ified. And it’s all covered up with moral outrage, partisanship and culture warring, public relations, and management wisdom bullshit.

I’ll finish on a note of optimism. This loss in Afghanistan, while hugely embarrassing, could serve as a wake-up call. After the loss in Vietnam, a group of military officers, led by John Boyd, one of the greatest American military strategists in U.S. history, created a military reform movement, to change the way the Pentagon developed and used weapons, and they made enormous progress in restructuring key parts of the defense establishment. (One of the members of Boyd’s “Fighter Mafia,” Pierre Sprey, the man responsible for the remarkable A-10 Warthog, just passed away.) Similarly, the British, after losing the American Revolution, radically reformed their corrupt and antiquated systems of governance. Losing wars is a great spur to reform. It means that we as a society get to look at ourselves honestly. We may choose not to act on what we see, but we do in fact have the opportunity. And that’s not nothing.

UPDATE: I'd like to apologize to Whitney Kessel. She is no longer at the Arkin Group. After a stint at Palantir, she ended up at Morgan Stanley, where she is now the Head of Cyber Event Management for North America, which is not at all a highly paid fake job full of make work.

Tyler Durden Mon, 08/30/2021 - 23:00
Published:8/30/2021 10:14:06 PM
[Middle Column] Bookstore bans Morano’s anti-Green New Deal book: Conservative conference cancels book signings after bookseller balks at ‘Green Fraud’

Green Fraud: Why the Green New Deal Is Even Worse Than You Think

Steamboat Institute CEO and Chairwoman Jennifer Schubert-Akin said organizers concluded that “either you’re going to sell all of our books, or you’re going to sell none of our books.” ...  “Steamboat Institute is traditionally proud to partner with local bookstores to sell the latest compelling books by Freedom Conference speakers at the event,” she said in a statement. “Yet we will never allow partner bookstores to censor by picking and choosing which speaker books they sell based on their political preferences. We look forward to working with local bookstores committed to robust and open debate at our future events.”

Off the Beaten Path, the Steamboat Springs bookstore, declined to comment on its refusal to offer “Green Fraud,” but Mr. Bruneau cited an email from the company saying it was unwilling to be “associated with a title that disputes the reality of climate change." “They said, ‘Look, Colorado’s wildfires, we can’t sell this, we can’t give credence to this belief,’” Mr. Bruneau said. “So Jennifer said, ‘We don’t support censorship, we can’t accept your services.’ They still wanted to come but they wouldn’t sell that one book.”

#

Reality Check: Colorado WILDFIRES NOT MORE SEVERE since 1800s, says ‘massive’ University of Colorado study reveals – Funded by NSF &

STUDY: HUMANS, NOT 'GLOBAL WARMING', SPARKED ALMOST ALL OF CALIFORNIA’S WILDFIRES

Flashback: Mark Steyn on Amazon being pressured to cancel Morano’s ‘Green Fraud’ book: ‘The warm-mongers are opting for their preferred method of disposal – get ’em canceled’

Published:8/30/2021 5:39:23 PM
[Politics] Day of the Unicorn Comes for Politico As feats of publishing entrepreneurship go, it's one for the record books, or at least the business school case studies Politico, a Washington-centric mostly online news organization founded in 2007, will be sold to the German publisher Axel Springer for a reported $1 billion. If that sum is even close to being accurate, it's staggering. Time magazine was sold in 2018 to Marc Benioff and his wife Lynne Benioff for $190 million. The Washington Post was sold to Jeff Bezos in 2013 for $250... Published:8/30/2021 1:35:30 PM
[Markets] Mauldin: Perfect Storms Are Brewing Mauldin: Perfect Storms Are Brewing

Authored by John Mauldin via MauldinEconomics.com,

Having been Puerto Rico residents for almost three years now, Shane and I have learned a few things about living in the tropics. In Dallas, we didn’t often think about hurricanes, though we did have tornadoes and severe thunderstorms. Ditto for earthquakes. North Texas is pretty stable, geologically speaking.

Now hurricanes and earthquakes are part of normal life. We expect them to happen, and indeed they have happened since we came here. They weren’t too bad but could have been much worse. So, we have plans and precautions to deal with them, as does everyone else here. Last year, a hurricane came through and decided to drench the eastern part of the island and simply miss us. We had no wind or rain. But we were prepared, as were our neighbors. It’s just part of life. But then that same storm tragically devastated the Bahamas.

I was thinking about this in connection with my Sandpile letter, which we again reposted recently. Like those fingers of instability, our ability to predict the weather is far less than perfect. Technology can tell us when hurricanes/tropical storms are out there and the general direction they are moving. It’s still far from certain exactly where they will make landfall, and how strong they will be at the time. They can leave one corner of this small island devastated and the rest untouched.

So, the prudent course is to prepare for the worst, hope for the best—a trite saying but in this case it’s true. We would rather be overprepared than caught by surprise.

Investors face hurricanes, too, with even more uncertainty. The storm could hit someone else, or go back out to sea and dissipate. Do you bet everything that it will? I don’t.

Right now, several potentially big storms are brewing. They could be minor annoyances or catastrophic disasters, or anywhere in between.

I truly hope they all resolve with minimal fuss. But they may not. They could even combine into a perfect storm of even greater magnitude… so now is the time to prepare.

Hitting the Ceiling

I’ll describe several related but independent problems. The first one is US federal debt, which is approaching its limits. Literally so; the statutory debt ceiling, which Congress suspended for two years back in 2019, took effect again this month. The Treasury is now shuffling books to buy some time but we will reach the $28.5 trillion limit in the next few weeks.

Unlike the Federal Reserve, Treasury can’t create money. It manages the government’s cash flow by issuing new debt as needed to pay for the spending Congress approves. It has discretion on when to borrow, and in what amounts, so “cash on hand” can vary a lot. Treasury built up a huge cash balance last year and has been drawing it down in 2021, as this Gavekal chart shows.

Source: Gavekal Research

The blue line is Treasury’s “target balance” needed to cover the spending it knows will occur. Notice that the target balance increased rather dramatically at the beginning of the COVID crisis and it has not changed. The actual balance (red line) plunged this year and is now almost $500 billion below the target, and headed lower still.

The “easy” solution is for Congress to raise the debt ceiling, which obviously doesn’t restrain actual spending, and may actually increase spending by letting them postpone more effective reforms. But, as with everything else these days, that collides with other issues and becomes a political fight.

Congress is presently considering two infrastructure bills, the smaller of which has modest Republican support and is actually what we mostly think of as infrastructure, plus a much larger “human infrastructure” plan the Democrats will try to pass on their own. It includes universal preschool, free community college, and subsidized long-term healthcare as well as a host of other government benefits.

It is not clear the second bill can pass, as some moderate Democrats are not fully aboard. They could, and I suspect will, attach a debt ceiling increase to that bill. But regardless, they have to somehow modify the debt ceiling soon. If they don’t, some government spending will have to stop and Treasury debt holders may miss interest payments—the kind of thing that would constitute “default” for a private borrower.

The chances of this actually happening are small, but very real. Having been through this what seems like a dozen times, there will be lots of drama and then the debt ceiling will be increased.

All this has market impact even if ultimately resolved. Government spending and borrowing is critical to bond market liquidity. When this last happened in 2019, the related liquidity crisis forced the Fed to end its attempt to normalize policy. The FOMC decided in an October 4, 2019, secret meeting, unrevealed until a week later, to permanently add reserves to the system.

As I said at the time, “We have reached a point where the Fed believes it must have nuclear weapons just to swat flies.” A few months later COVID came along and the Fed enthusiastically fired those nukes. That brings us to the next problem.

Choose Your Poison

This week is the Fed’s Jackson Hole retreat—again virtual this year, but still an important policy decision point. Powell’s Friday morning speech was basically a nonevent. He did signal the initial taper could begin this year if all goes well. The speech was uber-dovish overall. Is the Fed really going to take its foot off the gas when Congress may ensure Fed support is needed more than ever? Hard to believe.

A further complication, as I discussed recently in Policy Errors Have Consequences, is the Fed’s own leadership is uncertain. Powell’s term as chair expires soon. President Biden still hasn’t announced whether he will renominate Powell or appoint someone else, although, as Peter Boockvar said, this speech did sound like someone campaigning to retain his job.

Treasury Secretary (and former Fed chair) Janet Yellen wants Powell to stay. This week we learned that much of the White House staff also wants Powell reappointed. While progressive Democrats wanted Biden to appoint Lael Brainard or another uber-dove, Powell increasingly seems like the likely choice.

Why suddenly shift back to Powell? The highly connected Harald Malmgren has a theory, stated succinctly in a recent tweet.

Source: Twitter

Read that a few times to let the implications sink in. Then remember this year’s recovery depended heavily on massive fiscal spending—stimulus payments, unemployment benefits, etc. The bipartisan infrastructure bills, while massive, will be spread over years and have less immediate effect. And if the White House now believes the second infrastructure bill’s passage is in jeopardy, then it is certainly worried about next year’s economic prospects.

In that case, they need a credible dove in charge at the Fed. Powell fits that bill, with the understanding he is to keep the economy moving even if Congress is paralyzed. How would he do that? Beats me. Monetary stimulus doesn’t have the kind of direct impact fiscal stimulus does. Powell himself (and before him Greenspan, Bernanke, and even Yellen to some degree) has been saying so for years. That raises the possibility of not just continued or additional QE, but other as-yet-untried stimulus tools.

This would mean we are between a rock and a hard place. Passage of the two infrastructure bills would push federal debt even higher than the already-unsustainable level. But if not passing those bills will make the Fed go nuclear on steroids (sorry, I lack suitable metaphors to describe all this), an outcome I predicted we would see a few years down the road, then it just means the monetization process begins earlier.

Stimulus, Inflation, and Monetization

Although it is not portrayed this way in the headlines, Nancy Pelosi actually did compromise. The so-called “Unbreakable Nine” (which is now theoretically 10) simply agreed to allow a discussion about the human infrastructure bill in return for a “date certain” vote on the bipartisan infrastructure bill. Which is basically exactly what happened in the Senate. Now here’s where it gets tricky.

First, the current cost of the human infrastructure bill is $3.5 trillion. Kind of, sort of. Rather than the normal 10-year projections, they are projecting some of the spending for five years since it theoretically could expire. If you project those same programs out over 10 years, the bill’s cost grows to well over $5 trillion. As Milton Friedman so wittily observed, “There is nothing so permanent as a temporary government program.”

Senator Kyrsten Sinema (D-Arizona) says she won’t vote for a $3.5 trillion bill. Senator Joe Manchin (D-West Virginia) has said the same. My sources tell me the tax increases required to pay for such a bill are the key sticking points. What we don’t know is how much of a tax increase the key players will accept. Is it a 3–4% increase in corporate taxes? A 5% increase in capital gains? Higher capital gains rates for those making over $400,000? We simply don’t know. But my educated suspicion is the tax increases will dictate the ultimate size and content of the bill.

Getting the votes won’t be easy. The House progressives want a guarantee on the human infrastructure bill before they support the bipartisan bill, and it doesn’t have enough Republican support to pass without them. Nor can either bill pass without the moderate House Democrats, who are seeking re-election in Republican-leaning districts. 

There is literally no telling what will happen in the next month. I see a reasonable chance both bills pass, with the “human infrastructure” bill significantly reduced, but also a nontrivial chance neither passes. Both sides have begun digging in their heels.

The immediate consequence is a little clearer. I think the Fed will wait until Congress somehow resolves these spending and debt ceiling issues before it makes any taper decisions, even though Powell says they may start tapering this year. The White House may be waiting as well before announcing Powell’s reappointment, even though he seems to have the necessary support.

All this means a month or two of uncertainty and guesswork, potentially sparking some market fireworks. And next year? Choose your poison. None of the likely outcomes are good for the economy. Though, oddly, more QE might boost asset prices.

But in one asset class, we have another problem brewing.

Supply Surge

One of the pandemic’s more surprising effects has been a boom in housing prices and home construction. It’s partly logical; in an era where we spend more time at home, cities have less allure and people want space. Some urban residents are moving to suburbs and rural areas, driving up prices. But that’s not all.

For one, we have a long-term trend in effect. The Millennial generation is forming households and needs starter homes. This has been the case for some time, as my friend Barry Habib has been saying (see Tiny Housing Bubbles) and will go on several more years.

Add to that the pandemic stimuli. The Fed’s mortgage bond purchases have essentially capped mortgage rates at a historically low level. But probably more important, cheap borrowing and low yields elsewhere incentivize investors to buy/build homes for rental, generating higher yields than they can get from other fixed income instruments. This is just another form of private credit, and with a little leverage can produce high single-digit yields, for which there is clearly high demand.

And on top of that, the various forbearance programs have kept homes that would otherwise be for sale (voluntarily or via foreclosure) off the market. This reduced supply helps boost prices. The effect has been significant... and it’s about to end.

My good friend (and fellow Puerto Rico resident) Harry Dent pointed out last week that almost 1.8 million homes are now in forbearance. These owners will have to resume making payments soon. Some will be able to do so, others won’t. What next? Here’s Harry.

Zillow estimates that 25% of these forbearances will end up on the market, as the owners cannot sustain their mortgages when they are forced to pay them again, but they allow that number could be as high as 50%.

In my scenario, the number starts around 25%, adding to recession pressures that then rapidly turn that number to 50% and ultimately to more like 100% before the recession bottoms by late 2023 or so. [JM: Clearly Harry is more bearish on the economy that I am, but he does have a point.]

…The point is this: Home prices are about to peak, as sales have fallen 23% already since January due to rising unaffordability. Home prices will start to fall with rising inventory, which mostly will hit by the end of November. Falling home prices and sales guarantee we’ll get a recession, as housing has been the strongest recovery sector as a result of extremely low mortgage rates from the unprecedented stimulus that has gone on for 13 years.

Here’s the chart from Zillow via Harry:

That’s scary enough, but it’s not all. Many homeowners who haven’t sold, and have no desire to, have used this time to refinance and in some cases pull cash equity out of their homes. Similarly, homebuilders and contractors have added debt to buy properties, materials, and equipment. All this added leverage could become problematic in a recession/falling home price environment. And we know how debt problems cascade through the economy.

Now, recognize this problem could blow up just as the Fed is trying to either normalize or get more aggressive, and Congress is unable to agree on any kind of helpful response. It’s a bit like living on a tropical island and seeing on TV that three different hurricanes are all headed your way. I can assure you, it won’t be a good feeling. It might make Shane and me get on an airplane and show up on your doorstep.

But Wait, There’s More

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Those of us of a certain age remember the late-night infomercials by the legendary Ron Popeil, who passed away last month. His classic line was, “But wait, there’s more!” As if all of the above weren’t concerning enough, there’s more.

  1. As of Friday morning, five out of five regional Fed presidents have come out in favor of tapering earlier than waiting till next year. Most indicated they are worried about inflation.

  2. And inflation is a problem. Taiwan Semiconductor just raised their prices 20%. Hong Kong/LA container prices are almost doubled since the beginning of the year, and 4X since last summer.

Source: Peter Boockvar

Inflation (CPI) is running well north of 5% and looks to be picking up steam. The longer the Fed goes without tapering and raising rates, the longer “transitory” inflation will last. I do not believe this Fed will make the mistake that Arthur Burns did in the 1970s by doing nothing and then allowing inflation to get to 10% plus.

  1. Thus, Powell will be under pressure to begin tapering sooner than the market thinks. A slowing economy and rising inflation? Can you say stagflation boys and girls? Do you want to run for reelection in 2022 on that premise? How do you think the market will react? Me too.

  2. Long COVID, a very debilitating disease that now affects more than 15 million Americans, could see as many as 1 ½ million Americans on disability which is almost 1% of the work force. GDP is simply the number of workers times productivity. If you reduce the number of workers without raising productivity, GDP will drop.

  3. Consumer spending came in weak Friday morning. Part of it is COVID and part of it is stimulus is beginning to go away.

I wrote pre-COVID that I thought the 2020s would see much closer to 1% real GDP annual growth than the 2% we have been experiencing for two decades. Debt pressure is inexorable. Then COVID came along and simply blew out all the prior debt projections. I’ve said we were looking at $50 trillion by 2030. I now think it will be at least another $5 trillion more and maybe double that. I don’t believe the bond market can handle that by itself.

The same logic that made me project early in the last decade that the Bank of Japan would monetize Japanese debt at levels nobody then thought possible makes me think the Federal Reserve will do the same thing. I firmly believe a $25 trillion+ Federal Reserve balance sheet is likely by the end of this decade.

That level of balance sheet debt, which will be duplicated percentagewise in Europe, means the developed world, including the US, will be lucky to grow 1% by the end of the decade.

That’s not a disaster, as both Europe and Japan are wonderful places to live. But it means traditional investment portfolios, especially passive index funds and bond funds, are not going to perform anywhere nearly as well as they have in the past. You are going to need to develop a completely different approach to investing if you want to see your portfolio grow on average in the high single digits.

On the investment side of my business (separate from Mauldin Economics) we look for strategies that will still work in this low-growth world. If you want to discuss some of these opportunities just click here. I guarantee you it’s worth a phone call to learn what’s in the Mauldin Kitchen. You don’t have to take a full menu—you might find some ingredients which will please your investing palate. (In this regard, I am chief economist and an investment advisor representative of CMG Wealth.)

Normalization, Travel, and Booster Shots

I’m not certain what “future normal” looks like, but it is not going to look like 2019. I think my life of 200–250,000 airline miles a year is over. I might not see 100,000 again. Many of those miles were for international speeches, and it will be years before they return, if ever.

As Mike Roizen and I keep saying to each other, this is just a damn tricksy virus. He was telling me earlier this summer the boosters would be after six months. And now it gets announced this week. Hopefully I get mine in October. COVID may be around for more than a few years, with booster shots somewhat like the annual flu shot. We’ll learn to live with the reality and get on with our lives. I used to travel with Theraflu packets in my briefcase as a precaution. Still do. I am not certain what I will carry in the future, but I do plan to get on planes.

*  *  *

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Tyler Durden Mon, 08/30/2021 - 13:55
Published:8/30/2021 1:03:09 PM
[Middle Column] Watch: Morano featured on C-SPAN’s Book TV in 30 min interview: Green Fraud: Why The Green New Deal Is Even Worse Than You Think

Morano on C-SPAN's Book TV

 

C-SPAN offers Morano's Green Fraud book for sale here. - C-SPAN explains: "Your purchase helps support C-SPAN. C-SPAN.org offers links to books featured on the C-SPAN networks to make it simpler for viewers to purchase them. C-SPAN has agreements with retailers that share a small percentage of your purchase price with our network."

Published:8/23/2021 2:00:43 AM
[World] Next Avenue: You have a purpose, you just need to find it—and it’s one of the most important things for your retirement Here are some ways to unlock your purpose from the author of nine books on the subject.
Published:8/14/2021 3:17:02 PM
[Right Column] COVID Lockdowns exposed: ‘In the sweep of history, intellectuals have specialized in conjuring rationales for why freedom needs to be ended…Every age has generated some fashionable & overriding reason why people cannot be free’

Jeffrey A. Tucker: "In the sweep of history, intellectuals have specialized in conjuring rationales for why freedom needs to be ended in favor of top-state statist forms of social planning. There were religious reasons, genetic reasons, end-of-history reasons, security reasons, and a hundred more. Every age has generated some fashionable and overriding reason why people cannot be free. Public health is the reason of the moment. In this author’s telling, everything we think we know about the social and political order must conform to his number one priority of pathogen avoidance and suppression, while every other concern (such as freedom itself) should take a back seat."

Vinay Prasad correctly writes: “When the history books are written about the use of non-pharmacologic measures during this pandemic, we will look as pre-historic and barbaric and tribal as our ancestors during the plagues of the middle ages.”

...

As Lord Sumption writes: “There are few more obsessive fanatics than the technocrat who is convinced that he is reordering an imperfect world for its own good.”

Published:8/2/2021 12:52:16 PM
[Markets] Israel Seeks To Invoke US Anti-BDS Laws Against Ben & Jerry's Israel Seeks To Invoke US Anti-BDS Laws Against Ben & Jerry's

Authored by Dave DeCamp via AntiWar.com,

Israeli leaders are furious with the American ice cream company Ben & Jerry’s for announcing that it will stop selling products in the occupied Palestinian territories of East Jerusalem and the West Bank.

Gilad Erdan, Israel’s ambassador to the US, sent letters to the governors of the 35 US states that have laws on the books against the Boycott Divestment and Sanctions (BDS) movement that calls for a global boycott to pressure Israel over its occupation and other human rights abuses.

Wikimedia Commons

"I ask that you consider speaking out against the company’s decision, and taking any other relevant steps, including in relations to your state laws and the commercial dealings between Ben and Jerry’s and your state," Erdan said in the letter that he sent Tuesday, which he coordinated with Israeli Foreign Minister Yair Lapid.

Erdan said Israel views Ben and Jerry’s decision as "the de-facto adoption of antisemitic practices." Lapid made similar comments on Twitter. "Ben & Jerry’s decision represents shameful surrender to antisemitism, to BDS and to all that is wrong with the anti-Israel and anti-Jewish discourse," the foreign minister wrote on Monday.

Lapid also vowed to contact US governors in states with anti-BDS laws. "Over 30 states in the United States have passed anti-BDS legislation in recent years. I plan on asking each of them to enforce these laws against Ben & Jerry’s. They will not treat the State of Israel like this without a response," he said.

The anti-BDS laws, which Israeli officials lobbied states to pass, deny state funds to those who advocate for the boycott of Israel and require state contractors to sign oaths pledging not to boycott the Jewish state. The laws are a clear violation of the First Amendment and are always ruled unconstitutional when brought to court.

Vermont, the state Ben and Jerry’s is based in, does not have anti-BDS laws on the books. It’s not clear how other states’ anti-BDS laws could affect Ben & Jerry’s, but Israeli officials are exploring other ways to go after the ice cream company.

Israeli Prime Minister Naftali Bennett spoke with the head of Unilever, a consumer goods company of which Ben & Jerry’s is a subsidiary. According to a statement from Bennett’s office, the Israeli leader told Unilever CEO Alan Jope that Ben & Jerry’s decision will have "severe consequences" and said Israel will take "strong action."

The US State Department on Tuesday reaffirmed that the Biden administration is against the BDS movement, but declined to comment on Ben & Jerry’s decision. "I don’t have a reaction to offer regarding the actions of a private company. More broadly what I would say is that we firmly reject the BDS movement, which unfairly singles out Israel," State Department spokesman Ned Price told reporters.

Disclosure: Antiwar.com has received donations in the past from Ben Cohen, the co-founder of Ben & Jerry’s

Tyler Durden Wed, 07/21/2021 - 20:00
Published:7/21/2021 7:04:51 PM
[History] Anti-slavery revolution (Scott Johnson) Chris Flannery is a senior fellow at the Claremont Institute and a contributing editor of the Claremont Review of Books. Chris holds down the fort for Claremont in The American Story podcast. It’s also linked over in our sidebar. In his current series of three podcasts — each just over six minutes in length — Chris takes up the question of slavery and the American founding. In the series he Published:7/21/2021 11:32:15 AM
[Big Tech] Media Finds Mark Levin’s ‘American Marxism’ Book Too Counterrevolutionary

We’re six months into the Biden administration, and the liberal media is still obsessing over new books full of titillating tales from anonymous sources about... Read More

The post Media Finds Mark Levin’s ‘American Marxism’ Book Too Counterrevolutionary appeared first on The Daily Signal.

Published:7/21/2021 11:03:40 AM
[Markets] Many Big-City Democrat Mayors Defunded Police While Spending Heavily On Their Security Details, Watchdog Finds Many Big-City Democrat Mayors Defunded Police While Spending Heavily On Their Security Details, Watchdog Finds

Authored by Mark Tapscott via The Epoch Times,

Democratic mayors in 20 of the nation’s 25 biggest cities slashed police department budgets and positions even as they spent millions of tax dollars on their own security details, according to data obtained by a government watchdog.

“In 25 major U.S. cities, officials have proposed cutting—or in 20 cases already cut—police budgets. However, what OpentheBooks.com auditors found was that mayors and city officials still enjoy personal protection of a dedicated police detail costing taxpayers millions of dollars,” Adam Andrzejewski, Chief Executive Officer and Founder of Open The Books (OTB), said in a statement announcing the new data.

“This is ‘police protection for me (the political elites), but not for thee (the citizens),’” Andrzejewski said.

The Chicago-based group is a non-profit that uses public-right-to-know and freedom of information laws to maintains hundreds of publicly available databases of federal, state, and local spending with the goal of providing “every dime online in real time.”

In San Francisco, for example, the costs of the security detail protecting Mayor London Breed and other city officials spiraled from $1.7 million in 2015 to $2.6 million in 2020.

Breed has proposed shifting $120 million from the city’s police department to mental health and workforce training programs. City officials declined to say how many officers are assigned to the security details, according to OTB.

In Chicago, Mayor Lori Lightfoot claimed to be opposed to defunding the police, but OTB found officials quietly abolished 400 police department positions last year.

Those positions were eliminated even as the city’s “security detail costs peaked in 2020 – up $700,000 over five years: $2.7 million spent on 16 officers (2015); $2.9 million for 16 officers (2016); $2.7 million for 20 officers (2017); $2.8 million for 16 officers (2018); $2.8 million for 17 officers (2019); and $3.4 million for 22 officers (2020)—an all-time high,” OTB said.

In New York City, Mayor Bill DeBlasio slashed $1 billion from the New York Police Department’s (NYPD) $6 billion annual budget, including $354 million transferred to mental health, homelessness, and education services.

But the mayor, who briefly sought the Democratic presidential nomination last year, continues to enjoy tax-paid police protection for himself, his wife, and his son.

City officials have not yet agreed to disclose the costs or number of officers assigned to the multiple DeBlasio security details, according to OTB.

In Baltimore, Mayor Brendon Scott’s administration spent $3.6 million on a security detail that included 14 officers to protect the chief executive as well as States Attorney Marilyn Mosby and Police Commissioner Michael Harrison, according to the data compiled by OTB. The Baltimore Police Department budget has been reduced by $22 million.

“Protection for the mayor included six officers and one sergeant, costing almost $2 million,” OTB said in the statement. “The state’s attorney has three officers and one sergeant, costing $1.3 million. The police commissioner’s security detail included two officers and one sergeant, costing $464,948.”

Baltimore has been plagued for a decade with steadily rising rates of serious crime, including murder, robbery, and assault. The city has also seen two of the present mayor’s immediate predecessors, Catherine Pugh and Sheila Dixon, resign and be convicted on various corruption charges.

In San Diego, Mayor Todd Gloria’s administration budgeted $2.6 million for 12 full-time officers to protect him and members of the city council during meetings and city hall.

“However, the mayor’s budget calls for cutting $4.3 million from the police overtime budget and spending more than $1 million to set up the new police oversight body, the Commission on Police Practices,” OTB said.

Notable among the other cities examined by OTB were these:

  • Minneapolis, where George Floyd was killed, cut $8 million from the police budget to launch a mental health team to respond to certain 911 calls.

  • Oakland officials cut the police budget by $14.6 million. Even bigger cuts are expected in the near future.

  • Despite two years of near-continuous rioting led by Antifa and Black Lives Matter (BLM) activists, Portland officials slashed $15 million from the police budget and disbanded a gun violence reduction unit and transit team that had been accused of over-policing Black communities, among other cuts.

  • Milwaukee officials are cutting 120 police officer positions, beginning with the current year’s budget. The reductions are to come mainly by not replacing retiring officers. Sixty positions were eliminated last year.

  • In Seattle, city council members at one point last year declared their intent to slash the police budget by half, but ultimately settled on a 20 percent reduction.

  • Los Angeles officials have approved a $150 million budget cut from its $1.86 billion proposed budget.

  • In the nation’s capital, officials reduced the Metropolitan Police Department’s budget by $15 million.

  • Philadelphia residents have seen local officials transfer $33 million from the police to other programs.

  • Austin officials cut about $20 million from the police department and shifted $80 million in services previously provided by law enforcement to other departments.

Tyler Durden Tue, 07/20/2021 - 23:25
Published:7/20/2021 10:27:56 PM
[Markets] Taibbi: NPR's Brilliant Self-Own Taibbi: NPR's Brilliant Self-Own

Authored by Matt Taibbi via TK News,

Yesterday’s NPR article, “Outrage As A Business Model: How Ben Shapiro Is Using Facebook To Build An Empire,” is among the more unintentionally funny efforts at media criticism in recent times.

The piece is about Ben Shapiro, but one doesn’t have to have ever followed Shapiro, or even once read the Daily Wire, to get the joke. The essence of NPR’s complaint is that a conservative media figure not only “has more followers than The Washington Post” but outperforms mainstream outlets in the digital arena, a fact that, “experts worry,” may be “furthering polarization” in America. NPR refers to polarizing media as if they’re making an anthropological discovery of a new and alien phenomenon.

The piece goes on to note that “other conservative outlets such as The Blaze, Breitbart News and The Western Journal that “publish aggregated and opinion content” have also “generally been more successful… than legacy news outlets over the past year, according to NPR's analysis.” In other words, they’re doing better than us.

Is the complaint that Shapiro peddles misinformation? No: “The articles The Daily Wire publishes don't normally include falsehoods.” Are they worried about the stoking of Trumpism, or belief that the 2020 election was stolen? No, because Shapiro “publicly denounced the alt-right and other people in Trump's orbit,” as well as “the conspiracy theory that Trump is the rightful winner of the 2020 election.”

Are they mad that the site is opinion disguised as news? No, because, “publicly the site does not purport to be a traditional news source.”

The main complaint, instead, is that:

By only covering specific stories that bolster the conservative agenda (such as… polarizing ones about race and sexuality issues)… readers still come away from The Daily Wire's content with the impression that Republican politicians can do little wrong and cancel culture is among the nation's greatest threats.

NPR has not run a piece critical of Democrats since Christ was a boy. Moreover, much like the New York Times editorial page (but somehow worse), the public news leader’s monomaniacal focus on “race and sexuality issues” has become an industry in-joke. For at least a year especially, listening to NPR has been like being pinned in wrestling beyond the three-count. Everything is about race or gender, and you can’t make it stop.

Conservatives have always hated NPR, but in the last year I hear more and more politically progressive people, in the media, talking about the station as a kind of mass torture experiment, one that makes the most patient and sensible people want to drive off the road in anguish. A brief list of just a few recent NPR reports:

Billie Eilish Says She Is Sorry After TikTok Video Shows Her Mouthing A Racist Slur.” Pop star caught on tape using the word “chink” when she was “13 or 14 years old” triggers international outrage and expenditure of U.S. national media funding.

Black TikTok Creators Are On Strike To Protest A Lack Of Credit For Their Work.” White TikTok users dance to Nicky Minaj lyrics like, “I'm a f****** Black Barbie. Pretty face, perfect body,” kicking off “a debate about cultural appropriation on the app.”

Geocaching While Black: Outdoor Pastime Reveals Racism And Bias.” Area man who plays GPS-based treasure hunt game requiring forays into remote places and private property describes “horrifying” experience of people asking what he’s doing.

Broadway Is Reopening This Fall, And Every New Play Is By A Black Writer.” All seven new plays being written by black writers is “a step toward progress,” but critics “will be watching Broadway's next moves” to make sure “momentum” continues.

She Struggled To Reclaim Her Indigenous Name. She Hopes Others Have It Easier.” It took Cold Lake First Nations member Danita Bilozaze nine whole months to change her name to reflect her Indigenous identity.

Tom Hanks Is A Non-Racist. It's Time For Him To Be Anti-Racist.” Tom Hanks pushing for more widespread teaching of the Tulsa massacre doesn’t change the fact that he’s built a career playing “white men ‘doing the right thing,’” NPR complains.

Mixed in with Ibram Kendi recommendations for children’s books, instructions on how to “decolonize your bookshelf” and “talk to your parents about racism” (even if your parents are an interracial couple), and important dispatches from the war on complacency like “Monuments And Teams Have Changed Names As America Reckons With Racism, Birds Are Next,” “National” Public Radio in the last year has committed itself to a sliver of a sliver of a sliver of the most moralizing, tendentious, humor-deprived, jargon-obsessed segment of American society. Yet without any irony, yesterday’s piece still made deadpan complaint about Shapiro’s habit of “telling [people] what their opinions should be” and speaking in “buzzwords.”

This was functionally the same piece as the recent New York Times article, “Is the Rise of the Substack Economy Bad for Democracy?” which similarly blamed Substack for hurting “traditional news” — and, as the headline suggests, democracy itself — by being a) popular and b) financially successful, which in media terms means not losing money hand over fist. There, too, the reasons for the rise of an alternative media outlet were presented by critics as a frightening, unsolvable Scooby-Doo mystery.

It’s not. NPR sucks and is unlistenable, so people are going elsewhere. People like Shapiro are running their strategy in reverse and making fortunes doing it. One of these professional analysts has to figure this one out eventually, right?

Tyler Durden Tue, 07/20/2021 - 19:25
Published:7/20/2021 6:29:31 PM
[TC] Litnerd streams live actors into the classroom to help kids better connect with reading Our kids can’t read. As of 2019, roughly a third of US fourth graders were unable to read at the level expected of them. The scores have barely changed in decades. Something isn’t working here. Litnerd, a company out of New York City, wants to try something new. They’re writing books and building lesson plans […] Published:7/20/2021 1:56:34 PM
[Markets] The Panic Pandemic The Panic Pandemic

Authored by John Tierney via City-Journal.com,

Fearmongering from journalists, scientists, and politicians did more harm than the virus...

The United States suffered through two lethal waves of contagion in the past year and a half. The first was a viral pandemic that killed about one in 500 Americans—typically, a person over 75 suffering from other serious conditions. The second, and far more catastrophic, was a moral panic that swept the nation’s guiding institutions.

Instead of keeping calm and carrying on, the American elite flouted the norms of governance, journalism, academic freedom—and, worst of all, science. They misled the public about the origins of the virus and the true risk that it posed. Ignoring their own carefully prepared plans for a pandemic, they claimed unprecedented powers to impose untested strategies, with terrible collateral damage. As evidence of their mistakes mounted, they stifled debate by vilifying dissenters, censoring criticism, and suppressing scientific research.

If, as seems increasingly plausible, the coronavirus that causes Covid-19 leaked out of a laboratory in Wuhan, it is the costliest blunder ever committed by scientists. Whatever the pandemic’s origin, the response to it is the worst mistake in the history of the public-health profession. We still have no convincing evidence that the lockdowns saved lives, but lots of evidence that they have already cost lives and will prove deadlier in the long run than the virus itself.

One in three people worldwide lost a job or a business during the lockdowns, and half saw their earnings drop, according to a Gallup poll. Children, never at risk from the virus, in many places essentially lost a year of school. The economic and health consequences were felt most acutely among the less affluent in America and in the rest of the world, where the World Bank estimates that more than 100 million have been pushed into extreme poverty.

The leaders responsible for these disasters continue to pretend that their policies worked and assume that they can keep fooling the public. They’ve promised to deploy these strategies again in the future, and they might even succeed in doing so—unless we begin to understand what went wrong.

The panic was started, as usual, by journalists. As the virus spread early last year, they highlighted the most alarming statistics and the scariest images: the estimates of a fatality rate ten to 50 times higher than the flu, the chaotic scenes at hospitals in Italy and New York City, the predictions that national health-care systems were about to collapse.

The full-scale panic was set off by the release in March 2020 of a computer model at the Imperial College in London, which projected that—unless drastic measures were taken—intensive-care units would have 30 Covid patients for every available bed and that America would see 2.2 million deaths by the end of the summer. The British researchers announced that the “only viable strategy” was to impose draconian restrictions on businesses, schools, and social gatherings until a vaccine arrived.

This extraordinary project was swiftly declared the “consensus” among public-health officials, politicians, journalists, and academics. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, endorsed it and became the unassailable authority for those purporting to “follow the science.” What had originally been a limited lockdown—“15 days to slow the spread”—became long-term policy across much of the United States and the world. A few scientists and public-health experts objected, noting that an extended lockdown was a novel strategy of unknown effectiveness that had been rejected in previous plans for a pandemic. It was a dangerous experiment being conducted without knowing the answer to the most basic question: Just how lethal is this virus?

The most prominent early critic was John Ioannidis, an epidemiologist at Stanford, who published an essay for STAT headlined “A Fiasco in the Making? As the Coronavirus Pandemic Takes Hold, We Are Making Decisions Without Reliable Data.” While a short-term lockdown made sense, he argued, an extended lockdown could prove worse than the disease, and scientists needed to do more intensive testing to determine the risk. The article offered common-sense advice from one of the world’s most frequently cited authorities on the credibility of medical research, but it provoked a furious backlash on Twitter from scientists and journalists.

The fury intensified in April 2020, when Ioannidis followed his own advice by joining with Jay Bhattacharya and other colleagues from Stanford to gauge the spread of Covid in the surrounding area, Santa Clara County. After testing for Covid antibodies in the blood of several thousand volunteers, they estimated that the fatality rate among the infected in the county was about 0.2 percent, twice as high as for the flu but considerably lower than the assumptions of public-health officials and computer modelers. The researchers acknowledged that the fatality rate could be substantially higher in other places where the virus spread extensively in nursing homes (which hadn’t yet occurred in the Santa Clara area). But merely by reporting data that didn’t fit the official panic narrative, they became targets.

Other scientists lambasted the researchers and claimed that methodological weaknesses in the study made the results meaningless. A statistician at Columbia wrote that the researchers “owe us all an apology.” A biologist at the University of North Carolina said that the study was “horrible science.” A Rutgers chemist called Ioannidis a “mediocrity” who “cannot even formulate a simulacrum of a coherent, rational argument.” A year later, Ioannidis still marvels at the attacks on the study (which was eventually published in a leading epidemiology journal). “Scientists whom I respect started acting like warriors who had to subvert the enemy,” he says. “Every paper I’ve written has errors—I’m a scientist, not the pope—but the main conclusions of this one were correct and have withstood the criticism.”

Mainstream journalists piled on with hit pieces quoting critics and accusing the researchers of endangering lives by questioning lockdowns. The Nation called the research a “black mark” for Stanford. The cheapest shots came from BuzzFeed, which devoted thousands of words to a series of trivial objections and baseless accusations. The article that got the most attention was BuzzFeed’s breathless revelation that an airline executive opposed to lockdowns had contributed $5,000—yes, five thousand dollars!—to an anonymized fund at Stanford that had helped finance the Santa Clara fieldwork.

The notion that a team of prominent academics, who were not paid for their work in the study, would risk their reputations by skewing results for the sake of a $5,000 donation was absurd on its face—and even more ludicrous, given that Ioannidis, Bhattacharya, and the lead investigator, Eran Bendavid, said that they weren’t even aware of the donation while conducting the study. But Stanford University was so cowed by the online uproar that it subjected the researchers to a two-month fact-finding inquiry by an outside legal firm. The inquiry found no evidence of conflict of interest, but the smear campaign succeeded in sending a clear message to scientists everywhere: Don’t question the lockdown narrative.

In a brief interlude of journalistic competence, two veteran science writers, Jeanne Lenzer and Shannon Brownlee, published an article in Scientific American decrying the politicization of Covid research. They defended the integrity and methodology of the Stanford researchers, noting that some subsequent studies had found similar rates of fatality among the infected. (In his latest review of the literature, Ioannidis now estimates that the average fatality rate in Europe and the Americas is 0.3 to 0.4 percent and about 0.2 percent among people not living in institutions.) Lenzer and Brownlee lamented that the unjust criticism and ad hominem vitriol had suppressed a legitimate debate by intimidating the scientific community. Their editors then proceeded to prove their point. Responding to more online fury, Scientific American repented by publishing an editor’s note that essentially repudiated its own article. The editors printed BuzzFeed’s accusations as the final word on the matter, refusing to publish a rebuttal from the article’s authors or a supporting letter from Jeffrey Flier, former dean of Harvard Medical School. Scientific American, long the most venerable publication in its field, now bowed to the scientific authority of BuzzFeed.

Editors of research journals fell into line, too. When Thomas Benfield, one of the researchers in Denmark conducting the first large randomized controlled trial of mask efficacy against Covid, was asked why they were taking so long to publish the much-anticipated findings, he promised them as “as soon as a journal is brave enough to accept the paper.” After being rejected by The LancetThe New England Journal of Medicine, and JAMA, the study finally appeared in the Annals of Internal Medicine, and the reason for the editors’ reluctance became clear: the study showed that a mask did not protect the wearer, which contradicted claims by the Centers for Disease Control and other health authorities.

Stefan Baral, an epidemiologist at Johns Hopkins with 350 publications to his name, submitted a critique of lockdowns to more than ten journals and finally gave up—the “first time in my career that I could not get a piece placed anywhere,” he said. Martin Kulldorff, an epidemiologist at Harvard, had a similar experience with his article, early in the pandemic, arguing that resources should be focused on protecting the elderly. “Just as in war,” Kulldorff wrote, “we must exploit the characteristics of the enemy in order to defeat it with the minimum number of casualties. Since Covid-19 operates in a highly age specific manner, mandated counter measures must also be age specific. If not, lives will be unnecessarily lost.” It was a tragically accurate prophecy from one of the leading experts on infectious disease, but Kulldorff couldn’t find a scientific journal or media outlet to accept the article, so he ended up posting it on his own LinkedIn page. “There’s always a certain amount of herd thinking in science,” Kulldorff says, “but I’ve never seen it reach this level. Most of the epidemiologists and other scientists I’ve spoken to in private are against lockdowns, but they’re afraid to speak up.”

To break the silence, Kulldorff joined with Stanford’s Bhattacharya and Sunetra Gupta of Oxford to issue a plea for “focused protection,” called the Great Barrington Declaration. They urged officials to divert more resources to shield the elderly, such as doing more tests of the staff at nursing homes and hospitals, while reopening business and schools for younger people, which would ultimately protect the vulnerable as herd immunity grew among the low-risk population.

They managed to attract attention but not the kind they hoped for. Though tens of thousands of other scientists and doctors went on to sign the declaration, the press caricatured it as a deadly “let it rip” strategy and an “ethical nightmare” from “Covid deniers” and “agents of misinformation.” Google initially shadow-banned it so that the first page of search results for “Great Barrington Declaration” showed only criticism of it (like an article calling it “the work of a climate denial network”) but not the declaration itself. Facebook shut down the scientists’ page for a week for violating unspecified “community standards.”

The most reviled heretic was Scott Atlas, a medical doctor and health-policy analyst at Stanford’s Hoover Institution. He, too, urged focused protection on nursing homes and calculated that the medical, social, and economic disruptions of the lockdowns would cost more years of life than the coronavirus. When he joined the White House coronavirus task force, Bill Gates derided him as “this Stanford guy with no background” promoting “crackpot theories.” Nearly 100 members of Stanford’s faculty signed a letter denouncing his “falsehoods and misrepresentations of science,” and an editorial in the Stanford Daily urged the university to sever its ties to Hoover.

The Stanford faculty senate overwhelmingly voted to condemn Atlas’s actions as “anathema to our community, our values and our belief that we should use knowledge for good.” Several professors from Stanford’s medical school demanded further punishment in a JAMA article, “When Physicians Engage in Practices That Threaten the Nation’s Health.” The article, which misrepresented Atlas’s views as well as the evidence on the efficacy of lockdowns, urged professional medical societies and medical-licensing boards to take action against Atlas on the grounds that it was “ethically inappropriate for physicians to publicly recommend behaviors or interventions that are not scientifically well grounded.”

But if it was unethical to recommend “interventions that are not scientifically well grounded,” how could anyone condone the lockdowns? “It was utterly immoral to conduct this society-wide intervention without the evidence to justify it,” Bhattacharya says. “The immediate results have been disastrous, especially for the poor, and the long-term effect will be to fundamentally undermine trust in public health and science.” The traditional strategy for dealing with pandemics was to isolate the infected and protect the most vulnerable, just as Atlas and the Great Barrington scientists recommended. The CDC’s pre-pandemic planning scenarios didn’t recommend extended school closures or any shutdown of businesses even during a plague as deadly as the 1918 Spanish flu. Yet Fauci dismissed the focused-protection strategy as “total nonsense” to “anybody who has any experience in epidemiology and infectious diseases,” and his verdict became “the science” to leaders in America and elsewhere.

Fortunately, a few leaders followed the science in a different way. Instead of blindly trusting Fauci, they listened to his critics and adopted the focused-protection strategy—most notably, in Florida. Its governor, Ron DeSantis, began to doubt the public-health establishment early in the pandemic, when computer models projected that Covid patients would greatly outnumber hospital beds in many states. Governors in New York, New Jersey, Pennsylvania, and Michigan were so alarmed and so determined to free up hospital beds that they directed nursing homes and other facilities to admit or readmit Covid patients—with deadly results.

But DeSantis was skeptical of the hospital projections—for good reason, as no state actually ran out of beds—and more worried about the risk of Covid spreading in nursing homes. He forbade long-term-care centers to admit anyone infected with Covid and ordered frequent testing of the staff at senior-care centers. After locking down last spring, he reopened businesses, schools, and restaurants early, rejected mask mandates, and ignored protests from the press and the state’s Democratic leaders. Fauci warned that Florida was “asking for trouble,” but DeSantis went on seeking and heeding advice from Atlas and the Great Barrington scientists, who were astonished to speak with a politician already familiar with just about every study they mentioned to him.

“DeSantis was an incredible outlier,” Atlas says. “He dug up the data and read the scientific papers and analyzed it all himself. In our discussions, he’d bounce ideas off me, but he was already on top of the details of everything. He always had the perspective to see the larger harms of lockdowns and the need to concentrate testing and other resources on the elderly. And he has been proven correct.”

If Florida had simply done no worse than the rest of the country during the pandemic, that would have been enough to discredit the lockdown strategy. The state effectively served as the control group in a natural experiment, and no medical treatment with dangerous side effects would be approved if the control group fared no differently from the treatment group. But the outcome of this experiment was even more damning.

Florida’s mortality rate from Covid is lower than the national average among those over 65 and also among younger people, so that the state’s age-adjusted Covid mortality rate is lower than that of all but ten other states. And by the most important measure, the overall rate of “excess mortality” (the number of deaths above normal), Florida has also done better than the national average. Its rate of excess mortality is significantly lower than that of the most restrictive state, California, particularly among younger adults, many of whom died not from Covid but from causes related to the lockdowns: cancer screenings and treatments were delayed, and there were sharp increases in deaths from drug overdoses and from heart attacks not treated promptly.

Chart by Jamie Meggas

If the treatment group in a clinical trial were dying off faster than the control group, an ethical researcher would halt the experiment. But the lockdown proponents were undeterred by the numbers in Florida, or by similar results elsewhere, including a comparable natural experiment involving European countries with the least restrictive policies. Sweden, Finland, and Norway rejected mask mandates and extended lockdowns, and they have each suffered significantly less excess mortality than most other European countries during the pandemic.

A nationwide analysis in Sweden showed that keeping schools open throughout the pandemic, without masks or social distancing, had little effect on the spread of Covid, but school closures and mask mandates for students continued elsewhere. Another Swedish researcher, Jonas Ludvigsson, reported that not a single schoolchild in the country died from Covid in Sweden and that their teachers’ risk of serious illness was lower than for the rest of the workforce—but these findings provoked so many online attacks and threats that Ludvigsson decided to stop researching or discussing Covid.

Social-media platforms continued censoring scientists and journalists who questioned lockdowns and mask mandates. YouTube removed a video discussion between DeSantis and the Great Barrington scientists, on the grounds that it “contradicts the consensus” on the efficacy of masks, and also took down the Hoover Institution’s interview with Atlas. Twitter locked out Atlas and Kulldorff for scientifically accurate challenges to mask orthodoxy. A peer-reviewed German study reporting harms to children from mask-wearing was suppressed on Facebook (which labeled my City Journal article “Partly False” because it cited the study) and also at ResearchGate, one of the most widely used websites for scientists to post their papers. ResearchGate refused to explain the censorship to the German scientists, telling them only that the paper was removed from the website in response to “reports from the community about the subject-matter.”

The social-media censors and scientific establishment, aided by the Chinese government, succeeded for a year in suppressing the lab-leak theory, depriving vaccine developers of potentially valuable insights into the virus’s evolution. It’s understandable, if deplorable, that the researchers and officials involved in supporting the Wuhan lab research would cover up the possibility that they’d unleashed a Frankenstein on the world. What’s harder to explain is why journalists and the rest of the scientific community so eagerly bought that story, along with the rest of the Covid narrative.

Why the elite panic? Why did so many go so wrong for so long? When journalists and scientists finally faced up to their mistake in ruling out the lab-leak theory, they blamed their favorite villain: Donald Trump. He had espoused the theory, so they assumed it must be wrong. And since he disagreed at times with Fauci about the danger of the virus and the need for lockdowns, then Fauci must be right, and this was such a deadly plague that the norms of journalism and science must be suspended. Millions would die unless Fauci was obeyed and dissenters were silenced.

But neither the plague nor Trump explains the panic. Yes, the virus was deadly, and Trump’s erratic pronouncements contributed to the confusion and partisanship, but the panic was due to two preexisting pathologies that afflicted other countries, too. The first is what I have called the Crisis Crisis, the incessant state of alarm fomented by journalists and politicians. It’s a longstanding problem—humanity was supposedly doomed in the last century by the “population crisis” and the “energy crisis”—that has dramatically worsened with the cable and digital competition for ratings, clicks, and retweets. To keep audiences frightened around the clock, journalists seek out Cassandras with their own incentives for fearmongering: politicians, bureaucrats, activists, academics, and assorted experts who gain publicity, prestige, funding, and power during a crisis.

Unlike many proclaimed crises, an epidemic is a genuine threat, but the crisis industry can’t resist exaggerating the danger, and doomsaying is rarely penalized. Early in the 1980s AIDS epidemic, the New York Times reported the terrifying possibility that the virus could spread to children through “routine close contact”—quoting from a study by Anthony Fauci. Life magazine wildly exaggerated the number of infections in a cover story, headlined “Now No One Is Safe from AIDS.” It cited a study by Robert Redfield, the future leader of the CDC during the Covid pandemic, predicting that AIDS would soon spread as rapidly among heterosexuals as among homosexuals. Both scientists were absolutely wrong, of course, but the false alarms didn’t harm their careers or their credibility.

Journalists and politicians extend professional courtesy to fellow crisis-mongers by ignoring their mistakes, such as the previous predictions by Neil Ferguson. His team at Imperial College projected up to 65,000 deaths in the United Kingdom from swine flu and 200 million deaths worldwide from bird flu. The death toll each time was in the hundreds, but never mind: when Ferguson’s team projected millions of American deaths from Covid, that was considered reason enough to follow its recommendation for extended lockdowns. And when the modelers’ assumption about the fatality rate proved too high, that mistake was ignored, too.

Journalists kept highlighting the most alarming warnings, presented without context. They needed to keep their audience scared, and they succeeded. For Americans under 70, the probability of surviving a Covid infection was about 99.9 percent, but fear of the virus was higher among the young than among the elderly, and polls showed that people of all ages vastly overestimated the risk of being hospitalized or dying.

The second pathology underlying the elite’s Covid panic is the politicization of research—what I have termed the Left’s war on science, another long-standing problem that has gotten much worse. Just as the progressives a century ago yearned for a nation directed by “expert social engineers”—scientific high priests unconstrained by voters and public opinion—today’s progressives want sweeping new powers for politicians and bureaucrats who “believe in science,” meaning that they use the Left’s version of science to justify their edicts. Now that so many elite institutions are political monocultures, progressives have more power than ever to enforce groupthink and suppress debate. Well before the pandemic, they had mastered the tactics for demonizing and silencing scientists whose findings challenged progressive orthodoxy on issues such as IQ, sex differences, race, family structure, transgenderism, and climate change.

And then along came Covid—“God’s gift to the Left,” in Jane Fonda’s words. Exaggerating the danger and deflecting blame from China to Trump offered not only short-term political benefits, damaging his reelection prospects, but also an extraordinary opportunity to empower social engineers in Washington and state capitals. Early in the pandemic, Fauci expressed doubt that it was politically possible to lock down American cities, but he underestimated the effectiveness of the crisis industry’s scaremongering. Americans were so frightened that they surrendered their freedoms to work, study, worship, dine, play, socialize, or even leave their homes. Progressives celebrated this “paradigm shift,” calling it a “blueprint” for dealing with climate change.

This experience should be a lesson in what not to do, and whom not to trust. Do not assume that the media’s version of a crisis resembles reality. Do not count on mainstream journalists and their favorite doomsayers to put risks in perspective. Do not expect those who follow “the science” to know what they’re talking about. Science is a process of discovery and debate, not a faith to profess or a dogma to live by. It provides a description of the world, not a prescription for public policy, and specialists in one discipline do not have the knowledge or perspective to guide society. They’re biased by their own narrow focus and self-interest. Fauci and Deborah Birx, the physician who allied with him against Atlas on the White House task force, had to answer for the daily Covid death toll—that ever-present chyron at the bottom of the television screen—so they focused on one disease instead of the collateral damage of their panic-driven policies.

“The Fauci-Birx lockdowns were a sinful, unconscionable, heinous mistake, and they will never admit they were wrong,” Atlas says. Neither will the journalists and politicians who panicked along with them. They’re still portraying lockdowns as not just a success but also a precedent—proof that Americans can sacrifice for the common good when directed by wise scientists and benevolent autocrats. But the sacrifice did far more harm than good, and the burden was not shared equally. The brunt was borne by the most vulnerable in America and the poorest countries of the world. Students from disadvantaged families suffered the most from school closures, and children everywhere spent a year wearing masks solely to assuage the neurotic fears of adults. The less educated lost jobs so that professionals at minimal risk could feel safer as they kept working at home on their laptops. Silicon Valley (and its censors) prospered from lockdowns that bankrupted local businesses.

Luminaries united on Zoom and YouTube to assure the public that “we’re all in this together.” But we weren’t. When the panic infected the nation’s elite—the modern gentry who profess such concern for the downtrodden—it turned out that they weren’t so different from aristocrats of the past. They were in it for themselves.

Tyler Durden Mon, 07/19/2021 - 21:20
Published:7/19/2021 8:22:46 PM
[Markets] How Breakdown Cascades Into Collapse How Breakdown Cascades Into Collapse

Authored by Charles Hugh Smith via OfTwoMinds blog,

Maintaining the illusion of confidence, permanence and stability serves the interests of those benefiting from the bubbles and those who prefer the safety of the herd, even as the herd thunders toward the precipice.

The misconception that collapse is an all or nothing phenomenon is common: Either the system rights itself with a bit of money-printing and rah-rah or it collapses into post-industrial ruin and gangs are battling over the last stash of canned beans.

Neither scenario considers the fragility and resilience of the socio-economic system as a whole. It is both far more fragile than the believers in the permanence of the waste is growth model grasp and more resilient than the complete collapse prognosticators grasp.

The recent relatively mild logjams in global supply chains of essentials are mere glimpses of precariously fragile delivery-supply systems. These can be understood as bottlenecks that only insiders see, or as unstable nodes through which all the economy's connections run. Put another way, the economy's as a network appears decentralized and robust, but this illusion vanishes when we consider how the entire economy rests on a few unstable nodes.

One such node is the delivery of gasoline and fuels. It's such an efficient and reliable system that 99.9% of us take it for granted: there will always be plenty of gasoline at every station, the tanks of jet fuel will always be topped off, and so on.

The 0.1% know that this system, once disrupted, would knock over dominoes all through the economy.

Hyper-efficiency and hyper-globalization has reduced the number of producers of essentials to the point that disruptions cannot be overcome with redundant sources. We see this everywhere in the global economy: a handful of plants and companies (sometimes a single source of essential components) process or manufacture essential components in much larger systems.

This is how you end up with thousands of newly manufactured vehicles parked in lots awaiting one critical part that is in short supply.

Another key weakness is the entire system's reliance on debt, leverage and speculation. Few seem to understand that physical production and delivery systems can grind to a halt for financial reasons--for example, lines of credit being pulled, a counterparty to some arcane commodity swap goes under, taking the presumably solvent corporation down with it, and so on.

The more debt that's been piled up, the greater the instability of the entire system. Risk always appears low until the system destabilizes, and then all the hedges fail and risk breaks out, flooding through the entire financial system.

Leverage is great fun on the way up, as it magnifies gains. Since the Federal Reserve implicitly guarantees that "buy the dip" will generate massive gains, why not ramp up leverage ten-fold to maximize those Fed-guaranteed gains?

Leverage is less fun on the way down. When the underlying collateral has shrunk to 20% of the leveraged bets being made, a 21% decline in the asset wipes out all the collateral holding up the palace of leveraged debt.

The Fed can print money but it can't create collateral, nor can it make insolvent entities solvent. All the Fed can do is increase the debt and leverage, which is not the solution, it's the problem.

Speculation is also inherently unstable, as the euphoric herd, once startled, turns in panic and stampeded in fear. Markets which appeared liquid--i.e., sellers could count on someone buying as many millions of shares as they desired to sell--become illiquid, as buyers vanish like mist in Death Valley. With buyers gone, prices plummet to levels the herd reckoned "impossible" just days before.

The Fed's entire strategy in the 21st century has been to inflate asset bubbles that generate the illusion of wealth--the so-called wealth effect which is presumed to inspire voracious borrowing and spending.

Unfortunately for the Fed, most of the gains flowed to the top 0.1%, and an economy based on a handful of billionaires buying super-yachts and spaceships is a line of dominoes awaiting the inevitable "accident." So there are two systemic problems with relying on asset bubbles to generate "wealth": 1) since 90% of the assets are owned by a thin slice of the populace, bubbles increase destabilizing inequality, and 2) bubbles are intrinsically unstable. So the U.S. economy, dependent on the Fed for the "juice" of monetary stimulus, is now dependent on incredibly unstable bubbles in assets, debt and leverage, bubbles which have generated extremes of wealth/income inequality that are destabilizing the social and political orders.

As the three charts below illustrate, the fragility and instability are well hidden until it's too late: bubbles, debt, leverage, budgets and revenues can only click higher because the system breaks down if there is any sustained decline (the rising wedge model of breakdown). Once the subsystems fail, there's no putting the eggshell back together.

The second chart depicts how buffers thin beneath the surface, masking the systemic fragility. The loss of redundancy, the decay of maintenance, the loss of experienced workers--all of these are hidden from public view until the system breaks down.

The third chart tracks the S-curve of expansion, confidence, complacency, delusion and collapse followed by human systems, from nations to empires to corporations: as the buffers thin and the rising wedge reaches an apex of vulnerability, the leadership evinces a delusional confidence in the permanence and stability of increasingly fragile, unstable systems.

Maintaining the illusion of confidence, permanence and stability serves the interests of those benefiting from the bubbles and those who prefer the safety of the herd, even as the herd thunders toward the precipice.

This is how breakdowns in apparently stable subsystems triggers the fall of dominoes throughout the larger system, leading to a collapse that was widely viewed as "impossible." Such is the power of complacency and delusion.

*  *  *

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Tyler Durden Mon, 07/19/2021 - 20:40
Published:7/19/2021 7:51:00 PM
[Markets] "It's Not A Conspiracy" "It's Not A Conspiracy"

Authored by James Rickards via DailyReckoning.com,

Philosophers and analysts use a principle called Occam’s Razor (sometimes Ockham’s Razor) to solve difficult problems. It says that when you are confronted with two possible solutions to a problem, one complicated and one simple, it’s usually better to select the simple solution.

There’s always some attraction to the complicated solution because humans like intrigue and plot twists. But statistically, the simple solution is more likely to be correct and therefore the one that analysts should prefer unless contrary evidence presents. This approach is useful in dealing with conspiracy theories.

Yes, real conspiracies exist (such as the plot to assassinate JFK), and analysts must be alert to the possibility. But most so-called conspiracies have much simpler explanations that are more likely to be correct.

One of the most potent drivers of coordinated political action is not a deep, dark conspiracy. It’s usually just the result of like-minded individuals cooperating to achieve the same goal.

It’s Groupthink, Not Conspiracy

If the political players all think alike and agree on goals, you don’t need a conspiracy. Just let them go to work every day and communicate with each other, and you’ll get the coordinated result without the inevitable twists and turns of a conspiracy.

That’s a good thing to bear in mind when considering the current administration. 23, top Biden administration officials all worked at the same consulting firm called WestExec Advisors. These officials include Press Secretary Jen Psaki, Secretary of State Tony Blinken and Director of National Intelligence Avril Haines.

For those who may be unfamiliar, “WestExec” is a reference to West Executive Avenue, a non-public road that runs between the West Wing of the White House and the Eisenhower Executive Office Building.

The West Wing is not that large and only has a few choice offices plus the Situation Room, the Roosevelt Room (for larger meetings) and the Cabinet Room, which is smaller. Most officials who say they “work in the White House” actually work in the Eisenhower Building, which means they walk across West Executive Avenue when they have meetings with top Biden officials.

The WestExec Advisors name is a play on that kind of insider status of the long list of former WestExec principals who are now running the country. (Don’t look to Biden as the source of power; he’s not mentally competent and does what the WestExec crowd or the rest of the Biden family tell him to do).

A Threat to National Security

So, with all of this power emerging from one firm, does that mean there’s a conspiracy among the alums to control the world?

Not really. But, it points to a bigger problem, which is the lack of cognitive diversity. The WestExec crowd all went to top schools, had top jobs in previous administrations, exhibit high IQs, and boast lots of credentials.

If you look at their resumes, you’ll see they all went to the same schools, had the same professors and pursued the same career paths. With few exceptions, it’s all Harvard, Yale and Columbia with a small dose of Stanford or Chicago for good measure.

They all went to law school or got PhDs and worked for the same small set of law firms or consulting firms. Then they all worked in a small set of government agencies, including the State Department, National Security Council or the Intelligence Community.

They all think alike. That’s an acute weakness because if they all look at things the same way, they will all miss the real dangers coming that don’t fit into their mental molds. Lack of cognitive diversity is a fatal weakness.

As a leader, you should always be willing to lower the average IQ if it means you can increase the range of viewpoints. At least someone might point out it’s raining to a group that’s too buried in briefing books to look out the window. This uniform mindset is itself a danger to national security. Sooner than later, a threat will arise that none of them will see coming.

On the Verge of the Most Destructive War Since WWII?

And there’s no shortage of threats in the world. Perhaps the most pressing right now is China’s aggressive posturing in East Asia. It’s not just China and the U.S.

The world’s three largest economies — the U.S., China and Japan — may be squaring off for the most destructive and costly war since the end of World War II.

The main protagonists will be China and the U.S. The cause of war will be a Chinese invasion of Taiwan, which may be coming much sooner than the world expects.

China would start the war with an invasion across the Taiwan Strait. The U.S. would be obliged to come to the defense of Taiwan and take measures to disable the Chinese fleet and its air support. But, Japan is no bystander.

A glimpse at a map shows that if Taiwan were in Communist China’s hands, Japan’s own sea lanes would be threatened, including its access to imported oil. Japan has its own island disputes with China. If China were to capture Taiwan, Japan’s islands in the East China Sea would likely be the next to fall.

The U.S. could fall back to a line of islands, including Guam, Hawaii and the Aleutians, but no fallback is possible for Japan. If China seizes Taiwan and the U.S. falls back, Japan would be under the thumb of China, and they know it.

Of course, a fallback by the U.S. would be an enormous blow to U.S. credibility, as well as its economic power. That’s why an alliance of the U.S. and Japan against China to defend Taiwan (along with Taiwan’s own formidable defense capability) is the most likely response to a Chinese amphibious assault.

“Wolf Warrior” Diplomacy

The question for the world is whether China will get the message and refrain from attacking Taiwan. Unfortunately, signs point in the opposite direction. China has left its non-threatening style of diplomacy in the past.

Today, China pursues “Wolf Warrior diplomacy,” named after a popular Chinese movie that features aggressive Navy SEAL-style tactics as practiced by Peoples’ Liberation Army commandos.

China has come out of its shell and seeks regional hegemony to be followed by global hegemony. It is aggressively pushing on its neighbors in India, Myanmar, and the six nations that surround the South China Sea. Taiwan is the prize, and China is preparing to seize it.

This attack will be Xi Jinping’s legacy and his attempt to rival the reputation of Mao Zedong. Will Team Biden be able to see it coming?

U.S. investors should not take Chinese restraint for granted. Allocations to cash, gold and U.S. Treasury notes will preserve wealth when the worst happens.

Tyler Durden Mon, 07/19/2021 - 20:00
Published:7/19/2021 7:22:10 PM
[Markets] Transgender Biological Male Cleared To Compete In Women's Weightlifting In Tokyo Olympics Transgender Biological Male Cleared To Compete In Women's Weightlifting In Tokyo Olympics

In continuing with the total farce this year's Olympics has become thanks to Tokyo's overzealous response to Covid, the International Olympic Committee has given the "all clear" for a transgender biological male to compete on behalf of New Zealand in the women’s weightlifting super-heavyweight category.

43 year old Laurel Hubbard's inclusion "does not violate the current rules on the books," the committee ruled, according to the New York Post. She would be the first transgender athlete to compete in the Olympic Games, despite the fact that transgender athletes have been allowed to compete in the Olympics since 2015.  

IOC head Thomas Bach commented: “The rules for qualification have been established by the International Weightlifting Federation before the qualifications started. These rules apply, and you cannot change rules during ongoing competitions.”

Bach also noted the rules were "currently under evaluation" and would be reviewed "at a later date", the Post wrote.

He continued: “The IOC is in an inquiry phase with all different stakeholders… to review these rules and finally to come up with some guidelines, which cannot be rules because this is a question where there is no one-size-fits-all solution. It differs from sport to sport.”

The idea of transgender women in sports remains a point of contention in the U.S., with states like Florida and Montana looking to bar then from middle school and high school sports. Skeptics argue that "women" who go through bone and muscle development as biological men have (obviously) unfair advantages. 

Meanwhile, we've spotted the other women competing against Hubbard...

Tyler Durden Mon, 07/19/2021 - 02:45
Published:7/19/2021 2:15:23 AM
[Markets] Johnstone: Violent Extremists Took Over The US Capitol Long Before January 6 Johnstone: Violent Extremists Took Over The US Capitol Long Before January 6

Authored by Caitlin Johnstone,

No longer content with absurd claims that the January 6 Capitol riot was as bad as the 9/11 attacks, Democratic Party-aligned pundits are now insisting that it was in fact worse.

On a recent appearance with MSNBC’s ReidOut with Joy Reid, former Bush strategist Matthew Dowd said he felt the Capitol riot was “much worse” than 9/11 and that this is the “most perilous point in time” since the beginning of the American Civil War.

“To me, though there was less loss of life on January 6, January 6 was worse than 9/11, because it’s continued to rip our country apart and get permission for people to pursue autocratic means, and so I think we’re in a much worse place than we’ve been,” Dowd said. “I think we’re in the most perilous point in time since 1861 in the advent of the Civil War.”

“I do too,” Reid said.

Not to be outdone, Lincoln Project co-founder Steve Smith cited Dowd’s hysterical claim but adding that not only was January 6 worse than 9/11, but it was actually going to kill more Americans somehow, even counting all those killed in the US wars which ensued from the 9/11 attacks.

“He couldn’t be more right,” Schmidt said at a town hall for the Lincoln Project.

“The 1/6 attack for the future of the country was a profoundly more dangerous event than the 9/11 attacks. And in the end, the 1/6 attacks are likely to kill a lot more Americans than were killed in the 9/11 attacks, which will include the casualties of the wars that lasted 20 years following.”

A total of 2,996 Americans were killed in the 9/11 attacks, and a further seven thousand US troops have been killed in Iraq and Afghanistan. Exactly one person was killed in the January 6 riot, and it was a rioter shot by police inside the Capitol Building. Early reports that rioters had beaten a police officer to death with a fire extinguisher turned out to have been false.

These bizarre alternate-reality takes are awful for a whole host of reasons, including the fact that this so-called “insurrection” everyone is still shrieking about never at any point in its planning or enactment had a higher than zero percent chance of overthrowing the most powerful government in the world, and the fact that they are manufacturing consent for new authoritarian measures just like 9/11 did.

But perhaps the most annoying thing about all the melodramatic garment-rending over how close the US Capitol came to being taken over by violent extremists is that the US Capitol has been under the control of violent extremists for a very long time already.

For all the fretting everyone has been doing about fascists and white supremacist groups, those are not the violent extremists posing the greatest threat and amassing the highest body count today. Neither are the communists. Neither are the anarchists. Neither are the radicalized Muslims, nor the fundamentalist Christians, nor the environmentalists, nor the incels. No, the most dangerous and deadly group of violent extremists in our day are adherents of the mainstream status quo politics of the US-centralized power alliance.

And it’s not even close. Certainly many of the groups listed above are dangerous and undesirable, but they’re not the ones raining explosives upon families around the world for power and profit. They’re not the ones brandishing nuclear weapons with steadily increasing recklessness as they ramp up a new cold war against Russia and China. They’re not the ones poisoning the air and the water and rapidly destroying the environment we all depend on for survival. They’re not the ones enslaving humanity to a brutal, oppressive and exploitative global capitalist system which leaves far too many toiling for far too little when there’s plenty for everyone.

That would be the so-called “moderates” of the western empire, who in reality are anything but.

It is violent to wage nonstop campaigns of military mass murder and impose civilian-killing economic sanctions on nations which disobey your dictates. It is extremist to brutalize, brainwash and enslave humanity while continuously shoving the world in the direction of extinction and armageddon in the name of profit and unipolar hegemony. Because US officials sit almost entirely on the right side of the global political spectrum, we can accurately say that everyone is fretting about violent right-wing extremists storming a Capitol building that had already long been occupied by violent right-wing extremists.

And yet when Facebook started sending Americans warnings that they may have viewed “extremist content” scrolling through their feeds, posts supporting this most dangerous group of extremists were not the content they were being warned about, but any kind of content which opposes the status quo those extremists have created. They’re killing the ecosystem and murdering people every single day while imperiling us all with the risk of nuclear war, my social media feeds are full of Americans literally trying to crowdfund their own survival while the world’s worst add trillions to their wealth, but it’s the people who want to change this abusive system who are the dangerous extremists.

Some analysts focus primarily on criticizing the really obvious monsters who spout racist and bigoted rhetoric to advance their toxic agendas. Others focus more on criticizing the monsters that are harder to see through the fog of feigned politeness and propaganda distortion, the ones you see in government buildings and on Fortune Magazine covers and on TV news shows telling you what to think about the world. Those who spend their time criticizing the latter more than the former are often attacked and ridiculed as fascist sympathizers and Kremlin assets, but only by those who don’t actually see the monsters that they are pointing to.

Hollywood trained us to fear psychopathic killers prowling around in the dark so we won’t notice the psychopathic killers who rule our world in broad daylight. We’ve been trained to fear the serial killer covered in blood and wielding a chainsaw so we won’t notice the serial killer wearing a suit and wielding a pen.

Our collective maturity cannot begin until we learn to see the violent extremist monsters where they actually exist, and not just where we’ve been trained to look for them.

*  *  *

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Tyler Durden Sun, 07/18/2021 - 18:30
Published:7/18/2021 5:44:35 PM
[Markets] Keeping Up Morale In The Fourth Turning Keeping Up Morale In The Fourth Turning

Authored by Samantha Biggers via PeakProsperity.com,

During this part of the cycle, many of us have experienced some fairly extreme isolation due to the COVID-19 pandemic. Regardless of how serious you believe the disease is, the isolation, fear, and paranoia it has caused have led to some major consequences to the psyche and overall well-being of billions of people worldwide.

The first nine months of the pandemic, I spent hunkered down on our property in the mountains of North Carolina. We stopped going to major stores, including grocery stores, on January 31, and we have not been back. Part of the reason for this was that after nine months of isolation on our mountain, I became pregnant with our first child. At this point, we thought adoption many years down the road was the only way children would play a part in our lives.

All of a sudden, I was deemed as being in a high-risk group. Going to prenatal appointments and ultrasounds had to be done alone. It was 20 weeks before my husband even saw a picture, and that was only because they print them out for you. I have to admit I was a little scared of pregnancy during COVID-19. Pregnant women are four times more likely to need hospitalization and a ventilator, for example. The long-term effects on a fetus are unknown.

That is my story. I think I have handled it better than average because even before lockdown, we tended to keep busy at home and didn’t enjoy going out to shop. Most people are not like that. It is probably not good for anyone to stay at home for months at a time without going anywhere at all or seeing people besides immediate family.

Crime In 2020

Murder rates went up drastically in many major cities. NYC saw a 40% increase, Chicago murders increased 50%. Los Angeles saw a 40% rise. Practically any major city saw at least a 30% increase. Nationally murder rates went up 37.5% Source: NPR

According to the CDC, there were 81,000 overdose deaths in 2020. This is the highest number ever recorded in the USA. Compare this to 70,980 in 2019. Source: CDC

Homelessness increased dramatically due to increased substance abuse.

So how does the average person deal with this while staying strong for those that depend on them?

Take charge of your food security.

It is a good idea to have some extra food put back so you can be prepared for shortages, higher prices, and even civil unrest. Being prepared with some extra food can ease some of the stress and anxiety during uncertain times. Eating well helps boost morale during difficult times.

Growing some of your food can help take the bite out of rising food costs. With signs indicating that hyperinflation is upon us, anything you can do to produce some of what you eat is going to help. Gardening and outdoor activities can help with your mood and encourages exercise that can help you sleep better.

Find enjoyable activities to take your mind off what seems like an overwhelming situation.

Everyone needs something that they do that is enjoyable and helps relieve stress. At the beginning of the pandemic, I took a little time and money and created a more prolific home library. I keep around 100 books on hand and rotate them out. Some I sell back online while others I donate. I buy a lot of used books online. Local libraries usually have a system where you can check out ebooks and read them remotely. Amazon has a program called Kindle Unlimited is an affordable way to have unlimited ebooks on hand.

Kids and teens need something to keep them occupied. It is a good idea to start a “morale box” for them. Take a simple storage tote and start putting items in it that are engaging and thoughtful. This is something you can do overtime as you can afford it.

Try to stay strong for those that depend on you.

Times are tough for a lot of people. It can be incredibly challenging to put on your game face and be strong. Those that have dependents need to try as hard as they can. Negative emotions and letting yourself get too low will harm those around you. If you notice yourself slipping into the blues, the sooner you deal with it, the better. Don’t ignore your mental state. Try to work through it by finding solutions before it causes more trouble for you and those close to you.

Remember that a lot of people have been through some rough 4th turnings. While it may take some time, there are usually better times ahead.

Responsible use of vices can be helpful.

Everyone has a vice. While indulging too much can cause trouble or damage your health, responsible use of vices can be a fantastic morale booster. Plenty of people enjoy a glass of wine or have a cigar once in a while to relax.

Some vices can be harder to get during uncertain times, so it is wise to have a few put back. Here are a few common ones to consider.

  • Alcoholic Beverages

  • Tobacco

  • Chocolate

  • Specialty foods and beverages

Your vice might be something that doesn’t fit in those categories. Some people like to knit like crazy or write in a journal.

Enjoy making or listening to some music.

Music can help get you through some hard times. Who hasn’t listened to music to encourage relaxation, physical activity, or to remember good times and fond memories?

I keep an emergency radio on hand that can read and playback music and audiobooks. A Kaito emergency radio will work when other devices will not, and the speaker is big enough so that the sound will fill a room rather well.

If you don’t want to pay for music, you can find some free music that is not copyright protected online.

Video calls can help people stay in contact during times of isolation.

While nothing can replace being in the same room with someone, it is far better than nothing. Video calls are a great way to stay connected with relatives you want to support and check-in but live too far away for regular visits. Be sure to call and check in on relatives that live alone, especially those that are older. An occasional call from you likely brightens their day more than you realize. If they have a cell phone, you can help them learn how to do video calls if they don’t already know how to.

Online Counseling Services

I have read mixed reviews of online counseling services. I think that part of the reason reviews are mixed is that some people have a harder time working through their issues than others. Some may also do better with a real physical presence to help guide them through their troubles. Do remember that online or virtual counseling is an option for you if you are suffering from any type of mental illness or hard times. Costs vary, of course, by the company and session length.

Try to stay busy.

While some people have difficulty stopping and relaxing, others have difficulty not being bored or inactive. Keeping busy helps time pass and makes it harder to dwell on dark things. A sense of purpose and achievement is essential to the human psyche. If some people in your household are not doing much, try to give them something to do.

Take steps to improve your home defense. Feeling safe and like you have some control of your situation improves morale and mood.

With crime on the rise throughout the United States and civil unrest erupting at the drop of a hat, you need to consider how good your home defenses are. Here is a shortlist of home defense measures you can take.

  • Fences and fence spikes

  • Driveway alarms

  • Cameras

  • Window security film

  • Window locks and alarms

  • Become proficient with whatever weapons you choose.

For more advice on home security and defense, check out my article “Home Defense Methods and Strategies”.

What news sites are you reading? How much time are you spending on them?

I find it hard to look away from the news at times. While I favor alternative media sources like Citizen Free Press and ZeroHedge, I also check in on the mainstream sites to see the current stories and the propaganda of the day.

I think we can all agree that 2020 and 2021 have been one strange event after another. It is important to tune out and not dwell on it more than you should. Checking the news a few times a day is one thing but spending a ton of time staring at one outrageous and upsetting thing after another is not good for your mental health. Consider that you could be spending that time on something more productive or even just relaxing?

Remember that good news rarely gets reported. There are plenty of positive events occurring in daily life that you won’t hear about. Think about what is good in your own life. What are you grateful for?

Stop living in the past. Look to the future.

I hear many people saying “when things go back to normal” and dwelling on a way of life that we can never truly go back to. Things have changed. We have to consider what we can do to make things better in the future using the resources and abilities we have. To be successful at anything, we have to be somewhat realistic. We cannot rely on too much magic to solve our problems for us.

In “The Fourth Turning,” Strauss and Howe state, “Avoid post seasonal behavior, by terminating habits that were appropriate for the prior turning but are not for the current one.”

This is excellent advice. Continuing the habits of the prior Turning will result in increased stress and possible hardship for you and your family.

Don’t try to take on the problems of the world. Ask yourself what you can do to help solve issues within your community.

The Fourth Turning was written in 1997 during the unraveling 3rd Turning. Strauss and Howe were right when they wrote, “Come the Fourth Turning, national survival will require a level of public teamwork and self-sacrifice far higher than American’s now provide.” They also advise not to attempt to use community teamwork to solve national problems.

In short, taking on too much results in failure all too often. Organizing and making improvements on a small scale is much more feasible. Plus, if many communities do this, then suddenly, you have large portions of the country that have improved.

Try to be kind. During COVID-19, behavior in general society and politeness were kicked to the curb. Make an effort not to turn into that person.

When people are stressed, their actions and politeness can quickly deteriorate. Consider Asheville, NC, during the pandemic. Before the pandemic, it was a thriving small city that relied heavily on tourism and a vibrant downtown nightlife. A lot of people made their living in the food and service industries. When restaurants were forced to serve outside, take-out only, and enforce state regulations regarding masks during lockdown, many staff decided that they would never work in the industry again.

Why?

Because customers became abusive over minor things. Suddenly due to the new rules, people were looking for an excuse to complain or refuse to follow guidelines that restaurants were forced to enact or risk losing the ability to make a dime. Customers walked out on bills, became violent, etc. Then the protests started downtown. Protesters targeted hotels and restaurants. This led to more abuse towards staff trying to serve customers and provide them with the best experience while following current rules and regulations.

It has become widely accepted to get offended whenever one chooses, or at least people are walking around in battle mode, just knowing that they will inevitably offend someone. The reaction is likely to be over the top.

If someone boils over, try to get away from them. Don’t fuel the ridiculous lack of decency and manners that is all too common in the 4th Turning.

Realize that you can only help someone so much. The other person has to want to improve.

I have lost count of how many people over the years the people I had to give up on. That sounds awful, but the fact is that people have to want to make improvements. You cannot do all the work for them. Let’s examine the drug crisis in the USA to offer an example. Many of us know someone or know of someone that has become an addict. If not, we at least see people on the street that have a problem. The sad thing is that some of them have no authentic desire to change. Some people have chosen to live that way. Some people prefer living a nomadic or homeless lifestyle too. Helping people and giving them a chance to pull themselves up is great, but there reaches a point when it is wise to admit that your efforts are not effective and that you are likely being used.

The drug and homeless situation is going to get a lot worse before it gets better. You need to be prepared to make wise choices for your family’s safety, security, and overall well-being. Try to help people when you can, but set some limits.

What strategies have you found most useful for weathering this Fourth Turning?

Tyler Durden Sun, 07/18/2021 - 14:19
Published:7/18/2021 1:41:19 PM
[Markets] Earnings Kick Off With Markets Priced-For-Perfection Earnings Kick Off With Markets Priced-For-Perfection

Authored by Lance Roberts via RealInvestmentAdvice.com,

Market Pulls Back As Signals Turn

Last week, we discussed the market hit new highs with the index getting back to more extended and overbought conditions. To wit:

“While market volatility did pick up this past week, the index held its breakout support levels and closed at a new high. Such keeps the bullish bias intact. However, as shown, the money flow signals are now back to more elevated levels, which will provide resistance to higher prices short term.

The bulls are indeed in charge of the markets currently, but the clock is ticking.”

Not surprisingly, the market stumbled this past week as technology began to fade its recent outperformance. But, of course, investors have been piling into the trade as of late, pushing it to more overbought extremes. As noted by Sentiment Trader on Friday:

Of course, not surprisingly, investors are historically prone to “buying the most at the top.” With the seasonally weak trend of the Nasdaq approaching, with MACD’s triggering sell signals, there is likely to be some disappointment.

However, there are two reasons why investors are piling back into the 10-largest technology names:

  1. Portfolio managers need to be invested to generate performance, and the mega-cap Technology names are easy to “hide” in given the large daily trading volumes.

  2. These companies can generate earnings growth in a slowing economic environment.

The problem with the second point is that those top-10 mega-cap names generate the bulk of the earnings of the entire S&P 500 index. Such has only occurred at previous bull market peaks.

All of this suggests the risk of a correction remains elevated, particularly with the market priced for perfection.

Earnings Season Has A High Bar

Over the last few months, the rush of analysts to upgrade earnings estimates for the S&P 500 is one for the record books. According to Factset:

“If the S&P 500 reports year-over-year growth in earnings of 69.3% in Q2, it would mark the highest (year-over-year) earnings growth rate reported by the index since Q4 2009 (109.1%).”

Of course, given the expectation of robust earnings growth for Q2, analysts still predict a double-digit price increase for the S&P 500. To wit:

“Industry analysts in aggregate predict the S&P 500 will see a price increase of 11.2% over the next 12 months. The bottom-up target price is calculated by aggregating the median target price estimates (based on company-level estimates submitted by industry analysts) for all  companies in the index. On July 8, the bottom-up target price for the S&P 500 was 4803.62, which was 11.2% above the closing price of 4320.82.” – FactSet

(Of course, it is worth noting the S&P NEVER matches its bottom-up price target. In other words, estimates are always too high compared to reality.)

Analysts have set a very high bar for the markets to hurdle, given already lofty valuations. With indices already well-stretched above their historical means, there is much room for disappointment.

With the currently very overbought short-term market, a 3% to 10% correction this summer remains likely.

Markets Priced For Perfection

While earnings estimates are soaring on exuberant hopes of an indefinite economic boom, revenue may be telling a much different story. I noted this point earlier this week:

Investors should dismiss the above quickly. First, revenue is what happens at the top line. Secondly, revenue CAN NOT grow faster than the economy. Such is because revenue comes from consumers, and consumption makes up 70% of the GDP calculation. Earnings, however, are what happens at the bottom line and are subject to accounting gimmicks, wage suppression, buybacks, and other manipulations.

Since 2009, corporate operating earnings grew cumulatively by 339%. Yet, during that same period, the cumulative growth of revenue is only up 63%. It is through “accounting magic” that revenue gets multiplied to the bottom line. Out of each dollar of earnings, 82% is from accounting “management,” and just 18% is from revenue.

The majority of the rise in “profitability” came from various cost-cutting measures and accounting gimmicks rather than actual increases in top-line revenue. While tax cuts certainly provided the capital for a surge in buybacks, revenue growth, the result of a consumption-based economy, remains muted.

The Valuation Problem

The problem is the market surged higher due to the ongoing liquidity injections from the Federal Reserve. While liquidity drives asset prices higher, it does not foster economic activity, which creates corporate revenue. Currently, the price-to-sales (revenue) ratio is at the highest level ever. As shown, the historical correlation suggests outcomes for investors will not be kind.

Of course, given that revenue can only grow roughly as fast as the economy, the market-capitalization to GDP ratio is very important. While the “price” of the market can outpace economic growth in the short term, it can’t do so indefinitely. Thus, at 2.4x economic growth, the market is highly overvalued relative to what the economy can generate in revenue growth.

Lastly, with markets currently perched near all-time highs, both operating and reported earnings will fall in Q2 versus Q1 as economic growth peaks. (We have repeatedly warned of this issue.)

Note that as of Q2-2021, operating earnings (earnings without all the bad stuff) will only be 10% higher than they were in 2018. Yet, the market is currently trading 48% higher.

Even with the “sharpest recovery in earning in history,” the market continues to expand its valuation multiple. (Chart below uses current estimates for Q2-2021) So much for earnings catching up with the price.

As I said, investors have priced the market for perfection. Therefore, any disappointment could lead to poor outcomes for investors taking on excess risk.

Tyler Durden Sun, 07/18/2021 - 10:50
Published:7/18/2021 10:13:24 AM
[Markets] U.S.-Backed Tech Restores Internet To More Than 1 Million Cubans Amid Uprisings Against Gov't  U.S.-Backed Tech Restores Internet To More Than 1 Million Cubans Amid Uprisings Against Gov't 

Readers may recall after Arab Spring a decade ago. There was intense debate over the role social media platforms had on the uprisings. With summer uprisings in Cuba, the communist government has discovered ways to cut the internet off to millions of residents, so organized protesting on social media is near impossible. 

Let's take a step back to early last week when reports of the Cuban regime used China-made technology systems to block internet and cell phone service to prevent pictures and videos of what was happening on the ground published online near impossible for the outside world to see. The regime also blocked popular social media channels that would make organized protesting impossible. 

Remember, a decade ago, during Arab Spring, Facebook and Twitter were critical for organizers to orchestrate uprisings in Tunisia, Egypt, Libya, and Bahrain.

The Biden administration is finding ways to provide anti-censorship tools to Cubans to access social media during the blackouts. 

According to Bloomberg, the U.S. government supports a censorship circumvention tool designed to unblock content in Cuba and is powered by a company called Psiphon Inc. 

As of Thursday, Psiphon tweeted, "1.389 Million daily unique users accessed the open web from Cuba through the Psiphon network. Internet is ON; circumvention tools ARE working."

Psiphon uses proxy servers that disguise internet traffic so Cuban authorities cannot tell if people are accessing social media platforms. The Toronto-based nonprofit has received money from the U.S. government. Republican Senator Marsha Blackburn tweeted Saturday that the proxy service is working well:

The Biden administration has been strategizing on other ways to provide the people of Cuba with internet access. 

"They have cut off access to the internet. We are considering whether we have the technological ability to reinstate that access," President Biden said on Friday.

Biden commented after Florida Governor Ron Desantis told the president the federal government should restore internet on the island located in the northern Caribbean Sea. 

Desantis said there's a technology that would allow the U.S. to broadcast internet access into Cuba remotely. 

"Technology exists to provide Internet access into Cuba remotely, using the innovation of American enterprise and the diverse industries here," the governor wrote. He said this reminds him of the Cold War when the U.S. funded radio stations to broadcast information into the Soviet Union. 

"Similar to the American efforts to broadcast radio into the Soviet Union during the Cold War in Europe, the federal government has a history of supporting the dissemination of information into Cuba for the Cuban people through Radio & Televisión Martí, located in Miami," he said.

DeSantis has urged Cuba's military to "live in the history books" by overthrowing the communist government. 

Meanwhile, Cuban president, Miguel Díaz-Canel, has attacked the U.S. for their blatant and "shameful" attempts to "fracture" his country by triggering the largest anti-government protests in three decades. 

Tyler Durden Sat, 07/17/2021 - 17:00
Published:7/17/2021 4:05:19 PM
[Markets] Welcome To The 21st Century Sequel Of The Catastrophic 1600s Welcome To The 21st Century Sequel Of The Catastrophic 1600s

Authored by Charles Hugh Smith via OfTwoMinds blog,

As the chart below on 'how systems collapse' illustrates, the loss of stabilizing buffers goes unnoticed until the entire structure collapses under its own weight.

Disruptive extremes of weather: check

Rising geopolitical tensions with no diplomatic resolution: check

Multiplying scarcities in essential commodities: check

Domestic disorder accelerates as extreme positions harden into irreconcilable conflicts: check

Welcome to the 21st century sequel of the catastrophic 1600s, an extended period of mutually reinforcing crises that overturned regimes and empires from England to China and triggered unremitting misery across much of the human populace. (Global Crisis: War, Climate Change and Catastrophe in the 17th Century is a riveting overview of this complex era.)

What can we learn from the catastrophic 1600s? Leading the list: humans don't respond well to scarcities. They get crotchety, argumentative, and prone to finding ways to become disagreeable rather than agreeable. Their derangement deepens as they form self-reinforcing echo-chambers of the like-minded, and the source of their misfortune shifts from fate to equally fixated human opponents.

Three extended quotes come to mind: the first bitter satirical rant from Mark Twain, the second from Patrick Henry and the third from James Madison:

Mark Twain: "O Lord our Father, our young patriots, idols of our hearts, go forth to battle -- be Thou near them! With them -- in spirit -- we also go forth from the sweet peace of our beloved firesides to smite the foe. O Lord our God, help us to tear their soldiers to bloody shreds with our shells; help us to cover their smiling fields with the pale forms of their patriot dead; help us to drown the thunder of the guns with the shrieks of their wounded, writhing in pain; help us to lay waste their humble homes with a hurricane of fire; help us to wring the hearts of their unoffending widows with unavailing grief; help us to turn them out roofless with little children to wander unfriended the wastes of their desolated land in rags and hunger and thirst, sports of the sun flames of summer and the icy winds of winter, broken in spirit, worn with travail, imploring Thee for the refuge of the grave and denied it -- for our sakes who adore Thee, Lord, blast their hopes, blight their lives, protract their bitter pilgrimage, make heavy their steps, water their way with their tears, stain the white snow with the blood of their wounded feet! We ask it, in the spirit of love, of Him Who is the Source of Love, and Who is the ever-faithful refuge and friend of all that are sore beset and seek His aid with humble and contrite hearts. Amen."

Patrick Henry:"But we are told that we need not fear; because those in power, being our representatives, will not abuse the powers we put in their hands. I am not well versed in history, but I will submit to your recollection, whether liberty has been destroyed most often by the licentiousness of the people, or by the tyranny of rulers.

I imagine, sir, you will find the balance on the side of tyranny. Happy will you be if you miss the fate of those nations, who, omitting to resist their oppressors, or negligently suffering their liberty to be wrested from them, have groaned under intolerable despotism!

Most of the human race are now in this deplorable condition; and those nations who have gone in search of grandeur, power, and splendor, have also fallen a sacrifice, and been the victims of their own folly. While they acquired those visionary blessings, they lost their freedom."

James Madison: "Of all the enemies to public liberty war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few. In war, too, the discretionary power of the Executive is extended; its influence in dealing out offices, honors, and emoluments is multiplied; and all the means of seducing the minds, are added to those of subduing the force, of the people... (There is also an) inequality of fortunes, and the opportunities of fraud, growing out of a state of war, and... degeneracy of manners and of morals.... No nation could preserve its freedom in the midst of continual warfare."

Apt descriptions of 1641 and 2021? Check, check and check. War and conflict appear to be the solution once people are in the grip of this crisis-hardened derangement, and they discover their folly after their misery has increased 100-fold.

So where does all this lead? Nowhere good. Concentrated wealth and power breed hubris and open the door to catastrophic consequences flowing from the addled decisions of the few at the top.

Voices of calm reason are shouted down and excoriated, and compromise becomes impossible. Those seeking to maintain their exploitive grip on wealth and power whip up intensities of derangement to further their own self-interest, always under the banner of some noble cause.

In the confusion of decay and failure, the herd seeks a simplistic explanation and solution. Those seeking to maximize their private gain are keen to provide the easy answer, which just so happens to maximize their private gain at the expense of the herd.

In self-organizing emergent systems, every individual is making decisions based their perceived self-interests. This seems to be a stable arrangement, but the line between stability and instability thins in eras of scarcity and crisis, and trends that seemed linear and predictable suddenly shift into non-linear dynamics, in which seemingly small actions trigger enormously consequential reversals of trend. Stability wobbles and then dissipates, and those experiencing the loss of stability slowly come to realize there is no way to put the genie back in the bottle.

As the chart above on how systems collapse illustrates, the loss of stabilizing buffers goes unnoticed until the entire structure collapses under its own weight of artifice, debt, fraud, obfuscation, greed, inequality and incompetence.

Two short quotes come to mind:

"The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane." (Marcus Aurelius)

"I never did give anybody hell. I just told the truth and they thought it was hell." (Harry S. Truman)

*  *  *

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Tyler Durden Sat, 07/17/2021 - 12:30
Published:7/17/2021 11:33:56 AM
[Markets] LBMA Gets A Lifeline LBMA Gets A Lifeline

Authored by Alasdair Macleod via GoldMoney.com,

The draft PRA rules complying with Basel 3 regulations have now been issued six months ahead of their implementation to allow banks to adjust for them in time. From now, senior bankers, their lawyers and bank treasury managers will be planning amendments to their business strategies accordingly.

As a division of the Bank of England, the Prudential Regulation Authority recognises the importance of gold trading in London and has inserted a clause into the new rules (Article 428f) which will allow the LBMA’s centralised settlement system to continue to function. But in line with Basel 3’s apparent determination to get banking’s exposure to uneven derivative positions substantially reduced, net positions in precious metal derivatives in the form of forwards and swaps will be penalised through their inefficient use of balance sheet resources and will likely be replaced by transactions fully backed by physical gold.

The LBMA has been thrown a lifeline but will likely have to refocus from forward derivatives to physical bullion backed trading. By responding positively to these developments, the LBMA and its membership can retain and build on their pre-eminent position in global precious metals markets.

This article points out that the market value of forward derivatives in gold is currently the equivalent of 8,675 tonnes. While it would be incorrect to think it will all translate into new bullion demand, there is little doubt that if Basel 3 leads to the demise of the London forwards market, it will lead in turn to a significant replacement in the form of physical demand.

This article also looks at the broader picture for banking in the light of the PRA’s new regulations as well as the specifics for precious metal derivatives.

The background to Basel 3

Investors are increasingly aware that in all international financial centres, banks are now being required to run their businesses differently under the new Basel 3 regulations. For the first time, regulators are now telling banks how they must fund their assets out of their liabilities. This is a major change, which from the beginning of this month is being applied in the US and the EU. It is scheduled to be introduced in the UK from 1 January 2022.

The introduction of Basel 3 bank regulations follows an agreement at G20 level for the Basel Committee on Banking Supervision to draw up new regulations to address the systemic risk issues exposed by the Lehman failure in 2008. The new regulations proved controversial, delaying their introduction, having been finalised as long ago as October 2014. But, unlike rules originating from national regulators Basel 3 was not easily spiked by lawyers representing the banking industry’s interests.

The changes, particularly those that disqualify unstable short-term funding on the liability side of a bank’s balance sheet from providing cover for anything on the asset side, are intended to reform banking practices from the ground up. Since the 1980s, after the repeal of the US’s Glass-Stegall Act which separated commercial from investment banking, banks have grown their balance sheets into purely financial activities and proportionately away from the creation of bank credit to finance non-financial businesses. Non-financial businesses have been increasingly directed into bond and equity markets, where banks can charge large fees without having to worry about counterparty risk.

There are worrying signs that commercial banking for the big international banks has gone about as far as it can with financialisation and has become increasingly reliant on higher gearing for diminishing margins. Consequently, many aspects of financial activity are targeted and adversely affected by the new Basel rules. A bank like Goldman Sachs with its reliance on large customer deposits is treated unfavourably compared with a bank substantially funded by retail deposits and deposits of small businesses. And Goldman reportedly has very recently reduced its holdings of equity investments, treated unfavourably with a required stable funding factor set at 85%, the same as gold. While market traders might observe these moves as indicating Goldman has turned bearish on equities, it may have more to do with responding to the US regulator’s version of Basel 3. If so, it could be a warning of a similar effect on trading in precious metals.

As well as uneven trading books and related liabilities being penalised, derivatives appear to be a target for containment, with a global notional value of over-the-counter (OTC) contracts of $582 trillion recorded by the Bank for International Settlements last December. And this is after the introduction of counterparty netting agreements following the Lehman failure, whereby multiple transactions between pairs of counterparties in the same contracts were reduced to a far lower net figure by mutual written agreements.

Last December, these OTC contracts had a gross market value of $15.8 trillion, indicating a 36:1 gearing relationship with their notional value. And that is on top of bank balance sheets which are in turn geared, with assets anything up to 30 times balance sheet equity in the case of Eurozone banks. Not much has to go wrong for the BIS and its Basel Committee to have failed in their quest to make banks systemically safe.

How derivatives are financed is a key focus of the new regulations. The Basel 3 approach is to disqualify their financing with ephemeral deposits. But it goes much further. Short-term funding, other than from smaller deposits, is penalised. It would appear that unallocated precious metal customer accounts, because of their nature being a bank’s liability not valued in its accounting currency and by not being specifically mentioned as an allowable exception, default to an ASF of zero.

A confusing response from the LBMA

On the asset side of bank balance sheets, according to Article 428az derivatives net short or long require a 100% RSF. However, in a statement released yesterday, the LBMA claimed that gross derivative liabilities attract a 5% RSF, which seems bizarre because if that was true physical gold would be rated substantially riskier than its derivatives. Furthermore, a derivative liability is a derivative that is sold. A buyer, who records it as an asset at fair value, under the new regulations would have to treat it as subject to a 100% RSF, resulting in two different treatments, rendering this interpretation appear illogical.

According to Article 428at, what the LBMA actually refers to applies to a collateralised derivative position where the value of the derivative is negative, and being subject to Article $428da, relates to positions of qualifying central counterparties as opposed to a bank’s on-balance sheet derivatives.

This confusion followed the LBMA’s letter to the PRA during the latter’s consultation period on the new Basel 3 regulations, where the LBMA omitted to mention anywhere that unallocated gold was not physical gold but an OTC derivative of it, as defined by the Bank for International Settlements itself. By claiming that “gross derivative liabilities will also attract a 5% RSF”, perhaps it is now hoping an escape from the 85% RSF accorded to physical precious metals in an admission that forwards beyond a normal settlement cycle are in fact derivatives.

Discounting the LBMA’s initial take on the PRA rules, it was up against this unyielding brick wall that, with its unallocated gold market masquerading as bullion, the London Bullion Market Association found itself trapped.

Within precious metals markets there have been numerous comments and opinions as to the likely consequences of Basel 3. But there is general agreement that any discouragement given to bullion banks with respect to their position-taking would make precious metals prices more volatile. Subject to how these regulations would be treated by the UK bank regulator (the PRA), it was clear that the LBMA was extremely concerned for its future, and particularly for its settlement system.

With the publication of draft rules to be implemented next January, most of that uncertainly is now lifted, but clearly there are differences of opinion remaining. In an attempt to narrow these down, we shall now turn to the relevant passages in the new PRA rules

The new rulebook

The Prudential Regulatory Authority released its new draft rulebook last week, updated for Basel 3, which will become effective in January 2022. It is over-stamped by the PRA as near final, so we can assume that it will be the final version for all intents and purposes. It has been released at this time so that banks know in advance what changes to their treasury management and regulatory reporting will be required in six months’ time.

The application of Basel 3’s net stable funding ratio method to gold and other commodities generally accords with the Basel regulations, with one important addition. Article 428f concerns interdependent assets and liabilities, introduced so that the current and future owners of the London Precious Metal Clearing Limited (LPMCL) can continue to operate without having to suffer the penalties of the net stable funding ratio (NSFR). It also allows banks to use physical gold in a bank’s possession to offset customer liabilities (Paragraph 2).

The full rule, which is central to the LBMA’s future, is as follows:

“1. An institution may apply to the competent authority for permission to treat an asset and a liability as interdependent. For the purpose of this Article, an asset and a liability are interdependent where either conditions (a) to (f) below are met or where paragraph 2 applies:

(a) the institution acts solely as a pass-through unit to channel the funding from the liability into the corresponding interdependent asset;

(b) the individual interdependent assets and liabilities are clearly identifiable and have the same principal amount;

(c) the asset and interdependent liability have matched maturities;

(d) the interdependent liability has been requested pursuant to a legal, regulatory or contractual commitment and is not used to fund other assets;

(e) the principal payment flows from the asset are not used for other purposes than repaying the interdependent liability; and

(f) the counterparties for each pair of interdependent assets and liabilities are not the same.”

[Article 428f (1) above permits the operation of LPMCL and its owners to continue as before after the introduction of Basel 3’s NSFR rules, subject to the PRA granting permission to each of the owner banks.]

“2. This paragraph applies to an institution's unencumbered physical stock of precious metals and customer deposit accounts in precious metals where all of the following conditions are met:

(a) the institution’s unencumbered physical stock of each precious metal is used to cover customer deposit accounts in the same precious metal;

(b) the institution is not exposed to liquidity or market risk resulting from either the sale of precious metals by the customer or the physical settlement of customer transactions in precious metals; and

(c) the precious metals assets and liabilities are on the balance sheet of the institution.

For the purpose of paragraph 2:

(a) precious metals means gold, silver, platinum or palladium;

(b) the interdependent asset and liability treatment shall only be available to the extent that the institution's unencumbered physical stock of each precious metal is matched by customer deposits of the same precious metal. Any excess physical stock or customer deposits in a precious metal shall not be treated as an interdependent asset or liability for the purpose of paragraph 1;

(c) an institution’s precious metals accounts at any other institution shall not be considered a part of the institution’s physical stock of precious metals.”

[Paragraph 2&3 allows any bank to offset an unallocated customer liability with physical bullion, so long as it is in that bank’s allocated possession and on its balance sheet]

It will assist the reader to understand Article 428f (1) if the function of the LPMCL is briefly explained. LPMCL is a not-for-profit entity acting as a central clearing system for LBMA members. It is owned and operated by four London-based clearing LBMA members: HSBC, ICBC Standard Bank, JPMorgan and UBS, settling loco-London allocated and unallocated metal trades.

Unallocated trades, forming a large majority of settlements, are netted off, first by individual LPMCL members on behalf of their clients, other LBMA members and on their own books, and then the centralised LPMCL settlement system (AURUM) settles the remaining differences between the four LPMCL members. Deliveries of physical metal occur within the system but form a small minority of transactions. Except where an unallocated trade is settled by delivery, all unallocated trades naturally cancel each other out.

The four LBMA members owning LPMCL operate a physical float as part of their management of these trades. It can therefore be appreciated that unless Article 428f (1) had been added to the PRA regulations the LPMCL clearing system would have almost certainly ceased to function.

Paragraphs 2 and 3 of this Article are also important, permitting banks to offer unallocated accounts without a balance sheet penalty so long as they are fully covered by deliverable physical bullion on the bank’s balance sheet. It allows a bank to continue to offer the considerable convenience of an unallocated account without balance sheet penalties. Rather than withdrawing from offering customers any gold market facilities other than pure custody, it will permit LBMA members to continue to offer precious metal accounts on a pooled basis.

But instead of matching unallocated client accounts with unallocated or other derivative assets, banks will be encouraged through balance sheet incentives to acquire physical bullion to provide the service. While it should make bullion banks a safer systemic proposition for their customers — the objective of the Basel 3 exercise — it should be noted that unallocated accounts will continue to bear counterparty risk.

This could have a significant impact on the prices of precious metals because LBMA statistics show that the combined weekly turnover in gold, silver, platinum, and palladium totals $357bn between members alone. But from an attempt in 2011 by the LBMA to collect turnover statistics (which was abandoned) it appears that transactions between LBMA members and their non-member customers could be about five times greater. This must represent an ongoing and significant line of business interest, unlikely to be simply abandoned.

Article 428f (2 and 3) referred to above appears to offer a lifeline to the LBMA, which can continue to have an important and active role in precious metal markets. However, the market for forward transactions beyond a normal settlement cycle is likely to become significantly restricted or even end because of the balance sheet penalties of running uneven derivative positions. With bullion banks likely to restrict taking uneven trading positions for their own accounts, derivative supply will be withdrawn from the market and replaced by physical demand instead.

The interest cost penalty for buying physical bullion to replace unallocated derivatives is for the moment minimal because of current interest rate levels for reporting currencies. Instead of unallocated customer accounts being offered for free, they might suffer a small charge, perhaps 10—20 basis points, an annual maintenance cost that might drive some marginal trading business away. But London should continue to see good demand, some of which might even be diverted from ETFs whose expense ratios are considerably higher.

By significantly reducing counterparty risk for bullion bank customers while giving them a continuing facility, the PRA’s inclusion of Article 428f is a sensible addition to the proposed regulations.

Discouraging derivative exposure

The task set for Basel 3 was to de-risk the global banking system, with a significant danger detected in uneven derivative positions. When Basel 3 was being formulated, uppermost in regulators’ minds would have been the failure of AIG and the potential domino effect on the global banking system. What would have concerned the Basel Committee was the possibility that a deteriorating derivative position in the future could recur, and large corporate deposits flee from affected banks in search of safety. Clearly, the issue of systemic risk demanded separate treatment for derivative positions, and it is this that, among other funding issues, the net stable funding ratio addresses (NSFR).

The NSFR is available stable funding (ASF) divided by required stable funding (RSF) and must always be maintained at one or more. ASF is applied to a bank’s liabilities (i.e., its sources of funding) and different categories of liability have different ASF factors. Under Article 428k, unless specified otherwise in Articles 428l to 428o, all liabilities without a stated maturity are assigned a 0% ASF factor, which means they cannot be used for funding any of a bank’s assets. For bullion banks, this refers to customers’ unallocated metal deposit accounts. There is no mention in Articles 428l to 428o of customer accounts tied to precious metal or commodity prices, so we must assume that the intention is for them to have a zero ASF.

Now we must consider the RSF, which is the denominator in the NSFR equation. It determines how much ASF is needed to fund different categories of banking assets.

Under Article 428ag (g), an 85% RSF, the apportionment of ASF, is required for “physically traded commodities, including gold but excluding commodity derivatives.” The exception is for physical metal held specifically to hedge customer unallocated accounts in their entirety under Article 428f covering interdependent assets, referred to above, in which case both sides come out of the NSFR calculation.

Otherwise, physically traded gold and other commodities require 85% RSF, it appears without any matching deposit funding from the ASF side. And as discussed above, other than for central clearing purposes, commodity derivatives require a 100% RSF.

To summarise so far, this means that 85% of the funding for gold and commodity contracts, including other precious metals, is to be allocated from unrelated but more stable liabilities, and for derivatives 100% of stable funding is required. The issue that now needs clarification is whether the PRA regards a forward contract with a settlement date to deliver gold or silver beyond a normal settlement cycle as a derivative. The Basel Committee includes forward contracts and swaps in its derivative statistics, so despite the LBMA’s misleading representations to the contrary, we can safely assume that the PRA will take them to be derivatives as well.

Further implications for banks and precious metals

By the addition of Article 428f, the LBMA in London has a future, albeit a different one. In effect, the Bank of England is saying, “You can have your settlement engine and your banking members can continue to trade precious metals, instead of derivatives” It is the best result the LBMA could hope for, and it is a more stable future from which it will ultimately benefit.

There can be little doubt that in the general retreat out of derivatives some banking members will throw in the towel on precious metals trading. But there is still a market for gold dealing, which is to be satisfied by banks holding physical bullion to cover unallocated customer accounts. The potential size of this market is difficult to assess, but we can make a provisional estimate.

We know from a previous attempt to quantify trading between LBMA members and non-members, which we can take as public demand for loco-London trading, that it was in the region of five times daily settlements between LBMA members. But we need to know the value of outstanding forward settlement contracts, for which figures are not available from the LBMA. But the BIS estimate of gold forwards and swaps, the large majority of which is LBMA transactions, was $530bn at end-December 2020, a relatively stable figure similarly recorded at preceding half years. At current prices, that is the equivalent of 8,675 tonnes. How much of that will emigrate from forwards and swaps to physical bullion is difficult to estimate, but it can be expected to be determined by the following factors:

  • The number of LBMA banks and non-banks offering physically backed gold and silver account facilities, and therefore the competition to market new bullion-based services.

  • The availability of physical bullion to satisfy extra demand resulting from rule changes.

  • The price effect of extra bullion demand, and whether a rising price creates a bandwagon effect.

  • The expense of maintaining physically backed customer accounts, and therefore the likely charges, compared with generally charge-free unallocated accounts and allocated custodial services.

  • The outlook for the gold price relative to the dollar and other major fiat currencies.

That there will be a market for a bullion-based service we can be sure. It probably explains why Chinese-owned ICBC Standard Bank, one of the four LPMCL shareholders, acquired Barclay’s new mega-vault in mid-2016, having taken a lease on Deutsche Bank’s London vault six months earlier. Even without knowledge of the new PRA rules, the bank would have been able to work out the consequences of Basel 3 for the London forward market and anticipated its replacement with dealing in physical bullion.

The broader implications of the PRA’s rule changes

Both Basel 3 and the PRA’s interpretation of the role of commercial banks are consistent with the view that banks operate as intermediaries between depositors and their operations. This is not, in fact, the case. As I explained in last week’s Goldmoney Insight, through the process of double-entry book-keeping bank deposits are created as a direct consequence of the expansion of bank credit. And while some deposits are added to by customers transferring credits from other banks, these nearly always owe their origin to bank credit creation as well.

By permitting banks to manage the relationship between assets and liabilities before Basel 3, bank regulation has not usually challenged established banking law and practice. The NSFR regime might seem to ensure funding mismatches are lessened, but the reality is new mismatches are created because the funding of an asset can no longer be tied to an offsetting deposit. The double-entry system will continue, that is for sure.

But on the face of it, having expanded balance sheet capacity almost to its limits, the global banking system will now be in retreat. Derivatives and commodity trading positions are discouraged and are set to decline. Even market-making in equities will be hampered. It means that for banks their time horizons will contract because the risks they are accustomed to offsetting with derivatives can no longer be hedged as efficiently. It will affect all aspects of banking business, potentially drawing a close to fixed long-term low-interest loans, such as mortgages and car finance.

It is tempting to think that the Basel Committee has an ulterior motive behind driving banks out of financial activities. Perhaps the BIS’s role in coordinating central banking development of crypto currencies satisfies an ambition to side-line commercial banks entirely, and Basel 3’s introduction is a step in that common direction. But we have little evidence of this joined-up thinking.

Nevertheless, commercial banks are being side-lined in some jurisdictions. In the EU we see the global systemically important banks — the G-SIBs, now as primarily tools for absorbing government debt. In the US and UK they have become intermediaries for distributing QE to investing institutions, because the investing institutions do not have accounts with the central bank. It will be a small step for them to do so, as is already the case in the US reverse repo market with money funds. The same appears to be true of the Japanese banking system, and China’s banks under government ownership are slavishly carrying out government monetary and economic policies.

Only the smaller banks seem to have a focus on banking’s traditional business, the financing of local non-financial businesses, the SMEs that make up the bulk of any country’s GDP. Networks of smaller banks and credit unions with their fingers on the local business pulse go along with economic success, for example in Germany. But national regulators seem keen for them to be merged out of existence. These are all straws in the wind, which individually seem unimportant, but can easily lead to the impression that for banks the best times are now over.

Tyler Durden Sat, 07/17/2021 - 08:10
Published:7/17/2021 7:32:34 AM
[Uncategorized] Providence Teachers Union Confirms Affinity Group Segregation, Historical Books Destroyed, Holocaust Education Ended (Ramona Bessinger Update)

Union president: "So there's people of color in one group and white folks in another group.... both the people of color and our teachers of color and our white teachers have said that they're uncomfortable with it ... some people feel like this is further segregationist and feel like it's more divisive than helpful."

The post Providence Teachers Union Confirms Affinity Group Segregation, Historical Books Destroyed, Holocaust Education Ended (Ramona Bessinger Update) first appeared on Le·gal In·sur·rec·tion.
Published:7/16/2021 8:33:34 PM
[] Hubble, the 'Telescope With Nine Lives,' is Back for More Revelations Published:7/16/2021 2:28:05 PM
[Markets] Futures Slide As Yield Drop Accelerates Futures Slide As Yield Drop Accelerates

S&P futures dropped, trading near session lows and sliding along Europe shares and Treasury yields, as investors assessed a growth slowdown in China and dovish comments from Federal Reserve Chair Jerome Powell. The drop in yields helped push the Nasdaq higher with mega-cap technology stocks leading gains ahead of today's initial unemployment claims report that will allow investors to gauge the strength of the labor market. At 7:00 a.m. ET, Dow e-minis were down 189 points, or 0.54% and S&P 500 e-minis were down 141.00 points, or 0.32%, and Nasdaq 100 e-minis were up 12.5 points, or 0.08%, with FAAMG heavyweights all gaining between 0.1% and 0.4%. The dollar weakened against haven currencies and bitcoin slumped back under $32,000; the British pound rose after a Bank of England policy maker said withdrawing stimulus may be appropriate soon.

Netflix jumped 2.5% in premarket trading after announcing plans to expand into video games. It hired a former Electronic Arts Inc. and Facebook Inc. executive to lead the effort. Advanced Micro Devices rose 1.5% after Citigroup upgraded the chipmaker’s stock to “neutral” from “sell”. Verb Technology rose 20% in premarket trading amid a broader rally among meme stocks. Other stocks favored among retail traders also advance with Sgoco Group (SGOC) climbing 3.9% and Exela Technologies (XELA) gaining 4%.

Futures dropped even though second-quarter earnings season started on a strong note this week, with the four largest U.S. lenders - Wells Fargo, Bank of America, Citigroup and JPMorgan Chase - posting a combined $33 billion in profits, buoyed by the release of $9 billion in reserves they had put aside last year to absorb feared pandemic losses. Their shares were down between 0.7% and 0.8% in premarket trading, while Morgan Stanley edged 0.8% lower ahead of its results before the bell on Thursday.

The key overnight news came out of China, where second-quarter growth slowed to 7.9%, just missing expectations of 8.0%, even as a pick-up in consumer spending suggested a more balanced recovery.

In the U.S., Powell said it was still too soon to scale back monetary support even though inflation has risen faster than expected. Powell said he is confident recent price hikes are associated with the country’s post-pandemic reopening and will fade, and that the central bank should stay focused on getting as many people back to work as possible. The “powerful support” pledge assuaged some concerns over price pressures, helping the S&P 500 and the Dow end a choppy session with small gains. With central banks from New Zealand to Canada and the U.K. turning hawkish, traders continue to debate how far the Fed can hold back on tapering.

”U.S. stock indexes are going from one record to the next, although there are visible and quite serious signals of noticeable weaker growth in the U.S. economy,” Norbert Frey, the head of asset management at Fuerst Fugger Privatbank, wrote in a message to Bloomberg. “If inflation doesn’t go back on its own, the Fed must act. Then the markets could get bumpy.”

In Europe, the Stoxx Europe 600 fell 0.4%, dropping for a second day, with energy and retail shares leading losses among sectors; Eurostoxx 50 was 0.5% lower with Germany's DAX off 0.7%. FTSE MIB and IBEX lag. The Stoxx Europe 600 Energy sector index fell as much as 3.3%, the most among 20 groups in the region’s benchmark and heading for the third consecutive session of decline. Oil majors also decline under pressure from lower oil prices after U.S. gasoline stockpiles unexpectedly expanded. Here are some of the biggest European movers today:

  • Avast shares rose as much as 17%, the most since March 2020, after the cyber security firm said it was “advanced talks” on a possible merger with NortonLifeLock.
  • Glanbia shares surged as much as 7.6%, the most since October 2020, after the Irish food company said its trading in 1H was ahead of expectations.
  • Experian shares gained as much as 6.1%, hitting the highest since May 2020, after beating expectations and boosting its revenue estimates, with analysts upbeat about the credit services firm’s outlook.
  • EON shares rose as much as 3%, hitting the highest since May 19, after JPMorgan upgraded the German utility to overweight from neutral with regulatory risk now lower and a positive outlook for its U.K. operations.
  • Siemens Gamesa Renewable Energy shares dropped as much as 17% after cutting financial guidance for this year.  Siemens Energy shares down as much as 11%, the most on record, after it said its 3Q results will likely miss estimates owing to the guidance cut from Gamesa. Peer Vestas Wind Systems down as much as 7.4%, Nordex 7.8% ??????
  • Galapagos shares plunged as much as 14%, biggest intraday decline since Feb. 10. Readouts from its patient studies show there is work to be done to adequately de-risk and differentiate its drugs, RBC said in a note.
  • Orkla shares dropped as much as 6.8% after its earnings. Handelsbanken said it was a “weaker-than expected” report from the company and notes more cautious outlook comments from the group.
  • MorphoSys shares fell as much as 8.2%, to the lowest since August 2017, after the purchase of about 89% of outstanding shares of Constellation Pharmaceuticals, with the merger expected to complete before the start of U.S. trading today.
  • Asos shares slumped as much as 17%, most intraday since Nov. 9, after the online fashion retailer said sales started to soften, particularly in Britain, at the tail end of the third quarter as a result of poor weather, supply chain pressures and continued uncertainty over Covid-19. Analysts called the stock move an overreaction, recommending investors to buy on weakness.

Earlier in the session, Asian stocks crept higher after data from China showed its economic recovery steadied in the second quarter, while retail sales expanded more in June than analysts expected. The MSCI Asia Pacific Index rose as much as 0.3%, reversing an earlier decline of 0.2%, while the benchmark for emerging-market equities, however, rose to a one-week high, aided by the technology sector on a report of possible cooperation between Alibaba Group Holding Ltd. and Tencent Holdings Ltd.

Information-technology and finance sectors advanced, while peers in healthcare and industrials fell. A gauge of mainland- and Hong Kong-listed financial companies climbed 2.5%, the most since May 25, after China rolled over 100 billion yuan ($15.4 billion) of medium-term policy loans. “The data was good without being stellar,” said Kyle Rodda, an analyst at IG Markets in Melbourne. “But the sense is now that more stimulatory policy will be coming down the line at some point soon, and clearer signaling of that from policymakers will be crucial to a pick-up in Asian stock markets and probably the global economic outlook too.” The Asian stock benchmark is on course for its best weekly performance since February following a rally earlier this week. China’s central bank said last week that it would cut the amount of cash most lenders must hold in reserve, bolstering sentiment toward equities. China was the region’s best performer, with the CSI 300 and the liquidity-sensitive ChiNext both gaining more than 1%. The country’s stocks advanced while bonds declined as fears of a deep economic slowdown were allayed by the latest data. Meanwhile, benchmarks in Japan and the Philippines fell.

Japan’s stocks fell as a strengthening yen and Tokyo’s biggest jump in Covid-19 infections since January damped investor demand. The Topix index declined 1.2% to 1,939.61 in Tokyo, while the Nikkei 225 closed 1.2% lower at 28,279.09. Sony Group Corp. contributed the most to the Topix’s drop, decreasing 1.7%. Today, 1,836 of 2,187 shares fell, while 278 rose; 32 of 33 sectors were lower, led by electric appliances stocks. The yen headed for a two-day advance of 0.7% against the dollar. Takashi Ito, an equity market strategist at Nomura Securities, said stock investors were also concerned about the resurgence of Covid-19 cases. Tokyo confirmed 1,149 new infections Wednesday, the most since January, as the city prepares for the delayed Olympics that’s set to start in less than two weeks. The capital entered its fourth state of emergency on Monday. U.S. stock index futures were little changed during Asia trading hours. On Wednesday, Megacap tech stocks led the S&P 500 marginally higher and bond yields fell as investors turned to defensive favorites with Federal Reserve Chairman Jerome Powell making the case for maintaining economic stimulus. “Powell’s comments didn’t have that much impact on the markets. It’s more of Japanese stocks taking a breather after rebounding from last week,” said Hajime Sakai, the chief fund manager at Mito Securities Co. “There’s not that much material to trade off of, and investors are going to get into a wait-and-see mode ahead of the earnings season.”

In rates, Treasuries added to Wednesday’s curve-flattening gains, aided by a large purchase of 10-year note futures via a block trade in early U.S. session.  Yields are lower by ~2bp across long-end of the curve, 10-year by ~1.5bp at 1.33%, outperforming gilts by ~4bp while bunds keep pace; 5s30s is flatter by less than 1bp, 2s10s by ~2bp. Gilts lag following hawkish comments from Bank of England’s Saunders. Fed’s Powell returns to Congress for a second day of testimony on the economy and monetary policy, this time before Senate Banking panel. Bund and gilt curves steadily bull flatten with long-end Germany underperforming at the margin. Peripheral spreads widen, semi-core holds steady after relatively well received auctions from Spain and France.

In FX, the Bloomberg Dollar Spot Index rebounded sharply after sliding lower and was last trading at session highs alongside a pocket of weakness in futures, though most moves were confined to tight ranges; the Swiss franc and the yen rose for a second day against the dollar amid haven demand while risk-sensitive Antipodean and Scandinavian currencies inched lower. The euro edged up to trade at around $1.1850; the common currency’s term structure has inverted as central bank meetings set the tone, with emphasis on the Federal Reserve. CHF and JPY are the best G-10 performers with broader risk appetite dwindling. GBP, AUD and NZD are the weakest, albeit in choppy trade.

BOE’s monetary policy committee member Michael Saunders said that if economic activity and inflation remained in line with current trends, it may become appropriate “fairly soon” to withdraw some of the stimulus. The speech, released on the bank’s website, pushed gilts to erase gains.

In commodities,  West Texas Intermediate crude futures tumbled below $73 a barrel on expanding U.S. fuel inventories and a potential OPEC+ agreement to increase supply before recovering off the lows. Brent bounces back above $74. Spot gold grinds higher, pushing through Wednesday’s best levels to trade near $1,832/oz. Base metals push higher: LME copper gains as much as 1.25%.

To the day ahead now, and the highlight will once again likely be Fed Chair Powell’s testimony, as he appears before the Senate Banking Committee. Other speakers include the Fed’s Evans and the BoE’s Saunders. Separately, data highlights include June data on industrial production and the weekly initial jobless claims, whilst in Europe there’s also UK unemployment data for May. Earnings releases include UnitedHealth Group, Morgan Stanley, US Bancorp and BNY Mellon. Finally, US President Biden will be meeting German Chancellor Merkel at the White House.

Market Snapshot

  • S&P 500 futures little changed at 4,368.50
  • STOXX Europe 600 down 0.44% to 458.58
  • MXAP up 0.3% to 206.16
  • MXAPJ up 0.8% to 689.18
  • Nikkei down 1.2% to 28,279.09
  • Topix down 1.2% to 1,939.61
  • Hang Seng Index up 0.8% to 27,996.27
  • Shanghai Composite up 1.0% to 3,564.59
  • Sensex up 0.6% to 53,232.70
  • Australia S&P/ASX 200 down 0.3% to 7,335.92
  • Kospi up 0.7% to 3,286.22
  • Brent Futures down 0.8% to $74.13/bbl
  • Gold spot up 0.2% to $1,831.53
  • U.S. Dollar Index down 0.10% to 92.32
  • German 10Y yield fell 2.0 bps to -0.340%
  • Euro little changed at $1.1846

Top Overnight News from Bloomberg

  • China’s economic rebound steadied in the second quarter and showed more balance as consumer spending picked up, providing support to a global recovery being shaken by resurging coronavirus cases. Gross domestic product in the world’s second- largest economy expanded 7.9% from a year earlier
  • Bank of England Governor Andrew Bailey said he won’t rush to make judgments about inflation even after consumer prices leaped more than expected in June. The remarks, in an interview with the Business Live website yesterday and published on Thursday, were a reaction to inflation rising 2.5%, more than the BOE’s 2% target
  • U.K. companies added payrolls at a record pace in June as the reopening of the economy triggered an unprecedentedscramble for staff. The number of employees on company books climbed by 356,000, the Office for National Statistics said Thursday. Demand for staff rose, with vacancies in June alone increasing to a record 962,000, up 7% from May
  • ECB Governing Council member Ignazio Visco says “we have to avoid tapering before the time comes that we’re really confident we’re back where we should”

Quick look at global markets courtesy of Newsquawk

Asian stocks lacked firm direction as participants digested mixed Chinese GDP data - which partially offset the slight positive bias from the US following Fed Chair Powell's dovish reiterations in Congress. Powell stated it is still appropriate that monetary policy remains highly accommodative and that the jobs market is still a ways off from progress needed to begin tapering. The ASX 200 (-0.3%) was indecisive, with strength in most mining-related sectors and utilities counterbalanced by underperformance in tech and energy names. In addition, the latest jobs data was somewhat inconclusive and failed to spur price action with headline Employment Change slightly below forecasts despite a faster than expected decline to the Unemployment Rate. The Nikkei 225 (-1.2%) was pressured by recent flows into the domestic currency and cautiousness as the BoJ kick-started its two-day policy meeting where the Bank is touted to reduce its economic growth forecast for the current fiscal year. The KOSPI (+0.7%) remained afloat following an unsurprising BoK announcement to keep policy rates steady. The Hang Seng (+0.8%) and Shanghai Comp. (+1.0%) were varied with the former boosted by its tech giants Alibaba and Tencent amid reports they are considering opening up their ecosystems to each other and with Hong Kong also said to lift travel restrictions. Conversely, the mainland was choppy after mixed Chinese GDP data, which showed China's economic growth Y/Y slowed to 7.9% vs exp. 8.1% (prev. 18.3%), although GDP Q/Q beat expectations at 1.3% vs exp. 1.2% (prev. 0.6%) and both Industrial Production and Retail Sales figures also topped forecasts, while the PBoC only rolled over CNY 100bln in MLF loans vs CNY 400bln maturing this month. The PBoC also maintained the 1-Year MLF rate at 2.95%, which dampens prospects of a cut to the Loan Prime Rate next week, although China Securities Journal noted that China might reduce the Loan Prime Rate but not cut the policy rate. Finally, 10yr JGBs were uneventful and failed to benefit from the strength in USTs, which were inspired by Fed Chair Powell's continued dovishness and despite the underperformance seen in Japanese stocks, while slightly increased demand at the enhanced liquidity auction did little to spur prices with participants sidelined as the BoJ began its latest conclave.

Top Asian News

  • Chinese Stocks Rally, Bonds Decline as Data Allay Growth Fears
  • Blockbuster IPO Memes Reveal Emotion Amid India’s Unicorn Frenzy
  • Singapore Finds 42 Virus Cases With Most From Karaoke Cluster
  • TSMC Is Considering Building a Chip Plant in Japan, CEO Says

Stocks in Europe clambered off the losses seen shortly after the cash open, although this mild reprieve did not last long and and Europe holds onto a negative bias (Euro Stoxx -1.0%). This follows from a mixed APAC handover, which saw an overall firm performance in China following the nation topping expectations in Q/Q Q2 GDP alongside June Industrial Production and Retail Sales. US equity futures vary with the NQ (+0.2%) the outperformer as the tech-laden index future benefits from declining yields, whilst the RTY (-0.8%) lags and the YM (-0.4%) and ES (-0.2%) trade in more contained parameters. Back to Europe, the FTSE 100 (-0.9%) initially narrowly outperformed regional peers amid favourable currency dynamics at the time. However, the index was hit (alongside general sentiment) after BoE's Saunders struck a hawkish tone - suggesting that "it may become appropriate fairly soon to withdraw some of the current monetary stimulus." Sectors remain primarily in the red, with Oil & Gas the marked underperformer as crude prices ease. Overall, sectors have more of a defensive bias, with Food & Beverages, Personal & Household Goods and Healthcare towards the top of the pack. In terms of individual movers, Daimler (-0.5%) initially opened with gains following a stellar earnings report, with traders citing the broader downside in autos to the chip crunch squeeze expected to last into next year – as reiterated by chip-giant TSMC after their earnings. Sticking with earnings, TomTom (-15.7%) shares continue to decline after the group cut its outlook as a by-effect of the chip shortage. Meanwhile, Siemens Energy (-8.2%) ditched its margin guidance after the wind power division Siemens Gamesa (-13%) was hit by higher-than-expected raw material costs and product ramp-up expenses. Airbus (+0.3%) and UBS (Unch) have trimmed the earlier gains seen in the wake of positive broker moves.

Top European News

  • Poland Revokes EU Court Powers, Testing Bloc’s Legal Order
  • Ireland Determined to Push For 12.5% Corporate Tax Rate: Donohoe
  • Abrdn CIO to Retire in Shakeup at $740 Billion Money Manager
  • BOE’s Bailey Says He Won’t Rush to Judgment About Inflation

In FX, the Greenback is trying to find a footing after retreating to fresh lows in wake of Fed chair Powell’s testimony to the House that reinforced dovish policy guidance on the premise that higher inflation will prove to be a temporary phenomenon rather than persistent or permanent feature, while he also reiterated that reaching the goal of maximum employment remains a long way off. Using the DXY as a proxy, the index pared declines briefly to touch 92.500, but then faded fairly fast to trade down at 92.272 amidst greater demand for safer-havens, like the Yen, Franc and Gold due to a bout of risk aversion that is keeping global bond yields depressed and curves compressed. However, the Dollar will be looking for more evidence of substantial progress from a raft of US data and surveys before Powell returns to Congress and addresses the Senate in advance of comments from Evans.

  • JPY/CHF/XAU - As noted above, the Yen, Franc and Gold are bucking the general trend and consolidating their comeback from recent lows within a 110.03-109.75 range for the former ahead of the BoJ tomorrow and with decent option expiry interest between the round number and 110.13 (1.25 bn) capping the headline pair. Meanwhile, the Usd/Chf has reversed through 0.9150, with Eur/Chf edging closer to 1.0800 and spot bullion has climbed into a higher band above Usd 1800/oz and gathering stronger technical momentum following its close beyond the 200 DMA.
  • EUR - Notwithstanding, the aforementioned depreciation in Franc cross terms, the Euro has established a firmer base vs the Buck on the 1.1800 handle to retest half round number resistance and clear option expiries at 1.1800-05 (1 bn), but Eur/Usd faces more from the big figure above (1.15 bn between 1.1900-10 to be precise) and may be hampered by dovish ECB commentary from Visco.
  • NZD/GBP/AUD/CAD - All unable to capitalise on their US rival’s relative fragility on risk-off grounds, and with the Kiwi also unwinding some of its post-RBNZ outperformance in the run up to NZ Q2 CPI having topped out circa 0.7044 twice and failing to advance through 1.0600 against the Aussie. Moreover, Aud/Usd is holding above 0.7450 in wake of largely encouraging jobs data as a counterweight to more worrying COVID-19 developments as Melbourne, Victoria heads into a 5 day snap lockdown. Elsewhere, the Pound was back-pedalling across the board following a mixed UK labour report with Cable back beneath 1.3850 and Eur/Gbp rebounding sharply from almost 0.8500 to 0.8550+ before very hawkish remarks from BoE's Saunders sent Sterling up again (Cable to circa 1.3900 and Eur/Gbp under 0.8515).

In commodities, WTI and Brent front month futures have extended on the losses seen during APAC hours, with the former around 72.50/bbl (vs 71.68-72.96/bbl range) whilst the latter meanders just under USD 74.50/bbl (vs 73.50-74.59/bbl range). However, the complex rebounded off worst levels despite a distinct lack of newsflow at the time. That being said, several factors are currently at play for the crude market. Firstly, on the demand side, COVID cases have been rising across the globe, fuelled by the more potent COVID Delta variant. This, in turn, has prompted the reintroduction of some targeted lockdowns (Australia's Victoria State overnight) whilst international travel becomes more restrictive – with Japan also set to tighten border control. However, the summer picture is expected to be rosy, with hopes that mass vaccinations and summer weather permit more activity. Over to the supply side, although the UAE and Saudi reportedly struck a deal involving a higher base level to conduct the cuts from, Iraq has joined the call for its reference rate to be raised. As a reminder, during the early July talks, the UAE, Kazakhstan, and Iraq all asked for higher baselines. Thus, it will not be too surprising if more producers join the call for a higher base under the strain of balancing fiscal books. Furthermore, reports noted that the UAE's increased base would only be in effect after April 2022, when the original pact expires. Hence, a deal could be brokered whereby all those wanting to raise their baselines do so after April 2022, for the sake of a deal now – with any deal likely to be tweaked in the future depending on market conditions. It is also worth noting that Iraq asking for a baseline hike reintroduces the threat of a no-deal at the next meeting as unanimity is needed for an accord. The Iranian nuclear deal meanwhile has taken the backseat for now as sources suggested talks are not likely to resume until mid-August. Elsewhere spot gold and silver meander further above USD 1,800/oz and USD 26/oz, respectively, amid the weaker Dollar. LME copper is also on a firmer footing following the Chinese data overnight, but the contract remains below USD 9,500/oz.

US Event Calendar

  • 8:30am: June Import Price Index YoY, est. 11.1%, prior 11.3%; MoM, est. 1.1%, prior 1.1%
  • 8:30am: July Initial Jobless Claims, est. 350,000, prior 373,000; Continuing Claims, est. 3.3m, prior 3.34m
  • 8:30am: June Export Price Index MoM, est. 1.4%, prior 2.2%; YoY, est. 16.3%, prior 17.4%
  • 8:30am: July Philadelphia Fed Business Outl, est. 28.0, prior 30.7
  • 8:30am: July Empire Manufacturing, est. 18.0, prior 17.4
  • 9:15am: June Industrial Production MoM, est. 0.6%, prior 0.8%; Manufacturing (SIC) Production, est. 0.2%, prior 0.9%; Capacity Utilization, est. 75.6%, prior 75.2%

DB's Jim Reid concludes the overnight wrap

Risk markets continued to meander around record highs as reassuring remarks from Fed Chair Powell in his congressional testimony yesterday caused Treasuries to end their three-day selloff, with yields moving lower throughout the day. In terms of the main headlines from his remarks, Powell indicated that the FOMC still views the US economy as “still a ways off” from the standard of having made the ‘substantial further progress’ in order to cut down asset purchases. He also made clear that the FOMC will be discussing tapering at the next meeting in two weeks, and that the Fed will give the market ample warning before adjusting asset purchases. Chair Powell, who was speaking before members of the House Financial Services Committee, also noted that the inflation data so far has been “higher than expected and hoped for” but he still sees much of the pressures as transitory. He cited the price action of lumber, which is now trading at 8-month lows after rallying +200% at one point in that time, as what could happen to many of the transitory factors.

In terms of the specific market reaction, US Treasuries had already put in a decent performance in advance of Powell speaking, particularly after the release of his testimony and the “still a ways off” comment. 10yr yields were down -7.1bps at 1.346% by the close, with lower real rates (-4.7bps) and inflation expectations (-2.4bps) contributing to the decline. 10yr real yields themselves closed at their lowest level since mid-February. This move lower for Treasury yields came in spite of the fact that we actually received yet another upside inflation surprise from US producer prices. They came in at an above-expected +7.3% year-on-year in June (vs. +6.7% expected), while the measure that excludes food and energy also came in above expectations with a +5.6% increase (vs. +5.1% expected).

In fact, yesterday was notable as a number of countries in addition to the US seemed to be either seeing inflationary pressures or taking action to head them off. Here in the UK, the CPI reading for June came in at +2.5% (vs. +2.2% expected), which is the fastest inflation has been in nearly 3 years. That release saw gilts underperform other European sovereign bonds as investors brought forward the timing of a potential BoE rate hike, with yields on 10yr gilts closing -0.5bps lower on the day. Meanwhile in Canada, the central bank announced that they would be adjusting their QE programme to a new target pace of C$2bn per week, having been at C$3bn previously, as their statement pointed to “continued progress towards recovery and the Bank’s increased confidence in the strength of the Canadian economic outlook.” And as mentioned in yesterday’s edition, the Reserve Bank of New Zealand announced they would be ending QE this month, which meant that the New Zealand dollar (+1.22% vs USD) was the best-performing G10 currency yesterday.

Overnight in Asia, the main story is the release of China’s Q2 GDP reading, which showed year-on-year growth stood at +7.9% (vs. +8.0% expected). That said, data for June specifically surprised to the upside, with retail sales coming in at a year-on-year growth rate of +12.1% (vs. +10.8% expected), while industrial production was up +8.3% (vs. +7.9% expected), so that should help to alleviate concern among investors that there’s a slowdown in growth taking place. We also had some monetary policy action overnight, with the PBoC rolling over RMB100bn of loans from its medium-term lending facility and leaving borrowing rates unchanged at 2.95%. Separately, the Bank of Korea left its key interest rate at 0.5%, and Governor Lee Ju-yeol said he thought that it would be appropriate to begin a discussion about adjusting policy from the next meeting.

Asian markets have seen a divergent performance this morning, with the Shanghai Comp (+0.23%), the Hang Seng (+1.23) and the Kospi (+0.50%) advancing, whereas the Nikkei (-0.88%) has lost ground overnight. Futures on US equities are also pointing slightly lower, with those on the S&P 500 down -0.06%, while yields on 10yr US Treasuries are down a further -1.3bps.

Looking at other markets yesterday, equities were fairly subdued as they hovered around their record highs, with the S&P 500 (+0.12%) and Europe’s STOXX 600 (-0.09%) both within 0.25% of their all-time highs. Covid-sensitive stocks were one area that continued to struggle amidst the global spread of the delta variant, with the STOXX 600 travel and leisure index falling a further -0.99% yesterday to remain on track for a 3rd consecutive monthly decline. Elsewhere, cyclical sectors in the US all fell back as materials (-0.19%), banks (-0.25%), and energy (-2.94%) shares all declined. Energy companies saw larger declines as WTI oil prices (-2.82%) came down from their post-pandemic high on Tuesday, closing at $73.13/bbl, following news that the OPEC+ group is moving towards a new agreement that would allow the UAE to increase its output limit next year and allow the entire group to increase supply this summer.

Outside of that, commodity prices more broadly continued their ascent yesterday, with the Bloomberg Commodity Spot Index (+0.48%) rising for a 4th consecutive session. Precious metals were among the beneficiaries as gold prices (+1.09%) hit their highest level since the Fed meeting in June against this backdrop of intensifying concerns over inflation once again. Silver (+1.01%) and platinum (+2.15%) were also among the winners, whilst agricultural prices including corn (+0.89%), wheat (+2.58%) and soybeans (+2.07%) saw solid advances.

Turning to the US stimulus talks, Senators Jon Tester of Montana and Joe Manchin of West (both Democratic moderates) yesterday announced they are not yet signed on to the Democrats’ $3.5 trillion budget reconciliation bill, with both indicating they need further details and would like to see the majority or totality of the package paid for. Democratic leadership has signaled that the $3.5 trillion price tag is just the starting point, with Senate Majority Leader Schumer saying “there’s a long road ahead of us.” Following a lunch with congressional Democrats, President Biden said he was optimistic on a deal getting done that both moderate and progressive Democrats could sign onto, though a timetable is currently uncertain with the majority of the time before the August recess likely devoted to the bipartisan infrastructure package.

On the pandemic, the UK reported a further 42,302 new Covid-19 cases yesterday, marking the highest daily total since January 15. However, there was also some brighter news in that the UK government successfully hit its target of fully vaccinating two-thirds of the adult population by July 19, with 66.7% having now received both doses. One theme that’ll be increasingly prominent in the coming weeks will be at what point do countries struggle to vaccinate more people, as increasing numbers get close to the point where pretty much everyone who wants a vaccine has been offered one.

There wasn’t much in the way of other data, though Euro Area industrial production fell by a larger-than-expected -1.0% in May (vs. -0.3% expected), whilst the previous month’s growth was also revised down two-tenths.

To the day ahead now, and the highlight will once again likely be Fed Chair Powell’s testimony, as he appears before the Senate Banking Committee. Other speakers include the Fed’s Evans and the BoE’s Saunders. Separately, data highlights from the US include June data on industrial production and the weekly initial jobless claims, whilst in Europe there’s also UK unemployment data for May. Earnings releases include UnitedHealth Group, Morgan Stanley, US Bancorp and BNY Mellon. Finally, US President Biden will be meeting German Chancellor Merkel at the White House.

Tyler Durden Thu, 07/15/2021 - 07:41
Published:7/15/2021 6:52:09 AM
[Markets] Watch: Radical Fed Morphs From Central Bank To Bailout Kingpin... And Americans Aren't Paying Attention Watch: Radical Fed Morphs From Central Bank To Bailout Kingpin... And Americans Aren't Paying Attention

Authored by Pam Martens and Russ Martens via WallStreetOnParade.com,

This evening, the PBS program, Frontline, will do something that corporate broadcast media has failed to do since the financial crash of 2008. Frontline will air the results of its year-long investigation of the most powerful financial institution in the world – the central bank of the United States – known as the Federal Reserve, or simply “the Fed.”

The Fed’s radical makeover of itself began in December of 2007 when the Fed decided, on its own, that it had the authority to secretly pump out trillions of dollars in cumulative loans to prop up the mega banks on Wall Street, as well as to the foreign banks that were on the other side of Wall Street’s hundreds of trillions of dollars in derivative trades. The Fed secretly ran that program through at least July of 2010 according to the eventual audit that was conducted by the Government Accountability Office. (That audit only came about because Senator Bernie Sanders attached an amendment to the Dodd-Frank financial reform legislation of 2010.)

The Fed’s latest massive bailout operation began on September 17, 2019, months before there was a case of COVID-19 anywhere in the world. The full scope of this operation and other bailout programs remain a dark secret at the Fed, casting a pall over investors’ confidence in the transparency and stability of the U.S. financial system.

James Jacoby, Writer, Producer and Correspondent, “The Power of the Fed.”

Frontline writers and producers James Jacoby and Anya Bourg, who are the force behind tonight’s Frontline documentary, The Power of the Fed, will now become part of a rarefied group of individuals who have mustered the determination to cut through the Fed’s insidiously cultivated armor of Fed-speak and its preposterous structure that allows it to create trillions of dollars of money electronically out of thin air for bailouts, with only feigned oversight by Congress.

We have not yet seen the Frontline program but we have high hopes given the past work of Frontline. (See here and here.)

The Frontline team has the opportunity tonight to significantly build on the herculean work of two other journalists who spent years investigating the Fed and advancing Americans’ understanding of its kleptocratic nature: Mark Pittman and Nomi Prins.

Mark Pittman was the Bloomberg News reporter responsible for the Bloomberg lawsuit against the Federal Reserve during the 2008 financial crash. Pittman had asked the Federal Reserve Board, under a Freedom of Information Act (FOIA) request in April and May of 2008, for details of four lending programs, including the borrowers’ names and the amounts borrowed.  The programs were the Discount Window, the Primary Dealer Credit Facility, the Term Securities Lending Facility, and the Term Auction Facility. When the Fed brazenly stonewalled Pittman, Bloomberg News filed the lawsuit on his behalf.

On November 10, 2008 Pittman and his colleagues, Bob Ivry and Alison Fitzgerald, wrote an article headlined “Fed Defies Transparency Aim in Refusal to Disclose.” The article reports as follows:

“The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

“Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn’t require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.”

Pittman shared in a Gerald Loeb award for Bloomberg’s five-part series, “Wall Street’s Faustian Bargain,” which described how a group of Wall Street bankers had created the subprime doomsday machine over Chinese food. Many believed Pittman’s investigations of the Fed put him in line for a Pulitzer. But just a week before the secretive Fed Chair Ben Bernanke was scheduled to sit for his Senate Confirmation hearing for another term at the helm of the Fed, Pittman died of a heart attack at age 52 on November 25, 2009.

At the time of Pittman’s death, the Fed was still refusing to release the details of its trillions of dollars in secret loans, despite losing its court battle at the District Court. The Second Circuit appellate court decision, also ruling against the Fed, would not come until March 19, 2010, four months after Pittman’s death.

But even after the appellate decision went against it, the Fed refused to release the data. First the Fed asked for a rehearing by the Second Circuit Court of Appeals. When that was rejected, a Wall Street consortium of banks, that were the actual recipients of the trillions of dollars in secret loans, appealed the case to the U.S. Supreme Court. That appeal failed as well and the Fed was forced to finally release the astonishing sums it had showered on global banks with zero awareness by any elected member of the George W. Bush administration or any elected member of Congress.

When all of the Fed’s bailout programs were tallied up, the tab came to a staggering, cumulative $29 trillion, as meticulously analyzed by the Levy Economics Institute. The Fed had kept the American people completely in the dark as it sluiced these trillions to Wall Street trading houses, foreign banks, the insolvent bank, Citigroup, even hedge funds that were shorting (betting against) the market.

Today, the Fed is still stonewalling the public and refusing to release the names of the recipients of some of its emergency bailout programs and its $9 trillion repo loan program that began on September 17, 2019.

We reached out to Mark Pittman’s mother, Donna Pittman-Nealey, for her thoughts on her son’s work to bring transparency to the Fed. She told us this:

“I can only say he was a pioneer in every way throughout his life.  He was never afraid to tackle any problem when he felt he needed an answer.

“I am so proud of all he did. So brave a person, smart, and kind. He was so loved. We miss him.”

Nomi Prins has also done an extraordinary public service in bringing sunlight to areas that the Fed would much rather keep in the shadows. Prins authored the 2018 book, Collusion: How Central Bankers Rigged the World.

Prins writes that “Eight years after the [2008] crisis began, the Big Six US banks – JPMorgan Chase, Citigroup, Wells Fargo, Bank of America, Goldman Sachs, and Morgan Stanley – collectively held 43 percent more deposits, 84 percent more assets, and triple the amount of cash they held before. The Fed has allowed the biggest banks on Wall Street to essentially double the risk that devastated the system in 2008.”

Prins explains in the book that what the U.S. Fed and other major central banks like the Bank of Japan and European Central Bank are doing is “conjuring”  money. The money has been conjured or fabricated, writes Prins, because the Fed and other central banks are allowed to electronically create money at the push of a button.

The Fed is so captured as a regulator of the banks that Prins says the Fed imposed no obligations on them in exchange for its bailouts. Prins writes that the banks that “inhaled this cheap money were not required to increase their lending to the Main Street economy as a condition of the availability of that money….”

For its part in creating the most unstable financial structure in U.S. history, the Fed is absolutely shameless. Prins writes that “The Fed absolved itself of all responsibility for financial stability in the big bank landscape in June 2017 when it allowed thirty-four of the largest Wall Street banks, including the Big Six, to pass its stress tests. In turn, the banks took this opportunity to buy more of their own shares, elevating their stock prices rather than expanding their loan services for small businesses and Main Street customers.”

This maneuver by the Fed resulted in announcements that Wall Street banks planned “to buy back $92.8 billion of their own stock as a direct response to the Fed’s blessing,” notes Prins, effectively meaning that the Fed was “greenlighting legal manipulation of the stock market.” Indeed, says Prins, “The Dow soared.”

The Fed and those same banks are back to the exact tricks again today.

Prins’ policy recommendations for removing the stranglehold that the Fed has on America is to “implement actual oversight of the conjurers and dedicate effective channels through which to question and curtail their authority and actions.”

Let’s hope that the questioning of the unbridled powers of the Fed begins in earnest with tonight’s Frontline documentary.

Tyler Durden Wed, 07/14/2021 - 16:20
Published:7/14/2021 3:44:01 PM
[Markets] 67 Wildfires Spread Across 10 States In US West  67 Wildfires Spread Across 10 States In US West 

The National Interagency Fire Center (NIFC) reports 67 large wildfires burn across ten parched Western states on Tuesday, and the largest is in southern Oregon, already threatened to cut power to California. 

Nearly 918,000 acres have burned in 67 large fires across the United States. New large fires were reported in Arizona, California, Idaho, Montana, and Oregon. Type 1 and Type 2 Incident Management Teams are assigned to 24 large fires or complexes. And, more than 14,200 wildland firefighters and support personnel are assigned to incidents. 

As record temperatures continue across many states, it's important to remember that we all play a valuable role in wildfire prevention. -NIFC

The fires erupted as much of the Western half of the US is plagued with a megadrought and back-to-back heat waves. This has created the perfect storm of conditions that are fueling dangerous fires. 

The largest fire is the Bootleg Fire in southern Oregon. As of Tuesday 1200 ET, the fire has burned 202,000 acres and threaten major transmission lines that feed power into northern California.

California and other surrounding states are plagued with a megadrought, continuing heat waves, water shortages, fears of rolling blackouts, and a fire season that could be one for the record books

The current US wildfire map shows dozens of fires spreading across Western states. 

Twitter account "HRRR Smoke Bot" shows near-surface smoke encompassing the West. 

With no relief in sight, the number of wildfires across the West will likely continue to increase. 

Tyler Durden Tue, 07/13/2021 - 21:45
Published:7/13/2021 9:08:11 PM
[Markets] The $50 Trillion Plundered From Workers By America's Aristocracy Is Trickling Back The $50 Trillion Plundered From Workers By America's Aristocracy Is Trickling Back

Authored by Charles Hugh Smith via OfTwoMinds blog,

As I often note here, when you push the pendulum to an extreme of wealth and income inequality, it will swing to the opposite extreme minus a tiny bit of friction.

The depth of America's indoctrination can be measured by the unquestioned assumption that Capital should earn 15% every year, rain or shine, while workers are fated to lose ground every year, rain or shine. And if wages should ever start ticking upward even slightly, then the Billionaires' Apologists are unleashed to shout that higher wages means higher inflation, which will kill the economic "recovery."

Said another way: if wages stagnate so workers lose ground every year as inflation in essentials rises, that's the way it should be. If wages rise so workers can keep up with inflation, then that will trigger an inflationary death spiral.

That this indoctrination is so widely accepted reveals the success of America's Aristocracy in reshaping the narrative to make their plundering appear to be "inevitable." But the siphoning of $50 trillion from workers to the Aristocracy, and the Nobility's control of political power was anything but inevitable: it was engineered by policies that enriched billionaires, the top 0.01% Aristocracy, and the top 10% who own 90% of America's productive capital.

This wholesale transfer of wealth and income from workers to Capital was documented by a RAND Corporation reportTrends in Income From 1975 to 2018Time magazine summarized the findings: The Top 1% of Americans Have Taken $50 Trillion From the Bottom 90% -- And That's Made the U.S. Less Secure.

There are some who blame the current plight of working Americans on structural changes in the underlying economy--on automation, and especially on globalization. According to this popular narrative, the lower wages of the past 40 years were the unfortunate but necessary price of keeping American businesses competitive in an increasingly cutthroat global market. But in fact, the $50 trillion transfer of wealth the RAND report documents has occurred entirely within the American economy, not between it and its trading partners. No, this upward redistribution of income, wealth, and power wasn't inevitable; it was a choice--a direct result of the trickle-down policies we chose to implement since 1975.

The net result of this four-decade siphoning of wealth/income from workers was recently documented by a Foreign Affairs article: Monopoly Versus Democracy:

Ten percent of Americans now control 97 percent of all capital income in the country. Nearly half of the new income generated since the global financial crisis of 2008 has gone to the wealthiest one percent of U.S. citizens. The richest three Americans collectively have more wealth than the poorest 160 million Americans.

In other words, the bottom 90% have very little stake in the status quo: they receive essentially zero income from America's stupendous $121 trillion hoard of private wealth and have essentially zero political influence, as documented in Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens.

Now the worm has finally turned, and workers are refusing to accept the Neofeudal dominance of the Aristocracy, not by open revolts that the State can violently crush but by indirect means. Fed-up Boomers are retiring, fed-up Gen-Xers are cutting their hours, refusing to go back to the office, starting their own enterprises and Millennials are assembling multiple income streams, building micro-houses, and leveraging shortages of workers for higher wages.

The techno-fantasy that's Corporate America's fondest dream is automation of all labor: get rid of all human workers and just manage the robots with loving care. But the reality is robots have limits, as I explain in my book Will You Be Richer or Poorer?--limits imposed by physics and finance.

And so, weeping inconsolably, Corporate America continues exploiting its workforce with the usual threats: you're powerless because we can automate your job or offshore it to Lower Slobovia.

Contrast this with the real world: a young man of my acquaintance recently took a job at a Corporate America Big Box outlet. His wage was $12/hour, and all the power was of course in the hands of Corporate America: he had no power over his schedule, or anything else.

In the script of the past four decades, Corporate America (while crushing small business and buying the best government money can buy) could keep the serfs slaving away for stagnating wages, all in service of maximizing corporate insiders' stock options, buybacks and soaring profits.

This individual was tipped off to a much better opportunity, and when he gave notice to the Big Box manager, the manager corralled him for two hours, first offering a $3/hour raise (25%) and then badgering him to stay on as a serf on the Big Box plantation. He refused.

This is the pure distillation of Corporate America and the Aristocracy: if they'd offered this hard-working individual the 25% raise after he proved his worth, then maybe he wouldn't have been so motivated to seek better opportunities elsewhere.

At long last, some the $50 trillion plundered from workers is trickling back to the people who actually create the income and wealth. As a thought experiment, consider an economy in which farmers and workers reaped 15% gains annually like clockwork, and Corporate America's insiders, financiers and speculators, and Wall Street's parasites all lost 15% of their wealth and income every year like clockwork.

In other words, imagine the $50 trillion flowing back to those who generated it from those who looted it.

As I often note here, when you push the pendulum to an extreme of wealth and income inequality, it will swing to the opposite extreme minus a tiny bit of friction. The serfs are quietly slipping away, and the Aristocracy, blinded by hubris and greed, believes nothing will ever change because, well, their wealth and power is deserved. What they really deserve will manifest in the next four years as the chairs at the banquet of consequences are shuffled.

*  *  *

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A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

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Tyler Durden Tue, 07/13/2021 - 16:20
Published:7/13/2021 3:35:51 PM
[Markets] Bootleg Fire In Oregon Uncontrollably Doubles In Size Amid Megadrought Bootleg Fire In Oregon Uncontrollably Doubles In Size Amid Megadrought

Large swaths of the Western half of the US experienced triple-digit temperatures this past weekend, with intense heat expected to continue through mid-week. As the West baked, a huge wildfire doubled in size in southern Oregon, continuing to threaten major transmission lines that feed power into northern California.

California and other surrounding states are plagued with a megadrought, continuing heat waves, water shortages, fears of rolling blackouts, and an early fire season that could be one for the record books

The fire in focus Monday is the Bootleg Fire in southern Oregon, approximately doubling in size in the last 48 hours to more than 150,000 acres. 

The U.S. Forest Service published an incident report from the weekend specifying, "firefighters, emergency managers and other public safety officials faced the fifth day in a row of extreme, intense fire behavior on the Bootleg Fire, as hot, dry, windy weather persists in the area." 

The Bootleg fire began in the Fremont-Winema National Forest near the Sprague River last Tuesday. Nearby residents in Klamath County were told to evacuate because of imminent fire danger. 

On Sunday, the wildfire continued to spread and was zero percent contained. Extreme hot temperatures and a megadrought appear to be what fuels the fire. 

According to NBC News, "the fire interrupted electrical lines that transmit power from Oregon to California. The state lost thousands of megawatts of imported power and struggled to maintain operating reserves as temperatures soared into triple digits in parts of the state." 

Last week, the wildfire prompted California Gov. Gavin Newsom to issue an emergency proclamation to free up additional energy supplies.

On Friday, the state's grid operator, California Independent System Operator (ISO), was very close to triggering rolling blackouts to thwart a collapse of the power grid. 

Now ISO has issued a five-hour "flex alert" beginning at 1600 local time Monday and urged consumers to "conserve as much electricity as possible" to avoid outages.

With Bootleg Fire barely contained and a heat wave to persist through mid-week, it appears the fire has more to spread, potentially affecting transmission lines to northern California

 

Tyler Durden Mon, 07/12/2021 - 14:20
Published:7/12/2021 1:28:24 PM
[Markets] Illinois Teacher Sues District, Claims "Anti-Racist" Curriculum Teaches That Whites Oppress, Violates Constitution Illinois Teacher Sues District, Claims "Anti-Racist" Curriculum Teaches That Whites Oppress, Violates Constitution

Authored by Isabel van Brugen via The Epoch Times,

A middle school drama teacher in Illinois has filed a lawsuit against her school district, alleging that it is violating anti-discrimination laws and the U.S. Constitution through its curriculum that pits “different racial groups against each other” in the name of “anti-racism.”

Teacher Stacy Deemar, in her lawsuit (pdf) filed in federal court on June 29, alleges that since 2017, teachers in Evanston-Skokie district (District 65) have been made to under go so-called “antiracist training,” and continue to do so.

Deemar is being represented by the Southeastern Legal Foundation.

Among a number of objectives in the training, teachers are stereotyped by trainers and divided according to their race, the complaint says. Teachers are required as part of the training to accept that white individuals are “loud, authoritative … controlling” and to hold the view that “to be less white is to be less racially oppressive,” according to the lawsuit. It added that teachers were taught to modify their viewpoint to fit the theory that “White identity is inherently racist” and to denounce “white privilege.”

If teachers oppose, question, or “disengage” from the views promoted in the training, the district “blatantly calls them ‘racist,’” the lawsuit alleges.

Students in the district, meanwhile, are then taught these concepts by their teachers who are mandated according to the curriculum for Pre-K through eighth grade to impose the race-based worldview on their students, the lawsuit added. As a result, students are expected to gather by race in “affinity groups,” and to participate in “privilege walks” based on their skin color. They are also given books depicting “whiteness” as a devil that “mess[es] endlessly” with “all fellow humans of color.”

The children were also taught “whiteness is a bad deal,” white people send “overt and subliminal messages” that they are “superior” and black people are “bad, ugly, and inferior,” and that pretending not to see skin color “helps racism,” according to the complaint.

The lawsuit alleges these practices violate Title VI of the Civil Rights Act and the Equal Protection guarantee, as well as the Equal Protection Clause of the Fourteenth Amendment of the U.S. Constitution.

“Fostering racial identities, promoting the idea that they are in conflict, and perpetuating divisive stereotypes pits teachers and children against one another based on the color of their skin,” the lawsuit says.

“They teach them that their whole identity comes from the color of their skin. They teach them to hate each other. They teach them not only how to be racist, but that they should be racist.”

The Evanston School District didn’t immediately respond to a request for comment by The Epoch Times.

On its website, the district says that it has “persistent and unacceptable opportunity and achievement gaps for students of color.”

“The racial predictability of achievement and disciplinary outcomes is attributable to institutional racism, cultural biases and other societal factors,” it says.

“The district recognizes that in order to provide educational opportunities that result in equitable outcomes, particularly for Black/Brown students, that it must proactively acknowledge and intentionally address racial and cultural biases, in an effort to eliminate institutional structures and practices that affect student learning and achievement.”

The lawsuit come as efforts to incorporate elements of the quasi-Marxist Critical Race Theory (CRT) into American classrooms face intense pushback from moderates and conservatives. States that have banned or restricted the teaching of CRT in public schools include Florida, North Carolina, Oklahoma, and Texas, while more than a dozen states are considering or have partially imposed similar restrictions.

The CRT is rooted in the Marxist theory of class struggle but with a particular focus on race. Proponents of CRT see racism in every aspect of the American public and private life, and seek to dismantle American institutions—such as the Constitution and legal system—which they deem to be inherently and irredeemably racist.

The effort to promote CRT in K-12 education drew national attention in April when the Education Department under the Biden administration proposed a rule to prioritize funding U.S. history and civics programs that incorporate the works of critical race theorist Ibram X. Kendi and the New York Times’ 1619 Project, which centers around the idea that America was founded as, and remains today, a racist nation.

The lawsuit commented that ideologies like CRT are advocating “equity” in a departure from the U.S. tradition of striving for equality as “proclaimed in the Declaration of Independence [and] defended in the Civil War,” which is about sameness and treating everyone in an identical manner regardless of their race.

“Equality strives for equal opportunity while equity strives for equal outcomes,” it said.

Tyler Durden Sun, 07/11/2021 - 20:30
Published:7/11/2021 7:55:41 PM
[Markets] China: Fragile Giant China: Fragile Giant

Authored by Jim Rickards via DailyReckoning.com,

I’ve made many visits to China over the past thirty years and have been careful to move beyond Beijing (the political capital) and Shanghai (the financial capital) on these trips.

My visits have included Chongqing, Wuhan (the origin of the coronavirus outbreak), Xian, Nanjing, new construction sites to visit “ghost cities,” and trips to the agrarian countryside.

My trips included meetings with government and Communist Party officials and numerous conversations with everyday Chinese people.

These trips have been supplemented by reading an extensive number of books on the history, culture and politics of China from 3,000 BC to the present. This background gives me a much broader perspective on current developments in China.

In short, my experience with China goes well beyond media outlets and talking heads.

 

An objective analysis of China must begin with its enormous strengths. China has the third-largest territory in the world, with the world’s largest population (although soon to be overtaken by India).

China also has the fifth-largest nuclear arsenal in the world, with over 280 nuclear warheads. This is about the same as the U.K. and France but well behind Russia (6,490) and the U.S. (6,450). China is the largest gold producer in the world at about 500 metric tonnes per year.

Its economy is the second-largest economy in the world — behind only the U.S. China’s foreign exchange reserves (including gold) are the largest in the world.

By these diverse measures of population, territory, military strength and economic output, China is clearly a global super-power and the dominant presence in East Asia. Yet, these blockbuster statistics hide as much as they reveal.

China’s per capita income is under $12,000 per person compared to per capita income of about $64,000 in the United States. Put differently, the U.S. is only 38% richer than China on a gross basis, but it is 500% richer than China on a per capita basis (of course the massive economic fallout from the coronavirus will have an impact).

China’s military is growing stronger and more sophisticated, but it still falls short against the U.S. military when it comes to aircraft carriers, nuclear warheads, submarines, fighter aircraft and strategic bombers.

Most importantly, at under $12,000 per capita GDP, China is stuck squarely in the “middle income trap” as defined by development economists.

The path from low income (about $5,000 per capita) to middle-income (about $10,000 per capita) is fairly straightforward and mostly involves reduced corruption, direct foreign investment and migration from the countryside to cities to pursue assembly-style jobs.

The path from middle-income to high-income (about $20,000 per capita) is much more difficult and involves creation and deployment of high-technology and manufacture of high-value-added goods.

Among developing economies (excluding oil producers), only Taiwan, Hong Kong, Singapore and South Korea have successfully made this transition since World War II. All other developing economies in Latin America, Africa, South Asia and the Middle East including giants such as Brazil and Turkey remain stuck in the middle-income ranks.

China remains reliant on assembly-style jobs and has shown no promise of breaking into the high-income ranks.

To escape the middle income trap requires more than cheap labor and infrastructure investment. It requires applied technology to produce high-value added products. This explains why China has been so focused on stealing U.S. intellectual property.

China has not shown much capacity for developing high technology on its own, but it has been quite effective at stealing such technology from trading partners and applying it through its own system of state-owned enterprises and “national champions” such as Huawei in the telecommunications sector.

But the U.S. and other countries are cracking down on China’s technology theft and China cannot generate the needed technology through its own R&D.

In short, and despite enormous annual growth in the past twenty years, China remains fundamentally a poor country with limited ability to improve the well-being of its citizens much beyond what has already been achieved. And that has serious implications for China’s leadership…

China’s economy is not just about providing jobs, goods and services. It is about regime survival for a Chinese Communist Party that faces an existential crisis if it fails to deliver.

It’s an illegitimate regime that will remain in power only so long as it provides jobs and a rising living standard for the Chinese people. The overriding imperative of the Chinese leadership is to avoid societal unrest.

If China’s job machine seizes, as parts of it did during the coronavirus outbreak, Beijing fears that popular unrest could emerge on a potentially scale much greater than the 1989 Tiananmen Square protests. This is an existential threat to Communist power.

President Xi Jinping could quickly lose what the Chinese call, “The Mandate of Heaven.”

That’s a term that describes the intangible goodwill and popular support needed by emperors to rule China for the past 3,000 years.

If The Mandate of Heaven is lost, a ruler can fall quickly. Even before the crisis, China has had serious structural economic problems that are finally catching up with it.

China is so heavily indebted that it’s at the point where more debt does not produce growth. Adding additional debt today slows the economy and calls into question China’s ability to service its existing debt.

China also confronts an insolvent banking system and a real estate bubble. Up to half of China’s investment is a complete waste. It does produce jobs and utilize inputs like cement, steel, copper and glass. But the finished product, whether a city, train station or sports arena, is often a white elephant that will remain unused. The Chinese landscape is littered with “ghost cities” that have resulted from China’s wasted investment and flawed development model.

Essentially, China is on the horns of a dilemma with no good way out. China has driven growth with excessive credit, wasted infrastructure investment and Ponzi schemes.

The Chinese leadership knows this, but they had to keep the growth machine in high gear to create jobs for millions of migrants coming from the countryside to the city and to maintain jobs for the millions more already in the cities.

The two ways to get rid of debt are deflation (which results in write-offs, bankruptcies and unemployment) or inflation (which results in theft of purchasing power, similar to a tax increase).

Both alternatives are unacceptable to the Communists because they lack the political legitimacy to endure either unemployment or inflation. Either policy would cause social unrest and unleash revolutionary potential.

China also has serious demographic challenges that will limit future growth…

In 1980, China instituted a one-child policy in an effort to control population growth. But the 1980 announcement was really a matter of formalizing an existing policy. The Chinese have a cultural preference for boys over girls. So, when the one-child policy was implemented, the Chinese used pre-natal tests to determine sex and then aborted the girls.

At a more crude level, families kept buckets of water next to birthing beds so that if a girl was born she could be drowned immediately. It is estimated that between 20 million to 30 million baby girls were killed this way, resulting in an equivalent surplus of men over women.

These excess men will never find wives in China. Since women can be selective about husbands, it follows that the 30 million excess men will be the least talented and poorest in Chinese society. This cohort is highly prone to antisocial behavior, including alcohol and drug abuse and violence.

The demographic time bomb is now detonating. The missing children from thirty or forty years ago are the missing prime age workers of today. The Chinese economy grew strongly from 1995 to 2010, mainly because of a rural-to-urban migration and the rise of assembly-style manufacturing jobs.

Now the migration is over, the assembly-style jobs are moving to Vietnam and India, and China’s lack of high-value-added technology has left it stuck in the slow-growth middle-income trap. China might have overcome this through the sheer weight of low-wage workers, but they don’t exist.

China will lose over 100 million workers in the next ten years due to aging, retirement and the absence of working-age replacements. China is now trying to undo the demographic damage with a new “three-child policy.”

But, it’s too late. Demographic disasters take thirty years or more to create and they can take thirty years or more to cure. For the next thirty years, China’s worker shortage will be a drain on growth.

Tyler Durden Sat, 07/10/2021 - 21:30
Published:7/10/2021 8:47:25 PM
[Markets] Biden Targeting Class I Rail Mergers Biden Targeting Class I Rail Mergers

By William C. Vantuono, of Railway Age

President Biden on July 9 will sign an Executive Order directing federal regulators to “confront consolidation and perceived anticompetitive pricing” in the railroad and ocean shipping industries, among many others, “as part of a broad effort to blunt the power of big business to dominate industries."

“As part of a sweeping Executive Order expected [July 9], the Administration will ask the Federal Maritime Commission and the Surface Transportation Board to combat what it calls a pattern of consolidation and aggressive pricing that has made it onerously expensive for American companies to transport goods to market,” the WSJ said in its story, Biden to Target Railroads, Ocean Shipping in Executive Order, which cited an unidentified person familiar with the situation.”

“The Administration says the relatively small number of major players in the ocean shipping trade and in the U.S. freight rail business has enabled companies to charge unreasonable fees,” the WSJ said. ”In the case of the seven Class I freight railroads, consolidation has given railroads monopoly power over sections of the country where theirs are the only freight tracks, the person said.”

“The call to crack down on ocean carriers and freights is one facet in a multipronged executive order that will be one of Mr. Biden’s most sweeping unilateral moves on economic policy to date,” the WSJ noted. “The Democratic president, who has stacked his Administration with a cohort of advisers skeptical of corporate power and market dominance, is trying to blunt big business while introducing more competition in areas across the economy. The result, the Administration contends, will be more leverage for smaller companies and individual workers, and less ability for a few huge companies to dictate terms for the economy at large.

“In its actions targeting the transportation sector, the Administration is highlighting what it calls the dangers of consolidation. Three alliances control 80% of the shipping market, the person familiar with the executive order said. In 2000, this person said, the 10 largest shipping companies controlled just 12% of the oceangoing freight business. The White House says that dominance has come at a cost for American exporters, allowing the companies to extract higher rates and to exercise greater power to charge fees like those for demurrage, essentially late fees on shipments that aren’t picked up from freight terminals on time.”

“A wave of combinations in the 1990s left the U.S. with just seven Class I freight railroads, though STB merger rules in place since the Administration of President George W. Bush have effectively prevented further consolidation,” the WSJ noted. “Still, the White House argues that the current state of the industry leaves railroads with effective duopolies in much of the country, and monopolies at the local level, meaning customers have little leverage to negotiate prices. The Executive Order will encourage the STB to take up a longstanding proposed rule on so-called reciprocal or competitive switching (what the Association of American Railroads calls “forced access” – Editor), the practice whereby shippers served by a single railroad can request bids from a nearby competing railroad if service is available. The competitor railroad would pay access fees to the monopoly railroad, but could win the shipper’s business by offering a lower price.

“The STB proposed a competitive switching rule in 2016 but hasn’t yet acted on it. Any movement would likely trigger a major fight with freights and the … AAR, which has long opposed the policy. ‘The consolidation brought about much-needed rationalization in the system 25 years ago, but the net result is a lot of shippers who are subject to a market-dominant railroad,’ said a government official briefed on the White House’s proposal for the STB.

“The White House will also encourage the STB to consider proposals that would compel railroads to offer rates that would better enable shippers to cobble together routes across competing rail networks to lower their costs, and to more readily bring cases to the STB to challenge railroads’ rates, this person said.”

The Wall Street Journal cited the dispute over Gulf Coast passenger rail service involving Amtrak, CSX and Norfolk Southern, and the competition between CN and Canadian Pacific to acquire Kansas City Southern, both of which the STB is dealing with “as the regulator faces one of its busiest workloads in years.”

* * *

Commenting on the pending Executive Order, Railway Age Capitol Hill Contributing Editor Frank N. Wilner, whose new book, Railroads and Economic Regulation, will be published in late summer by Simmons-Boardman Books, observed:

“The STB, as an independent regulatory agency (and that goes, as well, for the Federal Maritime Commission) is under no statutory obligation to follow Executive Orders. However, neither the ICC nor STB have ever challenged an Executive Order. In fact, as a practical matter, the actual independence from the Executive Branch is more myth. This is so for three reasons:

“One, the President names a permanent STB chairperson—the STB CEO who controls the docket and, in theory, is expected to share the objectives of the President. In fact, on three occasions since Congress gave that authority to the President in 1969, the President has demoted two chairpersons. In 1985, Republican Reese A. Taylor was demoted by Republican President Ronald Reagan in favor of Republican Heather J. Gradison; and in 1995, Democrat Gail C. McDonald was demoted by Democratic President Bill Clinton in favor of Democrat Linda J. Morgan.

“Two, an STB member seeking a second term must be nominated by the President. Thumbing one’s nose at an Executive Order is not a strategy for renomination. 

“Three, while Congress determines STB budgets, the Executive Branch Office of Management and Budget—and the President through a bully pulpit—has meaningful sway in that process.

“Perhaps former Sen. George A. Smathers (D-Fla.) said it best in 1957 in reference to STB predecessor Interstate Commerce Commission: ‘The Interstate Commerce Commission is independent of everybody, except the President, the Congress, the courts, the Civil Service Commission, the Bureau of the Budget, and public opinion.’

“While the statute is clear that the STB alone has authority to approve or reject rail merger applications, the 1995 ICC Termination Act (ICCTA) instructed the STB to give ‘substantial weight’ to competition-related recommendations of the Department of Justice Antitrust Division. Thus, the Executive Order is, in this regard, merely parroting the ICCTA. In fact, the STB was transparent in making clear in its Canadian Pacific-Kansas City Southern voting trust decision the views of the DOJ as to voting trusts.

“Of historical note, in 2001, after an appellate court upheld the STB’s 15-month merger moratorium, allowing it to construct its New Merger Rules—resulting in BNSF and CN voluntarily scuttling their proposed merger, I quoted BNSF CEO Rob Krebs as saying, ‘Several years ago, when the ICC was on its last legs, I favored shifting jurisdiction over railroads to the Justice Department. Today, I wish I’d worked harder to make that happen.’

Tyler Durden Fri, 07/09/2021 - 09:53
Published:7/9/2021 9:05:20 AM
[Markets] Twitter Flags Foreign Policy Expert Tweeting Criticism Of China Twitter Flags Foreign Policy Expert Tweeting Criticism Of China

Authored by Jonathan Turley,

We have previously discussed Twitter’s robust censorship program that repeatedly has been denounced for bias in taking sides on scientificsocial, and political controversies. The problem is that, when you have an army of censors with their thumbs on buttons to flag or bar comments, the tendency is ever expanding levels of censorship. Indeed, much censorship is not thumbless through automatic systems to remove certain comments. That was evident this week.

Not only did Twitter flag a picture of a veteran wishing the country a Happy Fourth of July (presumably due to his combat scars) but it flagged New Zealand foreign policy expert Anne-Marie Brady who mocked the Chinese government.  The incident is particularly notable after Twitter recently admitted to censoring criticism of India’s government.

Brady is a professor at the University of Canterbury and an authority on the Chinese regime. Like many, Brady mocked the recent Communist Party’s over-the-top celebration of Chinese President Xi Jinping. She soon found that some of her tweets were “unavailable,” Twitter’s version of being “disappeared.”

What happened next is all-too-familiar: nothing. Brady tried to get someone to respond to the censorship and received no answer. Indeed, Twitter makes it extraordinarily difficult to reach anyone on such issues. While professing commitment to transparency, the company is notorious for being unresponsive and closed to criticism, even efforts to learn why actions have been taken on such tweets. It was only after Edward Lucas, a journalist for the Times of Britain, inquired that the company finally responded to him rather than Brady

Her account was then restored without an apology or acknowledgement. Brady dryly noted “Seems like @Twitter may have briefly forgotten they don’t work for Xi Jinping.”

The assumption is that this is the work of Chinese agents who submit a torrent of complaints to trigger a flagging. Various groups have used the same technique to cancel opposing views. Twitter does nothing about it. Rather than have a presumption in favor of free speech, it automatically flags material pending proof that it is worthy of publication. That often means that it does not disagree with Twitter’s own view of certain sensitive subjects. Absent media coverage, the Chinese would likely have succeeded in silencing Brady with the help of Twitter.

As discussed earlier, members of Congress are now pushing for public and private censorship on the internet and in other forums. They are being joined by an unprecedented alliance of academics, writers and activists calling for everything from censorship to incarceration to blacklists. For example, an article published in The Atlantic by Harvard law professor Jack Goldsmith and University of Arizona law professor Andrew Keane Woods called for Chinese-style censorship of the internet, stating that “in the great debate of the past two decades about freedom versus control of the network, China was largely right and the United States was largely wrong.”

Much of the effort by politicians and activists has been directed at using Big Tech to censor or bar opposing viewpoints, seeking to achieve indirectly what cannot be achieved directly in curtailing free speech. Congress could never engage in this type of raw content discrimination between news organizations under the First Amendment.

However, it can use its influence on private companies to limit free speech.

The move makes obvious sense if the desire is to shape and control opinion — the essence of state-controlled media. Controlling speech on certain platforms is meaningless if citizens can still hear opposing views from other sources.

You must not only control the narrative but also eliminate alternatives to it.

Tyler Durden Fri, 07/09/2021 - 05:00
Published:7/9/2021 4:04:45 AM
[Markets] Doug Casey On Why Most People Outsource Their Thinking To "The Experts" Doug Casey On Why Most People Outsource Their Thinking To "The Experts"

Via InternationalMan.com,

International Man: Thanks to the internet and modern technology, the average person can now access information on almost any topic with relative ease.

But it seems people are doing less critical thinking than ever.

Why do you think that is the case?

Doug Casey: Technology is a double-edged sword when it comes to critical thinking. It’s paradoxical that something so associated with knowledge and research is often at odds with wisdom. I think that’s partly because today’s technology offers instant answers—no thought required. You can go to Google, and an answer is at your fingertips. It doesn’t require research or thought—the answer just appears. It subtly obviates the need for contemplation.

Let’s first define what critical thinking is. I’d say it’s the process of questioning the validity of the assumptions and the accuracy of the data for everything. A critical thinker never assumes or takes anything for granted.

We can’t always be sure what the quality of a googled answer is, but most people assume it’s honest and correct. However, considering the nature of the people who run Google, Wikipedia, and websites of that nature, I prefer to assume that the quality of many answers is low.

In fact, the volume of data available through computer technology is so great that there’s a tendency to confuse all that quantity with quality. When the world, and the data stream, is moving very quickly, it seems you have less time to contemplate its meaning. You can get lost in it and lose perspective.

It reminds me of a scene out of the original Rollerball movie from the 1970s with James Caan. Books no longer exist. All knowledge is contained in an all-powerful computer. The scientist in charge of the computer is talking to another character and says, “Yeah, for some reason, we’ve lost the 13th century,” and he kicks the machine. It’s the only source of what used to be in millions of books.

We’re almost in a situation where everything comes from one source—basically Google—rather than researching books, getting answers from a dozen points of view, and thinking critically about their meaning. Sure, Google gives you many references. But how many others have been “cancelled?” How many considered politically incorrect are buried as deep as the 13th century in Rollerball?

International Man: Whether it’s finance, economics, politics, and many other areas, it seems almost everywhere you look, people are looking to the so-called “experts” to tell them what they should think about a given topic.

Where does this come from? How did most people come to trust the “experts”?

Doug Casey: As the amount and complexity of data grows, it’s natural to want an expert to sort it out for you. But experts are known for knowing a lot about a little, not for having broad, integrated knowledge. People understandably look to them to make decisions for them. That’s foolish. Better that you go to a philosopher than a technician when the time comes to decide on something important. But philosophers are in short supply today, so people listen to celebrities.

A celebrity is someone who’s famous for being well-known. People automatically assume that famous people must know something they don’t. The public doesn’t know much, but they know more about some celebrities than they do about their own friends, neighbors, and relatives. And that engenders trust. People trust a celebrity who endorses something he knows nothing about because they think they know him. It’s another consequence of mass media. The average person is much more likely to accept Google’s, or Wikipedia’s, or some celebrity’s opinion than to research something themselves. Critical thinking is hard work, and questioning authority doesn’t usually make you any friends.

I see it in the newsletter business all the time. Somebody who’s glib and can present well can be transformed into an instant expert, even though he knows very little—as long as he’s good at presenting and gaining people’s confidence. We see that with the talking heads on TV as well. They’re really just actors who don’t know anything, but they’re good-looking, well-promoted, and have a nice social veneer, so people trust them.

It makes no sense, and neither does the public’s obsession with credentials. Something like a third of Americans have a college degree—which today only means they’ve spent a lot of money to be indoctrinated over four years. It’s no guarantee of expertise—forget about wisdom or judgment. Over 13% of graduates have master’s degrees or PhDs. That doesn’t prove they’re critical thinkers.

In most cases, those degrees prove little, other than the recipients think it’s a good idea to spend a lot of time and money for a credential. Credentials should be suspect; critical thinkers don’t assume they’re worth anything. They’re often a camouflage for mediocrity. In today’s world, their main value is to intimidate by making the public assume you know what you’re talking about. They trust the credential, the way they’ve come to trust Google or Wikipedia.

People are comforted to believe that if they don’t know the answer, someone with a degree does. And they should be in charge. I suspect most higher degree holders think they should be in charge, too. It’s a bad tendency across the board.

International Man: The COVID hysteria has only accelerated this trend.

Throughout the pandemic, most people believed the “health experts” robotically and even attacked those who brought forth logical information and data which challenged the established narrative.

What is your take?

Doug Casey: The media and the Establishment have selected a set of credentialed health experts, promoted them, and told the public that they know what they’re talking about. Take Anthony Fauci—he has lots of credentials. Like everyone high up in government agencies, whether or not he was ever a competent scientist, you can be sure he’s a very competent political operator. And apparently quite wealthy, with positions in companies under his purview.

In any event, he’s a life-long government employee. A professional bureaucrat, previously invisible but now elevated from nowhere to near-dictatorial control.

Meanwhile, there are people that have written numerous peer-reviewed papers, done serious lab work, and are currently dealing with patients with boots on the ground whose views are cancelled because they disagree with Czar Fauci.

The average person never hears about them, and when they do, they’re cancelled by the mass media. The perfect example of this is the use of hydroxychloroquine and ivermectin in countering the COVID virus—apart from the fact the supposed pandemic itself is greatly overrated.

Anyone who’s “vaccine hesitant” or—God forbid—a COVID denier is painted as anti-science, a conspiracy theorist. My view is that there are legitimate reasons not to take any experimental vaccine. Especially when there’s a possibility the supposed cure is much more dangerous than the disease itself.

I’ve met exactly one person who’s gotten symptomatic COVID. He was sick for two days with the flu and fully recovered. So where are all the dead bodies? The casualties have strictly been very old people, very sick people, or very fat people. Occasional anomalous young, healthy, slim people die from it—assuming it was the actual cause of death—just the way young, healthy people occasionally die from the ordinary flu. So, is it a conspiracy? I don’t know. I’m just confident this era will go down as one of the most stupid and embarrassing in world history.

International Man: Politicians, bureaucrats, and the intelligence community are obvious members of the ruling class that seek power and control.

Are the “health experts” new members of the political ruling class?

Doug Casey: Sickness and fear of death get the public’s attention even more than sex and money. And, for what it’s worth, the public has been prepped for decades by loads of sci-fi books and movies featuring a virus wiping out most of humanity. And not without cause. In fact, the chances are overwhelming that biological warfare will be a major element in any future conflict with China.

Telling people that they’re going to get sick and die, endangering their loved ones, is a powerful motivator to get them to do as they’re told. Still, COVID is 90% hysteria. If someone is old, obese, or sick, they might want to isolate themselves, but it’s insane to lock down the whole planet to unsuccessfully safeguard a few people in danger. And, it’s equally insane for everyone to take risky vaccines against a non-threat.

Let the people who are worried risk getting the vaccine; although, there seems to be some serious question about how efficacious the vaccine itself is.

International Man: Where do you think this will all lead, and what are the implications?

Doug Casey: I’m afraid it’s all leading toward a many-tentacled police state.

The people who run the State have control of the money supply, the economy, the education system, and the media. They’ve gotten control of the medical system. They’re replacing traditional religion, as well, with what amounts to new secular religions; that’s an interesting twist.

Christianity is on its way out. It’s already a dead duck in Europe and is hanging on in the US only among the lower classes. The elite no longer believes in traditional religion. It’s being replaced by updated versions of Marxism, which was always a secular religion, even though it claimed to be “scientific”—like Greenism and Wokeism.

The bad guys—by which I mean the statists and collectivists—have mounted a war on many fronts, and they’re succeeding mightily. They’ll use the Greater Depression to create a genuine police state—a kinder and gentler version of the old USSR, East Germany, but with a higher standard of living and more TV channels.

The ruling class will blame the collapse of the economy on COVID. As the depression drags on, they’ll also blame it on global warming, not their stupid economic policies.

COVID and the Global Warming scam are wonderful deus ex machina devices to allow the bad guys to dodge the blame for what’s coming.

Marxism, statism, and collectivism will once more evade the blame for the consequences of their idiotic economic ideas and evil ethical notions. That’s largely because critical thinking has vanished from the West.

*  *  *

The 2020s will likely to be an increasingly volatile time. More governments are putting their money printing on overdrive. Negative interests are becoming the rule instead of the exception to it. One thing is for sure, there will be a great deal of change taking place in the years ahead. That’s precisely why legendary speculator Doug Casey and his team released an urgent new report titled Doug Casey’s Top 7 Predictions for the Raging 2020s.

Tyler Durden Thu, 07/08/2021 - 22:20
Published:7/8/2021 9:32:35 PM
[Markets] Taibbi: Is "Critical Race Theory" The Wrong Term? Taibbi: Is "Critical Race Theory" The Wrong Term?

Authored by Matt Taibbi via TK News,

The headline for Wednesday’s CNN feature said it all: The critical race theory panic has White people afraid that they might be complicit in racism

A quick note about headline style. Some time ago, the word came down in media circles that we should begin capitalizing the “B” in “black.” Trying to be forward-thinking, I went along with it. I remember New York Times national editor Marc Lacey explaining, “Some have been pushing for this change for years… They consider Black like Latino and Asian and Native American, all of which are capitalized.”

In that same article, “Why We’re Capitalizing Black,” the Times quoted W.E.B. DuBois, who once said using a small “n” for “Negro” was a “personal insult,” and that when the Times changed their style to agree with him, it was an “act of recognition of racial self-respect.” They added that “white doesn’t represent a shared culture and history in the way Black does, and also has long been capitalized by hate groups.”

The Columbia Journalism Review reiterated the concept in “Why we capitalize ‘Black’ (and not ‘white’),” saying, “Black reflects a shared sense of identity and community. White carries a different set of meanings; capitalizing the word in this context risks following the lead of white supremacists.”

Less than a month after these pieces, the Washington Post came out with, “Why ‘White’ should be capitalized, too,” arguing: “No longer should white people be allowed the comfort of this racial invisibility; they should have to see themselves as raced.”

In a flash the bulk of the business dropped their righteous reservations about using Stormfront style guide, and began employing capital Ws all over. I’ve since gone back to lower-casing everyone. People just make these things up on the fly, reveling in the overthrow of prevailing attitudes, even if the overturned standards are ones they themselves set ten minutes ago. It’s fashion, not politics.

Getting back to CNN’s story about the “panic” that “has White people afraid”: Republican politicians, mostly at the state level, are in the midst of an all-out, hair-on-fire campaign against “Critical Race Theory,” with legislators in 24 states attempting to introduce bans of its teaching. It’s become the main front in the culture war, and the Republican Party — which for decades now hasn’t yet met a political opportunity it can’t find a way to fuck up — is losing. Even a perfunctory glance at laws passed in Tennessee, Iowa, Oklahoma, Idaho and Texas reveal they’re making a mess of a response to a phenomenon they don’t understand.

Take the Texas law. In what’s supposedly an effort to fight a movement hostile to speech rights and rife with irrational orthodoxies, the Lone Star State is responding with dumber versions of the same thing. Their law includes broad mandates against “being compelled to discuss a particular current event or widely debated and currently controversial issue of public policy,” while also requiring teachers to present controversies “without giving deference to any one perspective.” Nearly all the Republican laws share this quality of imposing draconian bans on what they perceive to be elements of CRT, without really defining what CRT is. They don’t know what they’re fighting, so their solutions look like insane overreactions — like smashing at a water bug with a hammer and missing over and over.

The Republicans’ inability to define their target is a problem because conventional wisdom’s official position on “critical race theory” is that it doesn’t exist. The nebulous academic concept is said to be just a phantasm, a fascist fantasy. A recent Sunday edition of the Washington Post put it this way:

The challenge for educators amid the critical race theory backlash: How do you fight hot air?

There are two mainstream poses on this topic. One shrugs in would-be bewilderment, as if not understanding what conservatives could be upset about. The other points an accusatory finger back and insists Republicans cooked up the term as a stalking horse to prevent teachers from telling the truth about American racism. “Critical race theory,” said the Washington Post’s Colbert King, “is simple truth-telling.”

The war over “Critical Race Theory” in this sense has become a political marketing campaign that’s uniquely double-edged in its cynicism. Democrats are pretending they don’t know what the fuss is all about. Republicans are pretending there isn’t a dog whistle in their backlash campaign. At the center of it all is the concept itself, which does exist but is much broader, and both more interesting and more frightening, than the narrow race theory that has Republican politicians in maximum wig-out mode.

Two years ago, writer Wesley Yang penned a series of tweets about the “new language of power throughout the non-profit sphere,” giving it a name: the “Successor Ideology.” The author of The Souls of Yellow Folk created an umbrella term to explain everything from whatever the hideous moniker “cancel culture” means to purges of classics and STEM disciplines in universities, to the new move toward segregated “affinity spaces,” to “intent doesn’t matter,” to the spread of workforce training sessions that ask white employees in both the public and private sectors to focus on things like “undoing your own whiteness,” to a dozen other things.

What Yang went on to describe in a series of articles and appearances isn’t narrowly about race, or trans issues, or feminism, or American history, but a much wider concept that argues that our foundational notions about everything are wrong and need to be overturned.

Conversely, a wide variety of oppositional theologies, of varying degrees of eccentricity, have become allied in a unified front of negation:

The movement Yang describes is strategically brilliant and substantively moronic, a perfect intellectual killing machine. The Successor Ideology has blown through institutional America with great speed, coming to dominate everything from academia to the news media to Silicon Valley almost overnight.

Attempts by conservatives or even critics on the left to question any of this are usually described in news accounts as efforts to clamp down on something uncontroversially right and necessary, e.g. “educational discussions about race.” This ignores the fact that the movement seems also to be about things like ending blind auditions for orchestra applicants, or redefining mathematics to discourage a focus on “getting the right answer,” to classics teachers canceling the classics, and many other bizarre things.

In some instances it pleases intellectuals to argue that all of these things are and must be connected — that the opponent of police brutality must also stand in opposition to everything from the Harper’s Letter to the young adult novels of Amélie Zhao and EE Charlton-Trujillo. Sometimes, as in the case of the response to latest Republican backlash, the argument is not only that none of these things are connected, but that there’s nothing to connect. Which view is right?

Yang, whose new Substack site Year Zero launches tomorrow (you can find it here) is one of the few writers who takes the time to explore these issues without making an explicit project of howling in outrage about them. He outlines the “Successor Ideology” with a kind of awed detachment, like a scientist sent to describe a revolting but admirably destructive insect species. I asked him to outline his theory of the “Successor Ideology,” and explain why media discussion of it has been handcuffed by the public’s association of it with right-wing backlash politics.

Our discussion, edited for length:

TK: You’re credited with coming up with the term successor ideology. What was the genesis of that?

Wesley Yang: I was discussing the subject in Twitter mentions, and it just made sense. On the spot, I tweeted that we have an authoritarian utopianism that’s emerging on the left, and we need a name for it. There’s a range of different words people use to describe different parts of the elephant. Identitarianism; social justice politics; cancel culture; wokeness; postmodern neo-Marxism, which is the Jordan Peterson version of it; cultural Marxism.

Some of these terms have a spoiled progeny to them, so you want to avoid them for that reason. Some of them just name different parts of it without encompassing the whole thing. Cathy Young proposed KenDiAngeloism [eds. note: referring to “antiracist” authors Ibram Kendi and Robin DiAngelo. Some attribute the term to John McWhorter] which I think is actually quite useful, but that that only captures one element of it. There’s the race identitarianism. Then there’s also the gender-identitarianism, and they go together. Then there’s a radical feminist wing to it. Then there’s also a transgender ideology wing to it. There are internal tensions behind these movements, but the theory is, is that they all move together in concert.

This is an excerpt from today’s subscriber-only post. To read the entire article and get full access to the archives, you can subscribe for $5 a month or $50 a year.

Tyler Durden Thu, 07/08/2021 - 18:20
Published:7/8/2021 5:32:59 PM
[Politics] Whistleblower reveals Albuquerque Public Schools reading list is almost all about race, queerness, or revisionist American history In the public schools in Albuquerque, New Mexico, the indoctrination of our children is in full swing. A whistleblower revealed the recommended reading list for social studies and, according to James Lindsay, . . . Published:7/8/2021 2:30:32 PM
[Entertainment] Washington Post hardcover bestsellers A snapshot of popular books. Published:7/7/2021 8:13:07 AM
[Markets] Dershowitz Predicts Charges Against Trump Org's CFO Will Be Tossed Dershowitz Predicts Charges Against Trump Org's CFO Will Be Tossed

Authored by Tom Ozimek via The Epoch Times,

Harvard Law professor emeritus Alan Dershowitz says he believes federal tax fraud charges filed in New York City against The Trump Organization’s longtime finance chief will end up being dismissed.

“You can’t get a city district attorney indicting somebody for failing to pay federal income taxes when the IRS hasn’t even gone after him,” Dershowitz said in a July 3 interview with Newsmax.

“One of the charges, a major charge, is grand larceny against the United States government.

“That shows the extent to which they are prepared to stretch existing law and the Constitution to give them authority over federal taxes. It’s absurd.

Allen Weisselberg, Trump Organization CFO, leaves Manhattan Criminal Court after his arraignment in State Supreme Court in Lower Manhattan on July 1, 2021. (Michael M. Santiago/Getty Images)

On July 1, The Trump Organization and its chief financial officer, Allen Weisselberg, were charged in what New York prosecutors called a “sweeping and audacious” tax fraud scheme in which Trump’s company and Weisselberg allegedly cheated the state and city out of taxes by conspiring to pay senior executives off the books by way of fringe benefits, such as apartment rent and car payments.

Prosecutor Carey Dunne said in court that the alleged scheme was “orchestrated by the most senior executives” at the firm and got “secret pay raises at the expense of state and federal taxpayers.”

Weisselberg and attorneys for The Trump Organization have pleaded not guilty.

Ahead of the unsealing of the criminal indictment on July 1, The Trump Organization criticized Manhattan prosecutors for what they claimed was a partisan criminal investigation designed to hurt Trump politically. In a July 1 statement, The Trump Organization said the probe “is not justice; this is politics.”

Dunne pushed back on the claim, saying that “politics has no role in the jury chamber, and I can assure you it had no role here.”

Alan Futerfas, a member of The Trump Organization’s defense team, disagreed.

“I believe the political forces driving today’s events are just that. It’s political, politically driven, notwithstanding the statements by my colleague at the DA’s office in court today,” Futerfas said.

Weisselberg himself has been accused of defrauding the federal government—along with New York state and New York City—of more than $1 million in unpaid taxes and tax refunds for which he was ineligible.

The most serious charge against Weisselberg, grand larceny, carries a sentence of between 5 and 15 years behind bars.

Attorney Alan Dershowitz, then member of President Donald Trump’s legal team, speaks to the press in the Senate Reception Room during the Senate impeachment trial at the Capitol in Washington on Jan. 29, 2020. (Mario Tama/Getty Images)

Dershowitz told Newsmax he believes the charges against Weisselberg, who has intimate knowledge of The Trump Organization’s financial dealings, are a pressure tactic to get him to testify against Trump’s company.

“If he doesn’t turn, they will sentence him to prison, probably will not be a long prison term. Generally for crimes like this relating to a relatively small amount of taxes, there’s either no prison time or a small amount in prison time,” Dershowitz told the outlet.

“That’s the goal, to try to get people like him to testify against the higher-ups,” Dershowitz said.

“The ultimate goal here obviously, is Donald Trump. And the question is, will they get people to turn on him?”

This comes as Trump has been discussing a possible comeback run for president in 2024.

Tyler Durden Tue, 07/06/2021 - 23:00
Published:7/6/2021 10:06:31 PM
[Markets] Weimar Los Angeles: "You Can't Go Home Again" Weimar Los Angeles: "You Can't Go Home Again"

Authored by Roger Simon, op-ed via The Epoch Times,

When I saw video online of Antifa attacking demonstrators in front of the Wi Spa in Los Angeles’ Koreatown, I realized why, in the immortal words of Thomas Wolfe, “You Can’t Go Home Again.”

But unlike Wolfe, who, in his famous novel, was loath to return to his native Asheville, North Carolina, I am in the south, resistant to returning to California where I lived most of my adult life.

It was the homeless coming down in the morning from Mulholland Drive on the way to free food and not-so-free drugs, making even walking the dog a perilous activity, that had initially propelled our family out—at least in part.

But things have apparently only gotten worse since, considering what transpired at the Wi Spa. That was a place I knew because, in the eighties and nineties and into the first few years of this century, I had become an occasional habitué of LA’s Korean spas, excellent places to relax in the hot water, although I can only recall patronizing Wi once.

Nothing happened there then remotely similar to what occurred the other day—a man walking buck naked into the women’s only side, declaring his “gender identity” female, while not bothering to hide the contrary evidence in front of the assembled biological women and their children.

Later, a black woman expressed her justifiable anger at this display before management only to be herself confronted by a particularly obnoxious “woke” individual defending the right of the gender dysphoric to freak out kids. (This is also on video at the link, if you haven’t seen it.)

The next chapter had defenders of traditional human privacy (aka “normals” as my friend Kurt Schlichter calls them) protesting in front of the spa when they are confronted by the violent Antifa psychos who are apparently immune to any kind of serious prosecution by the district attorneys of Los Angeles, Portland and Seattle or, for that matter, our Department of Justice.

What are we to make of this other than it is all too predictable by now?

America, in its blue states at least, and they are doing their best to spread the poison elsewhere, has turned us into a land of the “woke” where near-total conformity rules the day, the populace terrified to speak up against the real intention behind this basic Marxist behavior—the destruction of the family as we know it.

When you look at the silent faces standing in the lobby of the Wi Spa while the “woke” spokesman pontificates, you see this fear and all you can say is “Welcome to Weimar Los Angeles.”

Indeed, the direction of our republic is eerily similar to that of Weimar, Germany, in everything from social mores to inflation.

One of the more interesting books that gives a sense of what it was like then is—doubly apropos since we are in the middle of Wimbledon—“A Terrible Splendor” about the epochal 1937 Davis Cup duel between America’s Don Budge and Germany’s Baron von Cramm—a handsome gay man who was under the thumb of the Gestapo at that time for his proclivities so that he would win against the Yankee.

Meanwhile, license prevailed for others in 1930s Berlin beyond anything we would even conceive of today.

What the self-described “progressives” of LA and elsewhere have to learn is this is not about whether you are pro or anti gay. There are plenty of gays on the right these days. Or how you feel about the transgendered. Personally, I’m live and let live.

It is about something much more basic we all learned in school when school really was school and not a Cultureal Revolution indoctrination camp. I’m going to put it in caps, lest it be forgotten:

RESPECT THE RIGHTS OF OTHERS!

Disrespecting others is what Antifa, BLM and virtually everyone else on the left is doing now at a level unknown since the Weimar Republic.

We all know how that ended.

Tyler Durden Tue, 07/06/2021 - 22:20
Published:7/6/2021 9:38:02 PM
[Markets] A Few Things About Reinforced Concrete High-Rise Condos A Few Things About Reinforced Concrete High-Rise Condos

Authored by Charles Hugh Smith via OfTwoMinds blog,

There is a downside to steel reinforcing bars: they rust.

The second most remarkable thing about the sudden collapse of the Florida condo building was the rush to assure everyone that this was a one-off catastrophe: all the factors fingered as causes were unique to this building, the implication being all other high-rise reinforced concrete condos without the exact same mix of causal factors were not in danger.

Before we accept this conveniently feel-good conclusion, there are a few things we should consider about reinforced concrete high-rise condos.

1. This may seem too obvious to be important, but concrete is a heavy material. Fill a 5-gallon bucket with wet concrete, let it cure (harden) and then pick the bucket up--if you can.

2. Conventional concrete is not water-proof; it absorbs moisture. Construct a concrete wall against an excavated cliff of damp earth saturated with underground moisture and the concrete wall will be damp unless it is sealed essentially perfectly--no easy task.

3. Steel reinforcing bars add specific kinds of strength to concrete, which is rather brittle in its conventional unreinforced state: tilt a slab of unreinforced concrete on a large, sharp rock and hit the elevated half of the slab with a sledge hammer, and the slab will crack on the (fulcrum) rock.

4. Roman aqueducts, bridges and buildings are still standing 2,000 after completion because they do not contain reinforcing steel bars, a.k.a. rebar. Roman concrete developed its remarkable durability and strength from its unqiue mix of aggregates--the rocks and sand-like materials that are mixed with cement to form concrete.

Why are these 2,000 year old structures still standing despite lacking reinforcing steel bars?

5. There is a downside to steel reinforcing bars: they rust. The porousness of conventional concrete and steel's propensity to rust in the presence of moisture become a structural problem in the making, for rust expands. As previously noted, concrete is rather brittle, and so a rusting rebar will crack the concrete from the inside. When the broken concrete piece falls off, this is called spalling.

When concrete spalls off, exposing the rusting rebar, this accelerates the rust by exposing it to additional moisture and oxygen in the air. Seawater and salt-laden air accelerate rust. There are ways to make rebar rust-resistant and concrete water-resistant, but these cost more and are therefore not conventional.

Given enough time, rebar rusts away, weakening the concrete in that part of the structure. This part of the structure becomes a weak point and potential point of failure, for as noted previously, concrete is very heavy. (Add a rooftop pool filled with water, and that adds even more weight. Fill a 5-gallon bucket with water and carry it, if you can.)

6. Given that this type of damage can be hidden inside the structure, it's non-trivial to identify it via visual inspections. If concrete spalling and rusting rebar are visible, it's non-trivial to assess the weakness this creates.

7. Pre-stressed reinforced concrete beams are made in factories, but the rest of the concrete is poured on-site and is subject to sloppy or hasty work. For example, if the rebar is too close to the surface (i.e., not embedded deep enough), then it is more readily reached by moisture and rusts/spalls more rapidly. Voids in concrete are also common, and post-completion patches may not offer much resistance to water.

8. Repairing serious structural damage in a reinforced concrete high-rise is a special skill, and few contractors have the requisite experience (and liability insurance) to do this work. As the insurer, how do you cover the possibility, however unlikely, that the repair uncovers further damage or fails to strengthen the structure sufficiently?

9. Reinforced concrete high-rises built decades ago to the building codes of that time may not be up to snuff should ground settlement exceed modest limits or structural weaknesses develop. Age and water are enemies of all structures, but multi-story buildings are especially at risk.

10. The value of units inside reinforced concrete high-rise condos will adjust to the results of inspections which reveal structural weaknesses, as the cost of repairs must be factored in. Unrepaired structural weaknesses may impair the creditworthiness of the units, limiting owners' ability to borrow the money needed to pay for potentially burdensome repairs.

11. The cost of repairing serious damage could easily exceed the original cost of the entire building, due to the risks and unknowns regarding the seriousness of the damage and the liabilities of every entity involved in the assessment, plans, insurance and execution of the repairs.

12. Owners who cannot afford the repairs or whose initial purchase cost was modest may elect to (or be forced to) abandon their unit, surrendering their equity (which may be severely impaired by the uncertainties generated by the knowledge of structural weaknesses). These abandoned units may well be difficult to sell, given the unknown total cost of repairs, and so they would revert to the control of the condo association, whcih would then be responsible for funding the unit's share of the repair bill.

If enough owners abandon their units, the remaining owners may find the threshold of repair costs per unit far exceeds the market value of the units once the building is repaired. In this scenario, the only option left is to surrender the building to demolition to eliminate the liability of it collapsing and damaging other structures or injuring others.

If that scenario seems farfetched, consider the ease of underestimating the costs of repairing structural damage in high-rise buildings, the liability exposure of all parties and the risks and unknowns intrinsic to the multi-stage process of repair.

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Tyler Durden Tue, 07/06/2021 - 14:25
Published:7/6/2021 1:34:55 PM
[Markets] One For The History Books: A New Control Regime In Oil One For The History Books: A New Control Regime In Oil

By Larry McDonald, author of The Bear Traps Report

You have to give pause when you think that the only news in markets that mattered today is OPEC+ and what the next move is by them. We live in a world with growing demand, shrinking supply. ESG matters, climate change, inflation, Iran, etc, mean nothing today in the global crude market.  All people want to know is what OPEC+ is going to do next. So clearly IT is an important issue for the market before we tackle anything else.

The sticking point in the talks – the UAE (United Arab Emirates) want a higher baseline after large-scale CAPEX investments in recent years’ production capacity and wants to boost production by 700mbd. On the other hand, the Saudis do not want to offend the Russians and other players by adjusting the UAE baseline.

  • *BRENT CRUDE SURPASSES $77 PER BARREL FOR FIRST TIME SINCE 2018 – Bloomberg

Gasoline, Summer Driving Season

After the U.S. handed far more control over the price of oil to the Saudis and Russians, consumers are paying the price. The White House wants this problem fixed by the time the 2022 midterm elections come around. Brent now up close to 116% since the eve of the 2020 U.S. Presidential election.

We are told OPEC+ is proud their “control of price” regime is back. A mere year ago, it was hard to grasp that they had any control after a 10-year hiatus as the dictator of pricing. We feel they canceled today’s planned meetíng just to save the pain of having to create more anxiety in the market when they say they could not land on a solution. Frankly, the solution likely lies behind closed doors with a few parties and not the whole group. That is likely what is happening. But there are a bunch of people out there that say they have ‘inside contacts’ that likely know or think they know.

“The deal we see is, no extension past April 2022, gives time for UAE to argue for a higher baseline, both are sides committed, Larry, there is a low probability of a destructive breakdown with a large boost in production, not happening.”

- CIO in Canada, in our live Bear Traps, chat on the Bloomberg terminal.

The market hanging on the outcome of the weekend along with the meteoric rise of Saudi control of the market over the last year. All should be seen as a sign that they (OPEC+) don’t want to blow this opportunity. The March 2020 testosterone show inflicted a lot of pain on all sides, those scars are still healing. Oil price risk is to the upside. The likely UAE deal is a kick of the can to April 2022. The world is watching them again for signs of control or lack of it. OPEC lost control for 10 years when the Shale drilling spewed new non-OPEC supply into the market in ’09 and they don’t want to lose control like that again.

We are in a period of strong demand and weak supply. The UAE weekend proposal says no extension past April 2022, OPEC + wanted the extension for all of 2022. In recent months, years, the Saudis have worked many other members into contained quotas, baselines.

A total breakdown is highly unlikely, “the oil market globally is in a sweet spot, there is too much money on the line for all the players. Demand globally is strong, we are looking at a deficit of 2.3 to 2.5mbd in June, the highest since last year coming out of covid” - CIO of a large energy fund in Canada.

If OPEC can’t make that perfect scenario work then it is sending a signal of significant weakness to the market, then volatility to pricing will be back. That means derivatives players will start controlling the price and we could see dramatic whipsaws in prices as we did in the last decade prior to COVID rebalancing the market. While Saudi is in control, you won’t see the shorts show up. They have warned the speculators to stay away or be hurt. They listened for the most part but would show up again if this cartel were to start showing significant cracks. We just don’t think that OPEC+ is that unwise to let all of their great efforts go to waste over this quota issue. Demand surge is real, summer driving. Overall market dynamics best in decades, the risk to oil prices is to the upside.

“All the emergency spare capacity is outside the USA now Larry.” - Portfolio Manager in the U.S. Midwest.

Spare capacity globally is mostly inside core OPEC, the ESG overdose has crushed US shale investments (see "Why One Bank Thinks ESG Could Trigger Hyperinflation")

“There is too much money in the hands of core OPEC, two years ago this was NOT the case with shale cranking” - CIO, Macro Fund in NYC.

Further to that, there is an agreement that all parties are saying they are obligated to work with until Apr ’22. Even UAE says they are not trying to be a thorn or break up the cartel or even the agreement. So I think we can assume this agreement will be honored and we have relative stability until then. That is a lifetime in this market lately. Iran’s new supply risk is out in November in terms of getting oil to mkt, current shale new rigs coming online are not sufficient to impact prices near term.

“Watch RIG equity as CAPEX investment start to come in, Q3. Very tight global market through year-end. One producer needs to produce 2.3mbd to get the mkt into a surplus, that is a high bar, not in anyone´s interest.” - CIO Energy Fund in Canada.

US shale is not a threat as it is very high-cost production and requires higher prices or contango in the curve to see incremental supply enter the system. Also, the ESG (backfire) narrative still weighs heavy on their ability to grow. In this cycle, companies are being forced to return capital to shareholders, there is far less cowboy up speculation, drilling. Frankly, this ‘noise’ around OPEC+ stability only shakes the ground under the US producer to remember how quickly prices could collapse again.

“It is time to think of the oil curve CL1 (front-month futures contract) is priced at $75.16 vs. CL36 (36 months out futures contract) down at $57.95. As you can see above the spread above is eye-opening looking back from 2005 to 2021. “Larry, the one-year backwardation roll is 11%, just wow” says a veteran oil trader in our live chat.

“Spikes in oil prices have triggered economic slowdowns historically. Remember, oil isn’t a forward-looking product. It is a ‘demand is here now’ product.. The curve shows it, CL36 at 2y highs vs. CL1 at 7y highs speaks volumes. WTI is saying this is a short-term supply and demand imbalance, Otherwise, PBR would be at $50/sh, its closer to $12.” - Veteran energy sector portfolio manager in Brazil.

Inventories are dropping and global demand is on the rise via economic re-opening, a massive increase in driving and massive unprecedented infrastructure spending around the world. We have yet to see the impact of global travel amongst countries via airlines which will add almost 3 mil b\d of demand. We don’t see any increase in OPEC+ production being considered as a threat to the current price. In this status quo market, we need more of their supply or we are going to see higher oil prices. The current situation is a very unique opportunity for OPEC to cash in. Non-OPEC – Ex USA production spare capacity around the world in decline.

“We see strong demand (India, Europe) with real supply risk, it is not in OPEC´s interest to blow this opportunity.” - CIO London. Oil has a shot at $90 to $100 in, next 6 months.

We do not believe that a price-destructive “non-deal” is in the cards at this time. This is the strongest period OPEC+ has had in the market in decades and they don’t want to give that all up.

Tyler Durden Mon, 07/05/2021 - 22:30
Published:7/5/2021 9:59:53 PM
[Markets] The "Deprogramming" Begins: Public Defender Representing January 6th Defendants "Re-Educates" Them The "Deprogramming" Begins: Public Defender Representing January 6th Defendants "Re-Educates" Them

Authored by Daisy Luther via The Organic Prepper blog,

Remember the potential re-education of Trump supporters that everyone said was a conspiracy theory? Welp, it turns out (as I said in this article where I “blew someone’s comment on social media out of proportion,”) it’s a fact. So far on a small scale. But having Americans re-educated politically in any way smacks of communism. Particularly problematic is that it’s been done on the taxpayer’s dime.

Defendants in the Jan. 6th Capitol case are being deprogrammed by their own lawyer.

A public defender named H. Heather Shaner, we’re assured by Ryan J. Reilly of the Huffington Post, has no option but to defend the January 6 “attackers” because “who can’t afford their own attorneys, as guaranteed by the U.S. Constitution and as laid out in the Criminal Justice Act.”

But she’s also taking the opportunity to re-educate her clients, so they aren’t racist anymore.

“Reading books and then watching these shows is like a revelation,” Shaner told HuffPost. “I think that education is a very powerful tool … So I gave them book lists and shows that they should watch.”

...

Shaner said her clients had poor educations and knew very little about the country. Her two female clients took to the task with zeal, Shaner said and got library cards for the first time in their lives.

“Both my women are like, ‘I never learned this in school. Why don’t I know about this?'” Shaner said. (A couple of the male clients weren’t quite as eager students, she said. “The men are very much like ‘Oh, I’ll get to it.'” But she said some of her male clients have been doing some self-education.) (source)

S0, if I understand this correctly, those poor dumb hick women just needed someone to help them see the error of their ways and introduce them to the joy of the public library, but the men refused to be womansplained to?

And how was this case race-related? It was purely political.

Shaner represents six of more than 500 Capitol defendants: Anna Morgan-Lloyd, Annie Howell, Jack Jesse Griffith (aka Juan Bibiano), Israel Tutrow, and Landon Kenneth Copeland.

What’s on the reading/movie list?

Shaner’s re-education program points out many of the worst moments in history (not just American history) to convince these white folks they have been racist. The program suggests the Capitol protest (even though it was based on what many believe to be a fixed election) happened due to their inherent racism.

Different political views? Get ready to face persecution.

While one of the books mentioned was not set in the United States, most will agree the rest showcase some low points in American history. However, when combined and forced upon a client by an attorney to “reform” them, it seems to be the beginning of another low point in America – the persecution of those guilty of having a different political opinion.

It assumes all Trump supports are actively racist and therefore need to be shown the error of their ways.

While Huffington Post cheers the actions of Shaner, not everyone agrees that the indoctrination of clients the government pays one to defend is an acceptable course of action.

Note: It would be as challenging to contest American Greatness as unbiased as it would be Huffington Post. So let me be clear when I say both of these sources have their own political agendas. But here, we like to take a look at both sides of the issue.

Let’s take a look at the other side of this.

Small newspapers across the country widely picked up an article written by Julie Kelly for the website American Greatness. Kelly wrote a powerful argument about the danger of Shaner’s actions. Here are a couple of excerpts:

Shaner’s legal captives are learning the hard way what the government will do when one resists their commands to comply. Not only have their personal lives been shattered, finances depleted, and reputations destroyed by an abusive Justice Department investigation, Shaner’s clients must be indoctrinated with leftist propaganda about America’s alleged systemic racism.

The purge of the populist mindset is underway, courtesy of the fetid Beltway judicial system and the Joe Biden regime. Judges routinely lecture January 6 defendants about the wrongthink of a “stolen election” while prosecutors openly mock their political beliefs, including homeschooling and gun ownership

…On the face of it, there’s nothing wrong with watching or reading any of Shaner’s “booklist.” What is very wrong is a taxpayer-paid attorney—one who is supposed to fight the government’s charges related to January 6, not play along with its phony depiction that “white supremacists” attacked the Capitol—using her authority to reprogram the political views of people she is supposed to be defending. The presumption of racist beliefs is automatic. (source)

You support who? You must be racist.

Anyone who supported Trump – no – let me rephrase that – anyone who did not emphatically denounce Trump – was deemed “crazy” and “racist.” By the very nature of their political beliefs, conservatives are looked down upon by tech giants, the mainstream media, and our government. And, this has been the case ever since Trump announced his run for the presidency.

Thinking outside the far leftist box is akin to treason, and people who do so are now being treated like traitors in a country that was founded on freedom of thought.

Politically correct prosecution?

Kelly cites Joshua Rothstein, the assistant U.S. attorney handling one of Shaner’s cases, who said, “We don’t prosecute people based on their beliefs.”

But we all know that’s not really true…

Meanwhile, approximately 800 people breached the Capitol, and 500 are facing federal charges. Doesn’t that seem a bit skewed?

More woke, less white…?

Look at the ever-increasing lists of things we’re not supposed to say because someone, somewhere, might take offense. Businesses like Coca-Cola and Disney are re-educating their employees to be more “woke” and “less white.”

Disney is pushing critical race theory on employees through a new plan called “Reimagine Tomorrow.” The program urges workers to recognize their “white privilege” in a battery of training modules on topics such as “systemic racism” and “white fragility,” according to internal documents obtained by City-Journal’s Christopher Rufo.

Staffers are told to reject “equality” for “equity.” They must “reflect” on America’s “racist infrastructure” and “think carefully about whether or not [their] wealth” is derived from racism, according to the documents. (source)

If we’re fighting against each other, we can’t stand up beside each other.

That, of course, is the goal. It’s “othering” at its finest, and it sets us up for civil war or the quiet disappearance of conservative views. 

People have been put in a difficult place. Speak up, and you’re likely to lose your job. Disagree, and you’re deemed a heinous racist, homophobic, or some other flavor of bigot. That’s what cancel culture is all about – silencing anyone who dissents with the threat of social and financial destruction. The deprogramming of Trump supporters and the re-education of white people to believe we owe penance to every person of other races is dangerously divisive. 

I’m not a huge government supporter, preferring instead to govern myself. However, our government was designed to have checks and balances to keep the pendulum from swinging too far to one side. Currently, that system is being overridden, and re-education is just the start.

*  *  *

Daisy Luther is author of Be Ready for Anything and The Prepper’s Book of Lists

Tyler Durden Sun, 07/04/2021 - 21:30
Published:7/4/2021 8:53:33 PM
[Markets] CHS On July 4th: Sorry, America, You Lost Me CHS On July 4th: Sorry, America, You Lost Me

Authored by Charles Hugh Smith via OfTwoMinds blog,

Star Wars 24 plus the novelized version, amusement park ride, podcast, action figure and OnlyFans pages, anyone?

I happened to be in a Big Box Emporium, buying two bags of whole wheat flour, when a strange revelation struck me: almost nothing in this giant emporium was made in the USA. Apologists will quickly point out that the two bags of whole wheat flour were "made in the USA," and note the US-made items in the food, liquor and beverage aisles; but wander out of these aisles and tell me how many of the hundreds of items are made in the USA (not assembled of foreign components, but made entirely in the USA). The answer is very few.

I suppose this fact is unremarkable to the majority of Americans, but my reaction was, sorry, America, you lost me: how is this not insane to depend on sweatshops thousands of miles away to make virtually everything on the shelves and warehouses of the U.S.?

It's as if a war was declared on manufacturing in America and we lost--or simply surrendered.

If you want to buy a bulldozer or electric vehicle, you can Buy American, and if you buy an iPhone, the firmware is conjured in Cupertino (the phone is assembled in China of components sourced globally). But below a certain price point and outside the snacks, magazines and beer aisles, U.S.-made good are "special order" if they're available at all.

Is this because the foreign made stuff is so high quality? No, it's virtually all garbage quality. A war was declared on quality, and America lost. Virtually nothing on the shelves of America's Big Box Emporiums and fulfillment warehouses is durable; it's either designed to fail (planned obsolescence) or it's so poorly made that it breaks, fades, rips, tears, delaminates or fails, and is dutifully hauled to the landfill as part of the entire Landfill Economy. (Forget trying to repair it; it's been designed to be impossible to repair, and all the components are junk, too.)

If stuff breaks or fails in short order, it isn't cheap, no matter what the price says. It's expensive because it must be constantly replaced. A war was declared on value, and America lost. Sorry, America, you lost me. How is the transition from quality and value to junk not a complete disaster for the nation?

So what is the business of America? Marketing. Everything boils down to marketing in America. Everything is a channel to collect consumer data that can be monetized (no, you can't monetize your own data; that's not how it works) or a channel to upsell anyone ensnared in the value chain.

You may naively think an iPhone is a device for phone calls and texts. Silly you! It's nothing but a channel to upsell you Apple services. The "settings" on my old SE still have a nag notice because "setting up" your iPhone means signing up for Apple TV, Apple Music, Apple Pay, Apple Skim and Apple Scam.

My Mom-in-law is in her 90s and like many in her age group, she enjoys watching TV. She lives with us and so we handle the cable TV subscription for her. She asked us to get the commercial-free English-language network from Japan, NHK, and of course this is only available in a package of rubbish channels.

Since I have a basketball hoop for my fitness amusement and have long been a roundball fan, I clicked to the NBA channel listed. It was nothing but a series of moronic adverts. I tried again later, nothing but moronic adverts. I gave up on the third try, because it dawned on me that apparently this channel doesn't actually televise any actual basketball, it only promises to do so at some later date; and in the meantime, here is an endless stream of moronic adverts.

Sorry, America, you lost me. Marketing and upselling is not prosperity or success, it's ruination.

The list of channels that are nothing but data mining, marketing and upselling is endless in America. Every subscription service is nothing more than a channel to upsell you on "Premium services."

Social media: nothing but data mining, marketing and upselling.

Internet Search: nothing but data mining, marketing and upselling.

Media, telecommunications, banking, etc.: nothing but data mining, marketing and upselling. Look at the most profitable and highest valuation corporations in America, and their sole business model and reason to exist is data mining, marketing and upselling.

The Healthcare Borg is also nothing but data mining, marketing and upselling. If you want to get a look indicating profound suspicion of your motives and beliefs, tell your healthcare provider, "I'm over 65 and don't take any meds." Within the Borg, such a statement can only mean 1) you haven't yet signed up for Medicare/Medicaid, and we need to get you in the gravy-train pronto; 2) you're some kind of nutcase who refuses medications, or 3) you're a dangerous subversive who should be reported to Facebook as a potential extremist.

The Healthcare Borg's marketing has reached extremes of absurdity. Practitioners are under extreme pressure from Corporate HQ to bill you for something on a regular basis, and so I received increasingly frantic phone calls and emails demanding I set up a telemarketing, oops, I mean telemedicine confab with my PCP (primary care physician--the Borg loves acronyms as much as the Pentagon).

I halfway expected to be accosted on the street by thugs informing me to make a telemedicine appointment or "we're gonna have to break something." Sorry, America, you lost me. When healthcare stopped being about nurturing health, especially via basic preventative measures, and became a profit center and marketing channel, the well-being of the nation spiraled into the sewer.

While I foolishly waited for a basketball game to appear on the NBA channel--how naive of me!--I clicked through a few movie channels. The offerings were the most recent batch of the super-hero genre. As a huge fan of action films, I had hopes these might reverse my disinterest in the genre. Nope. The movies were not bad, they were simply... uninteresting and derivative.

Sorry, America, you lost me. Everything that's a derivative of something that was creative and fresh decades ago is uninteresting, and virtually everything is a derivative. America is subjected to a remake of a remake of a remake, with a switch of media being the supposed creative magic.

Star Wars 24 plus the novelized version, amusement park ride, podcast, action figure and OnlyFans pages, anyone?

America's cultural obsession with super-heroes made me wonder, in a dangerously subversive fashion, what this means beneath the superficiality of reaping reliable profits. Does it now require super-human powers to survive the onslaught of exploitation, profiteering, overwork and exposure to fanatical marketing, data mining and upselling that is life in the USA?

Or does this cultural obsession reflect our fear that we're so far gone down the road of worshiping billionaires blowing billions on space tourism that only super-heroes can save us?

Sorry, America, you lost me. Many readers will write all this off as the sour rantings of some out-of-it geezer. But ask yourself: what if everything said here is correct, but nobody dares talk about it because that might make it real?

*  *  *

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Tyler Durden Sun, 07/04/2021 - 15:40
Published:7/4/2021 2:50:11 PM
[Markets] Why Isn't The US Preparing For EMP War Like The Rest Of The World? Why Isn't The US Preparing For EMP War Like The Rest Of The World?

Authored by Jeff Thompson via The Organic Prepper blog,

You’re likely already familiar with the 2009 EMP Commission Report. It was this report that raised the issue of EMP-preparedness for the American public. It’s notorious stating that just one year after an EMP attack, 90% of the American population would be dead, caused alarm throughout multiple sectors of society.

Books began to be written on the subject. Sales of Tedd Koppel’s Lights Out, Forstchen’s One Second After, and Crawford’s Lights Out quickly reached blockbuster levels. And while I believe that these books (and that report) brought the issue of an electromagnetic pulse to light for Americans, I don’t believe it showed Americans just how real of a threat it is.

To truly understand just how very real of a risk this is, I believe all we have to do is look at the battle plans of some of the nations that hate America most.

Let’s start with Russia

**Non-Contact Warfare was the name of Russian General Vladimir Slipchenko’s military textbook. Within this text, he explains how EMPs are the greatest revolution in military affairs in history. According to Slipchenko, the possession of an EMP renders an enemy’s armies, navies, and air forces completely obsolete, and it’s hard to argue with him there.

If you can’t get your missile defense systems online, if your tanks won’t run, if your planes have all just fallen out of the sky, you’re kind of screwed, aren’t you?

The flagship journal of the Russian General Staff, Military Thought, further echoes this concept. An article within the journal titled “Weak Points of the US Concept of Network-Centric Warfare” specifically points out the use of an EMP as a possible means of defeating the US.

Aside from the concern that comes from foreign military journals, specifically hatching battle plans against your country, Russia now possesses what is known as a “Super-EMP.” A weapon of drastically increased pulse amplitude capable of disabling spacecraft, radar sites, ICBMs, energy supply systems, military command systems, and economies as well.

And to top things off, it’s designed as a first-strike weapon—just food for thought. As of 2017, the US had no Super EMPs (that the public was aware of).

What About China? 

Things are no different here. EMP capabilities, theory, and defenses seem to be going relatively fast here, just like Russia.

In the PLA textbook The Third World War – Total Information Warfare, author Shen Weiguang notes the importance of developing China’s EMP defenses to neutralize and check the US if needed.

Other Chinese military journal articles specifically state that the US “is more vulnerable than any other country in the world” to EMP attacks. I believe that this singling out of Americans should cause eyebrows to be raised.

Iran

In Iran, not only are EMP attacks fully endorsed but battle plans for their use are being drawn up as well. Military textbook Passive Defense – published in 2010 – echoes Russian General Slipchenko’s ideas on EM. **Former Director of the CIA, James Woolsey, points out that “Tehran’s military is planning to be able to make a nuclear EMP attack…”

Woolsey goes on to say, “Passive Defense and other Iranian military writings are well aware that nuclear EMP attack is the most efficient way of killing people, through secondary effects, over the long run. The rationale appears to be that people starve to death, not because of EMP, but because they live in materialistic societies dependent upon modern technology.”

Another Iranian military journal, in an article titled “Electronics to Determine Fate of Future Wars,” notes that the key to defeating the United States is through an EMP attack. The article goes on to say, “if the world’s industrial countries fail to devise effective ways to defend themselves against dangerous electronic assaults, then they will disintegrate within a few years….American soldiers would not be able to find food to eat nor would they be able to fire a single shot.”

Whether this is a veiled threat or not is up for you to decide

What I will expressly state is that Iran is gearing up for the capability of doing such. **We know that they’ve reportedly attempted to purchase radiofrequency weapons from Russia, that the Iranian news agency MEHR reported Iran is protecting itself against EMP attack. Ambassador Henry Cooper, former Director of the Strategic Defense Initiative, has also warned that some Iranian satellite launches appear to be practice for such an attack against the US.

Our next nation on this list seems to have taken things just a bit further, though.

North Korea

What did you expect? Of course, they would make this list!

**On April 9, 2013, North Korea’s KMS-3 satellite orbited the US at the perfect trajectory to evade US early warning radars and National Missile Defenses. And all while at the ideal altitude and location to launch an EMP field over the continental US.

**On April 16, 2013, they did it again – this time orbiting the satellite over the DC-NYC corridor. If an EMP had been activated, we would have lost the entire Eastern Grid, where 75% of US electricity comes from. On that very same day, unknown parties used Ak-47s to attack the Metcalf transformer substation that services Silicon Valley as well. 

Coincidence?

In July of 2013, a North Korean freighter was found in the Panama Canal after passing through the Gulf of Mexico with SA-2 missiles mounted on their launchers hidden under bags of sugar. While the missiles weren’t armed at the time, they were of the type that could very easily have been used to execute an anonymous EMP attack via offshore freighter.

At a House hearing October 12, 2017, experts warned members of Congress that a North Korean EMP attack could kill 90% of Americans within one year, calling it an “existential threat.”

Source ]

What about in the states? 

While electric power lobbyists are fighting against EMP protection of the US grid in Washington, it seems like the rest of the world is doing the opposite. This doesn’t seem to make much sense from a self-preservation standpoint, does it?

However, it’s not all bad news.

Whether you like him or not – Donald Trump seems to have been the first president in years to have done anything to better prepare the USA against an EMP attack.

On October 13, 2016, Trump signed Executive Order 13744 – Coordinating Efforts to Prepare the Nation for Space Weather Events. While this was most certainly not directed towards EMP preparedness, the fact of the matter is that space weather and EMP preparedness often overlap.

A few short years later, on March 26, 2019, Trump signed Executive Order 13865 – Coordinating National Resilience to Electromagnetic Pulses. It was here that EMP-preparedness seemed to become a priority of the US military. Shortly after this EO was given, the Department of Homeland Security began investigated research-proven techniques to better protect critical American infrastructure against EMP attack. (Likely the most significant step that the US government has taken to date to defend itself against an EMP.)

Final thoughts

So while the US has taken some steps to better research what we can do to protect ourselves against EMP, it doesn’t appear as if we’re anywhere near as ready as many other nations worldwide are – particularly those who would love to see America fall.

What conclusions can we draw from such? I’ll leave that up to you to decide, but just know, for the moment, it looks as if we’re showing up to a fight empty-handed.

Daisy wrote a piece, How to Make a Faraday Cage in 4 Easy Steps, you may find useful. There is information on what a faraday cage is for and why you may need one.

*  *  *

All of the above information is readily available by reading EMP expert Dr. Pry’s 2017 Report to the Commission to Assess the Threat to the United States from Electromagnetic Pulse (EMP) Attack. It’s a more extended file, but it’s in the public domain, and you can easily access it HERE. I believe it’s well worth the read. For those seeking more references to the subject, you can find that HERE.

Tyler Durden Sat, 07/03/2021 - 23:30
Published:7/3/2021 10:45:32 PM
[Markets] How Media Consumption Evolved Throughout COVID-19 How Media Consumption Evolved Throughout COVID-19

Media consumption spiked in the early days of the COVID-19 outbreak as Americans actively sought information and entertainment while at home. Whether this changed over the course of 2020 remains unclear, however.

To dive deeper into the issue, this infographic from the Knight Foundation explores each generation’s shifts in media consumption habits as the pandemic wore on.

Further below, Visual Capitalist's Marcus Lu examines which media sources Americans deemed to be the most trustworthy, and why consumption habits may have changed for good.

Changes in American Media Consumption, by Generation

The data in this infographic comes from two surveys conducted by Global Web Index (GWI). The first was completed in April 2020 (N=2,337) and asked participants a series of questions regarding media consumption during COVID-19.

To see how consumption had changed by the end of the year, the Knight Foundation commissioned GWI to complete a follow-up survey in December 2020 (N=2,014). The following tables provide a summary of the results.

Gen Z

Unsurprisingly, a significant percentage of Gen Z reported an increase in digital media consumption in April 2020 in comparison to pre-pandemic habits. This bump was driven by higher use of online videos, video games, and online TV/streaming films such as Netflix.

By December 2020, these media categories became even more popular with this cohort.

The popularity of traditional outlets like broadcast TV and radio declined from their April 2020 highs, though they are still up relative to pre-pandemic levels for Gen Z survey respondents.

Millennials

Results from the December 2020 survey show that Millennials trimmed their media consumption from earlier in the year. This was most apparent in news outlets (online and physical press), which saw double digit declines in popularity relative to April.

Books and podcasts were the only two categories to capture more interest from Millennials over the time period. It’s also worth noting that the percentage of respondents who said “none” for media consumption rose to 20.3%, up significantly from 9.1% in April.

Possible factors for the increase in “none” responses include easing government restrictions and a return to more normal work schedules.

Gen X

The media consumption habits of Gen X developed similarly to Millennials over the year.

Broadcast TV and online press saw the largest declines over the time period, while once again, podcasts and books were the only two categories to capture more interest relative to April. The percentage of respondents reporting “none” rose to 28.9%—a slightly higher share than that of Millennials.

Boomers

Media consumption trends among Baby Boomers were mixed, with some categories increasing and others decreasing since April. Broadcast TV saw the biggest decline in usage of all media types, but remained the most popular category for this cohort.

Boomers also had the largest share of “none” respondents in both studies (23.0% in April and 31.0% in December).

Where do Americans Go For Trustworthy News?

To learn more about American media consumption—particularly when it came to staying updated on the pandemic—survey respondents were asked to confirm which of the following sources they found trustworthy.

The deviations between each generation don’t appear to be too drastic, but there are some key takeaways from this data.

For starters, Gen Z appears to be more skeptical of mainstream news channels like CNN, with only 28.9% believing them to be trustworthy. This contrasts the most with Gen X, which saw 40.1% of its respondents give news channels the thumbs up.

This story is flipped when we turn to the World Health Organization (WHO). Gen Z demonstrated the highest levels of trust in information published by WHO, at 50.3% of respondents. Only 39.0% of Gen X could say the same.

By far the least trustworthy source was foreign governments’ websites. This category had the lowest average approval rating across the four generations, and scored especially poor with Boomers.

The Lasting Effects of the Pandemic

Habits that were picked up during 2020 are likely to linger, even as life finally returns to normal. To find out what’s changed, respondents were asked which categories of media they expected to continue consuming in elevated amounts.

The chart below shows each generation’s top three responses.

Note that the top three for both Gen Z and Millennials are all digital and online categories (video games can be played offline, but the majority of popular titles are online). This contrasts with the preferences of Gen X and Boomers, who appear to be sticking with more traditional outlets in broadcast TV and books.

With consumption habits of younger and older Americans moving in opposite directions, advertisers and media companies will likely need a clear understanding of their target audiences in order to be successful.

Tyler Durden Sat, 07/03/2021 - 15:00
Published:7/3/2021 2:17:37 PM
[Markets] Robinhood And iAddiction Robinhood And iAddiction

Authored by Scott Galloway via No Mercy / No Malice blog,

On Wednesday, trading app Robinhood agreed to pay $70 million in fines and customer reimbursements to settle a FINRA investigation. That followed a $60 million fine in December to the SEC for failing to properly disclose its order-flow revenue, and a separate $1.25 million fine to FINRA.

These are record fines … that amount to less than 0.5% of the firm’s valuation.

On Thursday, the firm responded to regulatory bodies deeming them “reckless” by filing an S-1, initiating the IPO process.

In sum, these aren’t fines but a validation of the company’s business model and evidence that, each day, there is (another) insurrection in D.C. However, this mob drives Teslas and is on Clubhouse.

The S-1 reveals Robinhood’s revenue quadrupled in 2020, to nearly $1 billion, and the firm registered over a half a billion in revenue in just the first quarter of 2021. After eking out a small profit in 2020, the company incurred $1.5 billion in losses when meme-stock mania overwhelmed it.

The prospectus also discloses that Robinhood anticipates paying another $15 million fine to New York’s trading regulator, and that it’s currently under investigation by an alphabet soup of federal agencies and authorities in California, New York, and Massachusetts. Here’s a sentence you typically don’t find in an S-1: “[O]ur Co-Founder and CEO, Vladimir Tenev, among others, have received requests for information, and in some cases, subpoenas and requests for testimony, related to investigations….” And in the “surprising nobody” category, Robinhood will have a two-tier stock structure, with insiders (including Tenev) holding shares with 10x the voting power of shares sold to the public so they can continue to pursue a strategy of regulatory overrun regardless of what shareholders think.

There are a lot of great things about Robinhood and online trading, including onboarding an entire generation into equity investing.

(Disclosure: I am an investor in rival investment firm Public, which does not sell order flow, but I was on record with my criticisms of Robinhood before I’d even heard of Public.)

My concern with Robinhood - i.e., I believe these guys are mendacious fucks - is more fundamental.

The company’s mission to “democratize finance for all,” is similar to Pablo Escobar saying his mission was to “democratize cocaine.”

Providing people access to the tools of finance is a worthwhile mission.

Just this week on the Prof G Pod, I interviewed Pierpaolo Barbieri, the CEO and founder of Ualá, an Argentine attempting to reach the 50%+ of Argentines who are unbanked.

Robinhood, on the other hand, is the Sith Lord of finance - monetizing the addictive nature of day trading. Day trading is gambling. And it doesn’t pay off. I wrote about this a year ago, when a 20-year-old Robinhood customer killed himself after the app mistakenly suggested he was down $730,000. We’re reprinting that post below because this leopard has not changed its spots, only becoming bigger, bolder, and more menacing.

In response to criticism, Robinhood removed the confetti animation “celebrating” each trade. And it claimed it was increasing educational support on the app and instituting more rigorous criteria for eligibility for options trading. The company now has 2,700 customer support staff, triple the number it had in March of 2020 … underwhelming, as the company has roughly the same number of reps per account it did last March. The Wall Street Journal didn’t mince words in a recent analysis: “Robinhood Has a Customer Service Problem.” (Speaking of tech addiction, Adam Alter, who wrote the bestselling Irresistible on that topic, is teaching Section4’s next Product Psychology & Strategy Sprint.)

Our analysis of the S-1 reveals that “addict” does not appear anywhere. The filing does mention the suicide, but only as a disclosure of litigation filed against the company. (Robinhood reached a settlement with the young man’s family.) “Protect” is used 37 times, compared to 87 times for consumer lender Affirm and 65 times for crypto exchange Coinbase. The phrase “compound interest” appears exactly zero times, while “trade” shows up 191 times. And then there are all those fines and investigations. “Fine” appears 47 times in Robinhood’s S-1, vs. 28 in Coinbase’s and 30 in Affirm’s.

Robinhood traders invest overwhelmingly  in highly speculative assets: Dogecoin accounted for 34% of Robinhood’s cryptocurrency transaction-based revenue in Q1 2021, and 6% of the trading firm’s overall revenue in the same period. Dogecoin shed 30% of its value when “dogefather” Elon Musk took the SNL stage. Trades in the private market(s) reflect a valuation of $55 billion. That feels right. Pablo Escobar was believed to have amassed wealth of $64 billion.

*  *  *

[The following was originally published June 19, 2020.]

Addiction is the inability to stop consuming a chemical or pursuing an activity even though it’s causing harm.

I engage with almost every substance or behavior associated with addiction: alcohol, drugs, coffee, porn, sex, gambling, work, spending, devices, and social media. I’ve abused all of them, but don’t think I’m addicted. On a balanced scorecard, these substances and behaviors, abuse and all, have been a net positive in my life, even @twitter.

Most disease and hardship for our species has been a function of scarcity — too little salt, sugar, fat, approval, safety, opportunities to mate. As a result, when we find these things, our brain produces the ultimate reward, the pleasure hormone dopamine. And it makes sense. Nature rewards behaviors that ensure the propagation of the species.

The assembly line, processing power, and Amazon Prime have not only met the minimum thresholds for survival but created a new threat to our species: superabundance. Diabetes, income inequality, and fake news — all are a function of our belief that more is better. Jeff Bezos capturing and hoarding the GDP of Norway doesn’t make sense for the species, but his instincts (fear of starvation, wielding power) reign supreme.

Survival, propagation, and consumption should result in a next generation that’s smarter, faster, and stronger. Where things have come off the rails is a function of our innovation economy moving faster than our instincts. Historically, humans have engaged in activities that have natural stopping cues — the end of a chapter, the end credits. Platforms like Facebook, Instagram, and Netflix have systematically eradicated these cues. Just as casinos are deliberately laid out without hard angles: It’s all one continuous space and you keep moving through it, on to the next game.

Technological progress lapping the calibration of our instincts culminates in an endless scroll. We’re unable to find the off switch. Unlike our parents and grandparents, for us dopamine release no longer depends on sacrifice, engagement, or grit, but on sitting still, as in 15, 14, 13 seconds episode 5 of Killing Eve will begin. There are more filtered photos, more porn, more equities, more margin, more dopa — more time without the nuisance of needing to engage in … life.

The most recent crack dealers are online trading platforms (OTPs). What does endless scroll look like on a trading platform?

  • Confetti falls to celebrate transactions.

  • Candy Crush interface.

  • Gamification: Users can tap up to 1000x per day to improve their position on the waitlist for Robinhood’s cash management feature (essentially a high-yield checking account on the app).

The Ratio

Our institutions (courts, Congress, the SEC) are supposed to slow our thinking so our reflexive instincts are checked and we can decide not to discriminate, not to pour mercury into the rivers, and not to let a bankrupt car rental firm (Hertz) issue shares bound to be worthless. You lose, they win.

Technological change is vastly outpacing our species’ ability to adapt to an endless barrage of stimuli. This discrepancy in modulation has exploded our levels of teen depression and social chaos. We’re in a Supermarine Spitfire, accelerating every day, hoping the fuselage holds together as we approach the sound barrier — streaming 31 seasons of The Simpsons, lifelike video games, ubiquitous porn of increasing extremes, high-def documentation in real time of the party your 15-year-old daughter wasn’t invited to, social media algorithms fueled on emotion vs. veracity, and immediate approval of margin for a “bull put spread.”

A Mess

I was a fu**ing mess yesterday after learning of the suicide of Alexander Kearns, a 20-year-old from Naperville, Illinois, who was interested in the markets and began trading stocks. Alex mistakenly believed he was down $730,000 after trading options on the Robinhood app and took his own life. We don’t know what other factors were at play here, and young men taking their own lives after losing money in the market is not a new phenomenon.

Facebook and Twitter do what CNN and Fox have been doing for decades, but better. I’m afraid Robinhood might become an addictive platform — Instagram for trading. Robinhood users skew young (32% of visitors are between 25 and 34). The firm reported 3 million new accounts in Q1 2020. Half were first-time traders. In addition, with Vegas and sports wagering all but shut down, OTPs have become the place where an emerging gambling addiction can take root and/or a rehab facility where your sponsor is a dealer.

Learning to invest and understanding the markets are good things, as is connecting with friends online … to a point. Social media and gambling have the same addictive psychological mechanism: variable rewards — when you keep performing an action in hopes of getting a possible but unlikely reward. This is the type of behavior that’s the most addictive and hardest to stop. Robinhood’s management and investors have taken cues from Big Tech and made a conscious decision to disregard the well-being of our youth for personal enrichment.

Some additional data on the surge in online trading:

  • Excessive trading may be triggered by an addictive process.

  • 12% of all trading activity is from day traders, yet day traders are only 1.6% of all profitable traders.

  • Men trade more than women, and unmarried men trade more than married men.

  • Stock market crashes have been linked to upticks in suicide.

  • Investors with a large differential between their existing economic conditions and their aspiration levels hold riskier stocks in their portfolios.

Most articles will focus on what we, Americans, view as the profound risk with the surge in rookie online traders … that the markets might go down. Most market tops coincide with retail investors entering. We haven’t, to my knowledge, seen the scale of a market crash driven by twentysomethings investing government rescue funds, levered up via preapproval on their smartphones.

Our elected officials and gross idolatry of money and innovators have overrun the institutions charged with slowing our thinking and keeping our kids safe. Joe Scarborough put it well: “Mark, Sheryl, and Jack, you have revealed yourselves to be vapid vulgarians who put at risk Americans’ health, racial justice, fair elections, and basic truths.”

Where do we turn? The bulk of the pressure to protect kids from device addiction falls on parents — limiting use (severely) and getting other parents at school to limit use as well, so kids don’t feel they’re an exception. It’s difficult, and it needs to be done. An “electronics fast,” perhaps for the whole family, can allow the nervous system to reset. Lowering your dopamine threshold allows a smaller amount of pleasure to be satisfying.

The threat of addiction has been slowing our household down. One of our sons demonstrates behavior consistent with device addiction. It’s terrifying. Everything he does, says, and works toward, is in pursuit of the dopa hit waiting on his iPad. His mom and I are doing what most parents would do — reading, seeking outside help, limiting use. But more than anything, we’re trying to slow things down. Time with him, especially outdoors or with books. Time in bed with him telling him stories about his grandfather becoming a frogman in the Royal Navy. Slowing everything down. It appears to be working.

I see Alex Kearns, and I see my oldest son. A nerd, with a big smile, fascinated by the markets and seeking dopa hits. I can’t imagine the pain of that family. I can’t imagine how we’ve lost the script, letting the meaningful, innovation and money, trump the profound, our kids. The youth suicide rate has increased 56% in a decade. Girls between 10 and 14 had a tripling of self-harm episodes between 2009 and 2015. Teens who are on social media for 5+ hrs a day are twice as likely to be depressed than those who are on for less than an hour.

Is it any wonder Tim Cook doesn’t want his nephew on social media? If he wasn’t Tim Cook, would he also say, I don’t want him to have an iPad either?

The weapons are our phones and tablets, and the bullets are social media firms headed by sociopathic oligarchs. And now, we may have a new menace preying on young men: online trading platforms.

We are a virus-ravaged nation where curfew alerts are sent to our phones. Innovation has become synonymous with exploitation. We find solace in the market being high. But the market is not a reflection of the economy or progress — it is increasingly driven by a few firms’ ability to arbitrage the gap between the pace of technology and regulation. It’s depressing. What to do? I’ll check my likes, mentions, and stocks.

Tyler Durden Sat, 07/03/2021 - 13:45
Published:7/3/2021 1:12:42 PM
[Markets] The Descent Into (Utter) Madness The Descent Into (Utter) Madness

Authored by Stephen Karganovic via The Strategic Culture Foundation,

The assault on language ian integral component of the unrelenting warfare being waged for the conquest and control of the mind...

Little wonder that here and there sanity nostalgia is gripping the Western world, at least those isolated portions of it that are not internalising the sinister “new normal.” But it is seemingly to no avail. All commanding positions are firmly in the hands of lunatics, who are determined to turn a once great and exemplary civilisation into an asylum.

As George Orwell has taught us, language manipulation is at the frontline (yes, I have just broken one of the cardinal rules of his “Politics and the English Language,” but not his final injunction to “break any of these rules sooner than say anything outright barbarous”) of politicised mind-bending. The sort of language we are permitted to use circumscribes the thinking that we shall be allowed to engage in. The assault on language is, therefore, an integral component of the unrelenting warfare being waged for the conquest and control of the mind. Word elimination and reassignment of meaning, as Orwell also presciently noted, are essential elements of the campaign to reformat the mind and eventually to subjugate it.

A breath-taking example of how this process works was recently unveiled by the thoroughly brain-washed students of the once prestigious Brandeis University who, this time without prompting from their faculty elders and betters, voted to ban from their campus such odious words and phrases as “picnic” and “you guys,” for being “oppressive”. “Picnic” is prohibited because it allegedly evokes the lynching of Blacks.

The precocious young intellectuals took pains to produce an entire list of objectionable words and phrases, shocking award-winning novelist Joyce Carol Oates who tweeted in bewilderment: “What sort of punishment is doled out for a faculty member who utters the word ‘picnic’ at Brandeis? Or the phrase [also proscribed – S.K.] ‘trigger warning’? Loss of tenure, public flogging, self-flagellation?”

All three punishments will probably be applied to reactionary professors who go afoul of the list’s rigorous linguistic requirements.

Not to be outdone by the progressive kids on the East Coast, avant-garde California legislators have passed a law to remove the pronoun “he” from state legal texts. The momentous reform was initiated by California’s new attorney general, Rebecca Bauer-Kahan, who after looking up the job requirements made the shocking discovery that the law assumed that the attorney general would be a man.

Upon review, it turned out that the state code and other legal documents were enabling unacceptable concepts by using pronouns “he,” “him” and “his” when referring to the attorney general and other state-wide elected officials. Appalled, Ms. Bauer-Kahan denounced these linguistic lapses for not representing “where California is and where California is going.” She inarguably was right on that score at least, which has perhaps also something to do with the massive exodus of California residents to less complicated parts of the country.

When lawmakers of a state which is rapidly turning into a North American Calcutta have no concerns more pressing than to revise the use of pronouns in official documents, that sends a clear message where that state is going, exactly as the smart and thoroughly up-to-date woman said.

But as a Pakistani immigrant father in Seattle, state of Washington, discovered to his chagrin, the linguistic clowning can have very serious personal and political consequences. After checking in his 16-year-old autistic son for treatment in what he thought was a medical facility, Ahmed was shocked to receive a telephone call where a social worker explained to him that the child he had originally entrusted to the medical authorities as a son was actually transgender and must henceforth, under legal penalty of removal, be referred to and treated as a “daughter.”

Coming from a traditional society still governed by tyrannical precepts of common sense and not accustomed to the ways of the asylum where in search of a better life he and his family inadvertently ended up, the father (a title that like mother, now officially “number one parent,” is also on the way out) was able to conceive his tragic predicament only by weaving a complex conspiracy theory:

“They were trying to create a customer for their gender clinic . . . and they seemed to absolutely want to push us in that direction. We had calls with counsellors and therapists in the establishment, telling us how important it is for him to change his gender, because that’s the only way he’s going to be better out of this suicidal depressive state.”

Since in the equally looney state of Washington the age when minors can request a gender-change surgery without parental consent is 13, the Pakistani parents saw clearly the writing on the wall and, bless them, they came up with a clever stratagem to outwit their callous ideological tormentors. Ahmed “assured Seattle Children’s Hospital that he would take his son to a gender clinic and commence his son’s transition. Instead, he collected his son, quit his job, and moved his family of four out of Washington.”

Perhaps feeling the heat from the linguistic Gestapo even in his celebrity kitchen, iconic chef Jamie Oliver has come on board. Absurdly, Jamie vowed fealty to the ascendant normal by dropping the term “Kaffir lime leaves” from his recipes, in fear that the alleged “historically racist slur” would offend South Africans. No evidence at all has been furnished or demanded of complaints from South Africa in that regard. But it speaks volumes that someone of Jamie’s influence and visibility should nevertheless deem it prudent to anticipate such criticism even though, should it have materialised, it of course would not originate from South Africa but from white Western political correctness commissars.

Jamie is now busy, but not just cooking. He is going over his previously published recipes in order to expunge all offensive references to kefir leaves. Orwell aficionados will recall this precious passage from 1984: “Every record has been destroyed or falsified, every book rewritten, every picture has been repainted, every statue and street building has been renamed, every date has been altered.” And now every recipe as well. The dystopia fits, does it not, to a tee even something as seemingly trivial as a cooking show?

But it is not just recipes. Children’s fairy tales are also fair game for 1984 revision. Hollywood actress Natalie Portman (Star WarsThe ProfessionalThor), inspired apparently by the new cultural normal, has taken it upon herself not to write, but to re-write, several classic fairy tales to make them “gender-neutral,” so “children can defy gender stereotypes.” Predictably, pronouns were again a major target:

“I found myself changing the pronouns in many of their books because so many of them had overwhelmingly male characters, disproportionate to reality,” quoth Natalie as she put her linguistic scalpel to such old favourites as The Tortoise and the HareCountry Mouse and City Mouse and The Three Little Pigs.

Need we go on, or does the sharp reader already get the general drift? How about State University of New York student Owen Stevens, who was suspended and censured for pointing out on his Instagram the ascertainable biological fact that “A man is a man, a woman is a woman. A man is not a woman and a woman is not a man.” (Owen was snitched on by fellow students, readers from the former Eastern bloc will be amused to learn.) Or the Nebraska university basketball coach who was suspended for using in a motivational speech the mysteriously offensive word “plantation”? Or the hip $57,000-a-year NYC school that banned students from saying “mom” and “dad”, from asking where classmates went on vacation or wishing anyone “Merry Christmas” or even “Happy Holidays”? Or female university student Lisa Keogh in Scotland who said in class “women have vaginas” (who would be better informed than she on that subject?) and are “not as strong as men”, who is facing disciplinary action by the university after fellow classmates complained about her “offensive and discriminatory” comments? Or Spanish politician Francisco José Contreras whose Twitter account was blocked as a warning for 12 hours after he tweeted what some would regard as the self-evident truth that “men cannot get pregnant” because they have “no uterus or eggs”?

As Peter Hitchens noted recently “the most bitterly funny story of the week is that a defector from North Korea thinks that even her homeland is ‘not as nuts’ as the indoctrination now forced on Western students.”

One of Yeonmi Park’s initial shocks upon starting classes at Colombia University was to be met with a frown after revealing to a staff member that she enjoyed reading Jane Austen. “Did you know,” Ms. Park was sternly admonished, “that those writers had a colonial mind-set? They were racists and bigots and are subconsciously brainwashing you.”

But after encountering the new requirement for the use of gender-neutral pronouns, Yeonmi concluded: “Even North Korea is not this nuts… North Korea was pretty crazy, but not this crazy.” Devastatingly honest, but not exactly a compliment to what once might have been the land of her dreams.

Sadly, Hitchens reports that her previous experience served Yeonmi well to adapt to her new situation: “She came to fear that making a fuss would affect her grades and her degree. Eventually, she learned to keep quiet, as people do when they try to live under intolerant regimes, and let the drivel wash over her.”

Eastern European readers will unfailingly understand what it is that Hitchens meant to say.

Tyler Durden Sat, 07/03/2021 - 08:10
Published:7/3/2021 7:40:50 AM
[Books] Analyzing Dostoyevsky (Scott Johnson) Northwestern’s Gary Saul Morson takes a look at three new studies of Dostoyevsky in the July 1 New York Review of Books review “Dostoevsky and His Demons.” Subhead: “Three biographers take different approaches to the great writer’s life, which often resembled his most fantastic tales.” It’s an excellent review that takes a brief detour into Freudian analysis of Dostoyevsky. I found this funny: After Dostoevsky’s death, more legends accumulated. Best Published:7/3/2021 7:40:50 AM
[Books] The soul of Sowell (Scott Johnson) David Mikics salutes Thomas Sowell in the outstanding Tablet column “The ‘noble lies’ of the new race politics.” Mikics ranges over some of the leading themes of Sowell’s books on education, race, and culture over the past 50 years to present a brief overview of Sowell’s thought. Sowell turned 91 this week on June 30. Mikics takes the publication of Jason Riley’s new biography of Sowell (see “Talking about Thomas Published:7/2/2021 6:33:53 AM
[Markets] Joint Chiefs Chairman Ignores Evidence Showing Critical Race Theory Harms Unit Cohesion Joint Chiefs Chairman Ignores Evidence Showing Critical Race Theory Harms Unit Cohesion

Authored by John Rossomando via The Epoch Times,

Joint Chiefs of Staff Chairman Gen. Mark Milley dismissed concerns about neo-Marxist critical race theory. He feigned outrage at accusations the military was becoming “woke.” His cavalier response showed that at best he’s ignorant, and at worst he doesn’t care.

Critical race theory stems from a school of thought among post-Russian Revolution Marxist intellectuals who were disturbed by the fact communist revolution didn’t sweep Europe as Marx predicted. Orthodox Marxists deny that critical race theory is Marxist because it derives from a revisionist strain of thought. The revisionists reimagined Marxist theory to focus on who has power in society and who doesn’t instead of the class struggle between the working class and the capitalists found in Karl Marx’s writings.

Critical race theory’s reliance on Marxist dualism of the oppressor versus the oppressed intends to produce strife and chaos.

Unsurprisingly, a 2012 Harvard Business Review article noted, “Diversity training doesn’t extinguish prejudice. It promotes it.”

Other social-science research finds that diversity training is ineffective at reaching positive outcomes.

Milley clearly never read these reports.

“I’ve read Mao Tse Tung. I’ve read Karl Marx. I’ve read Lenin. That doesn’t make me a communist,” Milley said.

“So what is wrong with understanding, having some situational understanding about the country for which we are here to defend?”

Milley acknowledged critical race theory’s roots in critical legal studies at Harvard University back in the 1980s. It bears the strong influence of neo-Marxist theorist Frantz Fanon and Communist Party USA member W.E.B. DuBois, winner of the Lenin Peace Prize from the Soviet Union.

“And I personally find it offensive that we are accusing the United States military, our general officers, our commissioned, non-commissioned officers of being, quote, woke or something else, because we’re studying some theories that are out there. That was started at Harvard Law School years ago,” Milley continued.

He claimed that he wanted to understand the “White Rage” behind the assault on the Capitol on Jan. 6. The general’s liberal-sounding rhetoric masks the real problem. The concept of “White Rage,” developed by Emory University professor Carol Anderson, is an aspect of critical race theory itself.

Anderson promotes black powerlessness and blames whites for every contemporary problem of black America. She insinuates that questioning the critical race theorists’ dogmas itself is racist in her book “White Rage: The Unspoken Truth of Our Racial Divide.”

“The trigger for white rage, inevitably, is black advancement,” Anderson theorizes, thus setting up a strawman argument that suggests that all white Americans oppose prosperity for blacks and that it threatens them.

Her book cherry-picks points about white Americans following the Civil War. It avoids discussion of how people such as General and later President Ulysses S. Grant and the U.S. Army fought to protect freed blacks from racist violence. She also glosses over how Republicans tried to protect black civil rights from racist oppression immediately following the Civil War (pdf), focusing instead on President Andrew Johnson’s racism. Doing so is needed to portray America as totally evil. Such omissions show that Anderson’s “White Rage” is propaganda, not scholarship.

Are Grant’s exploits on behalf of black Americans discussed, or the role of the U.S. military during Reconstruction protecting black lives (pdf) talked about in the Defense Department’s seminars?

Milley’s discussion of his having read Mao, Marx, and Lenin was a red herring about the question at hand.

Namely, are U.S. servicemembers being indoctrinated in ideas developed by contemporary acolytes of Karl Marx? Marxist thought is particularly destructive because it’s predicated on dialectical thinking that promotes conflict to bring about a new society.

Milley’s dismissal set up a strawman argument because critical race theory is not a dispassionate examination of the history of slavery, Jim Crow, or even the problems black Americans currently face in American society. And by all reports, this critical race theory is being taught as fact rather than as a dispassionate assessment of the sectarian opinions of neo-Marxist scholars without presenting contrary ideas for debate. They aim to discredit the United States, its Constitution, and the same institutions that members of the military swear an oath to protect.

“What Gen. Milley was responding to was an exchange that I had had during my time of question-and-answer with Secretary Austin, where I raised the point of a series of courses and seminars that’s being taught at West Point, which was brought to my attention by very upset and disturbed cadets, their families, soldiers,” Rep. Michael Waltz (R-Fla.) told Hugh Hewitt on his podcast on June 24.

“One of the seminars, Hugh, was titled, ‘Dealing With Your Whiteness and White Rage,’ which apparently over 100 cadets attended; ‘Critical Race Theory: An Introduction’—the textbook is part of the curriculum.”

This was one of several incidents that have appeared since Joe Biden became president.

Members of Congress have repeatedly raised questions about the Navy’s recommendation of neo-Marxist ideologue Ibram X. Kendi’s book “How to Be an Antiracist,” which seeks to remedy past discrimination against blacks with “future discrimination” against whites. Kendi blames capitalism for the lack of an equality of outcome among black Americans. Kendi’s thesis falls apart after you look at how Afro-Cubans live in communist Cuba compared with Cubans of Spanish descent, the former suffering discrimination despite living under socialism.

Like Anderson, Kendi cherry-picks his information and gets facts, such as data about black poverty in the Reagan era and other topics that are more nuanced than he claims, wrong.

American capitalism has spawned more innovations and technological achievements than any in the preceding millennia of human history, including the technology that you’re reading this article on. Poor Americans of all colors have a higher standard of living here than they do in any socialist country, including China.

Adm. Michael Gilday similarly defended critical race theory and Kendi’s disinformation.

“Sir, initially you mentioned critical race theory: I’m not a theorist; I’m the Chief of Naval Operations,” Gilday told Congress.

“What I can tell you is, factually, based on a substantial amount of time talking to sailors in the fleet, there’s racism in the Navy, just like there’s racism in our country. And the way we’re going to get after it is to be honest about it, not to sweep it under the rug, and to talk about it—and that’s what we’re doing. And that’s one of the reasons that book is on the list.”

Winning wars requires unit cohesion and a common mission. It seems that Gen. Milley, Adm. Gilday, and the Pentagon’s civilian leadership are determined to compromise unit cohesion at the time when threats from Russia and China are increasing and that cohesion is needed the most. If they examined the social science, they would realize their activities only cause harm.

Tyler Durden Thu, 07/01/2021 - 22:20
Published:7/1/2021 9:32:54 PM
[Markets] Eric Adams Files Lawsuit To Ensure 'Fair Election Process' After NYC Board Botches Election Count Eric Adams Files Lawsuit To Ensure 'Fair Election Process' After NYC Board Botches Election Count

Authored by Jack Phillips via The Epoch Times (emphasis ours),

New York City mayoral candidate Eric Adams’ campaign filed a lawsuit Wednesday after the city’s Board of Elections released an inaccurate vote tally in the Democratic primary.

“Today we petitioned the court to preserve our right to a fair election process and to have a judge oversee and review ballots, if necessary,” his campaign said in a statement.

We are notifying the other campaigns of our lawsuit through personal service, as required by law, because they are interested parties.”

Brooklyn Borough President Eric Adams speaks on the steps of New York City Hall on July 9, 2014. (Andrew Burton/Getty Images)

Adams, the Brooklyn Borough president, called on “other campaigns to join us and petition the court as we all seek a clear and trusted conclusion to this election.”

The city’s Election Board, which is run by Democrats and Republicans, on Tuesday night said it inadvertently added some 135,000 so-called “test ballots” to the count, throwing the process into disarray. The agency released the data as part of a simulation of how ranked-choice voting would play out following the initial count of votes.

Adams, a former police officer, had emerged as the Democrat frontrunner following the initial vote count on Primary Day last week. But he lost much of his lead and was ahead of Kathryn Garcia, the city’s former sanitation commissioner, by about 15,900 votes, or around 2 percent, after the Board of Elections released the latest data on Tuesday.

Adams’ campaign publicly pointed out the vote discrepancy shortly after the faulty count was released.

Later, in a statement at around 10:30 p.m. ET, the Board said that the 135,000 ballot images it placed into its election systems for testing reasons were never cleared.

“The Board apologizes for the error and has taken immediate measures to ensure the most accurate up to date results are reported,” the statement read. As a result, the results that were initially released earlier in the day were withdrawn.

“We are aware there is a discrepancy in the unofficial RCV round by round elimination report. We are working with our RCV technical staff to identify where the discrepancy occurred. We ask the public, elected officials and candidates to have patience,” the elections agency also wrote in a tweet.

Former President Donald Trump also weighed in on the issue, saying “based on what has happened, nobody will ever know who really won” the primary race.

“Watch the mess you are about to see in New York City, it will go on forever,” said the former president in a statement. “They should close the books and do it all over again, the old-fashioned way, when we had results that were accurate and meaningful.”

Adams’ campaign lawsuit was filed Wednesday in Kings County Supreme Court.

Tyler Durden Thu, 07/01/2021 - 10:15
Published:7/1/2021 9:27:31 AM
[Markets] George Orwell's 1984 Has Become A Blueprint For Our Dystopian Reality George Orwell's 1984 Has Become A Blueprint For Our Dystopian Reality

Authored by John W. Whitehead & Nisha Whitehead via The Rutherford Institute,

“If you want a picture of the future, imagine a boot stamping on a human face - for ever.”

- George Orwell, 1984

Tread cautiously: the fiction of George Orwell (Jun. 25, 1903-Jan. 21, 1950) has become an operation manual for the omnipresent, modern-day surveillance state.

It’s been more than 70 years since Orwell—dying, beset by fever and bloody coughing fits, and driven to warn against the rise of a society in which rampant abuse of power and mass manipulation are the norm—depicted the ominous rise of ubiquitous technology, fascism and totalitarianism in 1984.

Who could have predicted that so many years after Orwell typed the final words to his dystopian novel, “He loved Big Brother,” we would come to love Big Brother.

“To the future or to the past, to a time when thought is free, when men are different from one another and do not live alone— to a time when truth exists and what is done cannot be undone: From the age of uniformity, from the age of solitude, from the age of Big Brother, from the age of doublethink — greetings!”—George Orwell

1984 portrays a global society of total control in which people are not allowed to have thoughts that in any way disagree with the corporate state. There is no personal freedom, and advanced technology has become the driving force behind a surveillance-driven society. Snitches and cameras are everywhere. People are subject to the Thought Police, who deal with anyone guilty of thought crimes. The government, or “Party,” is headed by Big Brother who appears on posters everywhere with the words: “Big Brother is watching you.”

We have arrived, way ahead of schedule, into the dystopian future dreamed up by not only Orwell but also such fiction writers as Aldous Huxley, Margaret Atwood and Philip K. Dick.

“If liberty means anything at all, it means the right to tell people what they do not want to hear.”?George Orwell

Much like Orwell’s Big Brother in 1984, the government and its corporate spies now watch our every move. Much like Huxley’s A Brave New World, we are churning out a society of watchers who “have their liberties taken away from them, but … rather enjoy it, because they [are] distracted from any desire to rebel by propaganda or brainwashing.” Much like Atwood’s The Handmaid’s Tale, the populace is now taught to “know their place and their duties, to understand that they have no real rights but will be protected up to a point if they conform, and to think so poorly of themselves that they will accept their assigned fate and not rebel or run away.”

And in keeping with Philip K. Dick’s darkly prophetic vision of a dystopian police state—which became the basis for Steven Spielberg’s futuristic thriller Minority Report—we are now trapped in a world in which the government is all-seeing, all-knowing and all-powerful, and if you dare to step out of line, dark-clad police SWAT teams and pre-crime units will crack a few skulls to bring the populace under control.

What once seemed futuristic no longer occupies the realm of science fiction.

Incredibly, as the various nascent technologies employed and shared by the government and corporations alike—facial recognition, iris scanners, massive databases, behavior prediction software, and so on—are incorporated into a complex, interwoven cyber network aimed at tracking our movements, predicting our thoughts and controlling our behavior, the dystopian visions of past writers is fast becoming our reality.

Our world is characterized by widespread surveillance, behavior prediction technologies, data mining, fusion centers, driverless cars, voice-controlled homes, facial recognition systems, cybugs and drones, and predictive policing (pre-crime) aimed at capturing would-be criminals before they can do any damage.

Surveillance cameras are everywhere. Government agents listen in on our telephone calls and read our emails. Political correctness—a philosophy that discourages diversity—has become a guiding principle of modern society.

“People sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.”?George Orwell

The courts have shredded the Fourth Amendment’s protections against unreasonable searches and seizures. In fact, SWAT teams battering down doors without search warrants and FBI agents acting as a secret police that investigate dissenting citizens are common occurrences in contemporary America. And bodily privacy and integrity have been utterly eviscerated by a prevailing view that Americans have no rights over what happens to their bodies during an encounter with government officials, who are allowed to search, seize, strip, scan, spy on, probe, pat down, taser, and arrest any individual at any time and for the slightest provocation.

“The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.”?George Orwell, Animal Farm

We are increasingly ruled by multi-corporations wedded to the police state.

What many fail to realize is that the government is not operating alone. It cannot. The government requires an accomplice. Thus, the increasingly complex security needs of the massive federal government, especially in the areas of defense, surveillance and data management, have been met within the corporate sector, which has shown itself to be a powerful ally that both depends on and feeds the growth of governmental overreach.

In fact, Big Tech wedded to Big Government has become Big Brother, and we are now ruled by the Corporate Elite whose tentacles have spread worldwide. The government now has at its disposal technological arsenals so sophisticated and invasive as to render any constitutional protections null and void. Spearheaded by the NSA, which has shown itself to care little to nothing for constitutional limits or privacy, the “security/industrial complex”—a marriage of government, military and corporate interests aimed at keeping Americans under constant surveillance—has come to dominate the government and our lives.

Money, power, control. There is no shortage of motives fueling the convergence of mega-corporations and government. But who is paying the price? The American people, of course.

Orwell understood what many Americans are still struggling to come to terms with: that there is no such thing as a government organized for the good of the people. Even the best intentions among those in government inevitably give way to the desire to maintain power and control over the citizenry at all costs.

“The further a society drifts from truth the more it will hate those who speak it.” ? George Orwell

Even our ability to speak and think freely is being regulated.

In totalitarian regimes—a.k.a. police states—where conformity and compliance are enforced at the end of a loaded gun, the government dictates what words can and cannot be used. In countries where the police state hides behind a benevolent mask and disguises itself as tolerance, the citizens censor themselves, policing their words and thoughts to conform to the dictates of the mass mind.

Dystopian literature shows what happens when the populace is transformed into mindless automatons.

In Ray Bradbury’s Fahrenheit 451, reading is banned and books are burned in order to suppress dissenting ideas, while televised entertainment is used to anesthetize the populace and render them easily pacified, distracted and controlled.

In Huxley’s Brave New World, serious literature, scientific thinking and experimentation are banned as subversive, while critical thinking is discouraged through the use of conditioning, social taboos and inferior education. Likewise, expressions of individuality, independence and morality are viewed as vulgar and abnormal.

In my debut novel The Erik Blair Diaries, the dystopian future that George Orwell predicted for 1984 has finally arrived, 100 years late and ten times as brutal. In this post-apocalyptic world where everyone marches to the beat of the same drummer and words like “freedom” are taboo, Erik Blair—Orwell’s descendant and unwitting heir to his legacy—isn’t volunteering to be anyone’s hero. Unfortunately, life doesn’t always go according to plan. To save all that he loves, Orwell will have to travel between his future self and the past.

And in Orwell’s 1984, Big Brother does away with all undesirable and unnecessary words and meanings, even going so far as to routinely rewrite history and punish “thoughtcrimes.” Orwell’s Big Brother relies on Newspeak to eliminate undesirable words, strip such words as remained of unorthodox meanings and make independent, non-government-approved thought altogether unnecessary.

Where we stand now is at the juncture of OldSpeak (where words have meanings, and ideas can be dangerous) and Newspeak (where only that which is “safe” and “accepted” by the majority is permitted). The power elite has made their intentions clear: they will pursue and prosecute any and all words, thoughts and expressions that challenge their authority.

This is the final link in the police state chain.

“Until they became conscious they will never rebel, and until after they have rebelled they cannot become conscious.”—George Orwell

Having been reduced to a cowering citizenry—mute in the face of elected officials who refuse to represent us, helpless in the face of police brutality, powerless in the face of militarized tactics and technology that treat us like enemy combatants on a battlefield, and naked in the face of government surveillance that sees and hears all—we have nowhere left to go.

We have, so to speak, gone from being a nation where privacy is king to one where nothing is safe from the prying eyes of government.

“Big Brother is Watching You.”?George Orwell

Wherever you go and whatever you do, you are now being watched, especially if you leave behind an electronic footprint. When you use your cell phone, you leave a record of when the call was placed, who you called, how long it lasted and even where you were at the time. When you use your ATM card, you leave a record of where and when you used the card. There is even a video camera at most locations equipped with facial recognition software. When you use a cell phone or drive a car enabled with GPS, you can be tracked by satellite. Such information is shared with government agents, including local police. And all of this once-private information about your consumer habits, your whereabouts and your activities is now being fed to the government.

The government has nearly inexhaustible resources when it comes to tracking our movements, from electronic wiretapping devices, traffic cameras and biometrics to radio-frequency identification cards, satellites and Internet surveillance.

In such a climate, everyone is a suspect. And you’re guilty until you can prove yourself innocent. To underscore this shift in how the government now views its citizens, the FBI uses its wide-ranging authority to investigate individuals or groups, regardless of whether they are suspected of criminal activity. 

“Nothing was your own except the few cubic centimetres inside your skull.” ? George Orwell

Here’s what a lot of people fail to understand, however: it’s not just what you say or do that is being monitored, but how you think that is being tracked and targeted. We’ve already seen this play out on the state and federal level with hate crime legislation that cracks down on so-called “hateful” thoughts and expression, encourages self-censoring and reduces free debate on various subject matter. 

Say hello to the new Thought Police.

Total Internet surveillance by the Corporate State, as omnipresent as God, is used by the government to predict and, more importantly, control the populace, and it’s not as far-fetched as you might think. For example, the NSA has been working on an artificial intelligence system designed to anticipate your every move. Aquaint (the acronym stands for Advanced QUestion Answering for INTelligence) has been designed to detect patterns and predict behavior.

No information is sacred or spared.

Everything from cell phone recordings and logs, to emails, to text messages, to personal information posted on social networking sites, to credit card statements, to library circulation records, to credit card histories, etc., is collected by the NSA and shared freely with its agents in crime: the CIA, FBI and DHS.

What we are witnessing, in the so-called name of security and efficiency, is the creation of a new class system comprised of the watched (average Americans such as you and me) and the watchers (government bureaucrats, technicians and private corporations).

Clearly, the age of privacy in America is at an end.

So where does that leave us?

We now find ourselves in the unenviable position of being monitored, managed and controlled by our technology, which answers not to us but to our government and corporate rulers. This is the fact-is-stranger-than-fiction lesson that is being pounded into us on a daily basis.

It won’t be long before we find ourselves looking back on the past with longing, back to an age where we could speak to whom we wanted, buy what we wanted, think what we wanted without those thoughts, words and activities being tracked, processed and stored by corporate giants such as Google, sold to government agencies such as the NSA and CIA, and used against us by militarized police with their army of futuristic technologies.

To be an individual today, to not conform, to have even a shred of privacy, and to live beyond the reach of the government’s roaming eyes and technological spies, one must not only be a rebel but rebel.

Even when you rebel and take your stand, there is rarely a happy ending awaiting you. You are rendered an outlaw. Just look at what happened to Julian Assange.

So how do you survive in the American surveillance state?

We’re running out of options.

Whether you’re dealing with fact or fiction, as I make clear in Battlefield America: The War on the American People and in my new novel The Erik Blair Diaries, we’ll soon have to choose between self-indulgence (the bread-and-circus distractions offered up by the news media, politicians, sports conglomerates, entertainment industry, etc.) and self-preservation in the form of renewed vigilance about threats to our freedoms and active engagement in self-governance.

Tyler Durden Wed, 06/30/2021 - 20:20
Published:6/30/2021 7:23:45 PM
[Markets] As California Begins To Burn, Biden Meets With Western Governors As California Begins To Burn, Biden Meets With Western Governors

Update: President Biden met with governors from Western states Wednesday to discuss new measures to contain wildfires as this year's fire season could be one for the record books amid the latest historic heat wave and megadrought. 

"We know this is becoming a regular cycle and we know it's getting worse," Biden said at the meeting. "The truth is, we're playing catch-up. This is an area that's been under-resourced, but that's going to change if we have anything to do with it."

"Wildfires are not a partisan phenomenon," Biden added. "We need a coordinated, comprehensive response… an we want to know what you, the states and localities and tribal governments, those on the frontlines, are facing in this danger, and what you think would help the most."

Biden said the government has "to act fast" in containing and preventing wildfires, adding that, "We're late in the game here." 

The president addressed the wage issue among federal firefighters by increasing their minimum wage from $13 per hour to $15. As we noted below, Biden last week called $13 "ridiculously low."

He said more federal firefighter positions would become permanent rather than seasonal "so that when fires aren't burning, we have a workforce of experienced hands enhancing our forest management, reducing the risks of future fire seasons."

For the fiscal year 2022, the Biden administration is requesting $30 billion for wildfire management and relief and a 62% rise in hazardous fuels treatment funding. 

* * * 

President Biden is expected to meet with governors of Western states as a megadrought, fallow lands, water shortages, and the latest heat dome has created perfect conditions for another devastating wildfire season.

Biden will meet with governors, including California Gov. Gavin Newsom, to potentially boost federal funding to fight fires, according to Los Angeles Times

At the moment, a 13,000-acre wildfire has erupted in Northern California and continues to expand. Preliminary reports suggest the Lava Fire, burning west of Mount Shasta, is only 20% contained. 

Western governors are expecting more funding from the federal government after former President Trump frequently criticized them for mismanaging their forests by neglecting to remove brush. 

The meeting comes as the U.S. Forest Service and the Bureau of Land Management are experiencing labor shortages due to low pay. Many state and local fire departments are exhausted from last year's record-breaking fire season in California. 

Last week, the National Interagency Fire Center, based in Boise, Idaho, increased national preparedness to level 4 on a 1 to 5 scale, saying this is the second earliest it had reached that point.

Jim Whittington, an expert in wildland fire response, expects labor shortages to overwhelm fire crews this year as this season could be dangerous.

"We're at a point where we're simply going to be overwhelmed year after year going forward given the current systems we have in place.

"We really need to look at the way we staff and work wildland fires, the way we fund them, and the way we take care of our people. We need a full reset," Whittington said.

The meeting with Biden and governors could result in better wages and benefits for firefighters. The president last week was outraged when he was told firefighters earn so little. 

"That's a ridiculously low salary," the president said in the Roosevelt Room in the White House during a meeting with top officials. 

Grassroots Wildland Firefighters, a group that advocates for better pay and working conditions for federal firefighters, said people risk their lives for public safety and deserve better pay. 

Ahead of fire season, in early May, Robert Baird, chief for the U.S. Forest Service Pacific Southwest Region, warned of "millions of dying trees and all of those pose hazards across California for all of us."

In response, CALFIRE has already prepared for what could be a fiery year. The agency ramped up personnel and equipment to expand its reach across the state. 

PG&E's chief risk officer Sumeet Singh is also preparing for what could be a dangerous year. He recently told WSJ that customers could experience increased rolling blackouts this summer as parts of the grid would have to be shut off to prevent fires. 

June is typically the month the wildfire season begins in California. The state, along with the Western half of the US, has been plagued with a megadrought that has produced an ample amount of fuels, such as brush and dead trees. 

Meanwhile, an unprecedented heat wave has battered the Pacific Northwest for the last week, shattering records as parts of Oregon and Washington record triple-digit temperatures

So what it looks like is that Biden will speak with governors from Western states today and could result in additional federal funding, personnel, and or equipment to combat future fires. 

Tyler Durden Wed, 06/30/2021 - 15:45
Published:6/30/2021 2:52:40 PM
[Markets] Crypto: Bitcoin and Ether head for worst second-quarter on record for the world’s No. 1 and 2 crypto Bitcoin and Ether's second-quarter performances shape up to be one for the history books.
Published:6/30/2021 12:23:01 PM
[Markets] Michael Pento: How Central Banks Murdered The Markets Michael Pento: How Central Banks Murdered The Markets

Via Pento Portfolio Strategies,

The Japanese Government Bond market is nearly $10 trillion in size. It is the 2nd biggest bond market in the world. However, it comes as a shock that this humongous market barely trades any longer.

The government of Japan has systematically supplanted and killed the entire private market for its bonds. Meaning, there are almost no private investors who will touch it any more. The Bank of Japan has bought so much debt that it forced interest rates below zero percent back in 2016; and the result is the free market has subsequently died.

Investors are now refusing to buy JGBs, which are guaranteed to lose principal in nominal terms—and deeply negative results after adjusting for inflation. But at the same time, are not in any hurry to sell their existing holdings because they understand the government will be propping up bond prices.

In this same vein, the 5-year greek yield recently turned negative. This is prima facie evidence that centrals banks have committed murder-one when it comes to markets. Back in February of 2012, at the height of the European debt crisis, the Greek 5-year Bond Yield skyrocketed to 63%. The free-market deemed the nation to be insolvent and that it could never pay back its debt without returning to the Drachma; and then turning it into confetti. Hence, bond yields surged—makes perfect sense, correct? Also in 2012, the Greek National debt to GDP ratio was 160%. Today, that ratio has soared to an all-time record high of 210%; and yet, these bonds display a negative cash flow going out 5 years in duration. Only one thing has changed: central banks deemed it mandatory to step in and replace the entire demand for government debt in order to force interest rates towards zero percent. It is the only way these countries would have any semblance of solvency.

Sadly, the U.S. is headed in this exact same direction as Greece and Japan. And, that is why we can be certain central banks’ monetary tightening cycles can’t last for very long and will end in disaster–as per usual. In fact, Mr. Powell will probably torpedo markets before he is able to end his current historic and massive QE program.

If you want to know how fragile markets really are, just look at the 2.5% selloff during the week surrounding Powell’s June FOMC press conference. The fed hasn’t started to end QE yet. In fact, it hasn’t even set a date to start the taper. All the fed’s money printers have done is admit that they have begun to discuss when to think about a time for the start of tapering $120b per month in asset purchases.

Now let’s talk about the gold market because it is related to what this commentary is all about.

We issued a warning on gold back in Sept of 2020 because of what we termed “the vaccine dead zone” was approaching, which would cause real interest rates to soar. That is exactly what occurred. Gold dropped by 20% from August ’20, thru April ‘21. Now the Fed has admitted that it has begun to talk about ending QE. But this is not the start of another bear market in gold. Instead, it is most likely the end of the bear market and the incipient beginnings of a massive bull market. Why? because of what I pointed out at the start of this commentary. The fed can’t remove very much liquidity from the system before chaos reigns on Wall Street.

The simple truth is, asset values and debt levels have grown to become such enormous monstrosities that they prohibit the tightening of monetary policy much at all before the entire fragile and artificial edifice collapses.

Right now, my 20-point Inflation/Deflation and Economic Cycle model indicates there is still some room to run on this bull market. This is what prevents us from panicking out of stocks prematurely, as some are prone to do. However, the time for a massive reconciliation of asset prices is growing close.

Wall Street’s favorite mantra post the Financial Crisis was: either the economy improves enough to boost earnings and the market, or the Fed will keep printing money in order to support stocks and engender a perpetual bull market. Now, as a result of the Fed’s “success” with creating runaway inflation, the exact opposite calculation is now true: either the economy soon slows down significantly enough on its own, which will depress EPS & inflation, or the Fed will tighten monetary policy until inflation is tamed, which will cause asset bubbles to collapse.

Central banks have destroyed price discovery across the board.

As these maniac money printers begin to exit their market manipulations, the free market will demand much lower asset prices.

The challenge for investors is to actively manage your portfolio in order to maintain—or perhaps even increase–your standard of living, in spite of the carnage that is set to occur on Wall Street and Main Street.

*  *  *

Michael Pento is the President and Founder of Pento Portfolio Strategies, produces the weekly podcast called, “The Mid-week Reality Check”  and Author of the book “The Coming Bond Market Collapse.”

Tyler Durden Wed, 06/30/2021 - 06:30
Published:6/30/2021 5:49:39 AM
[Markets] What The Pentagon Papers 50th Anniversary Means What The Pentagon Papers 50th Anniversary Means

Authored by Peter van Buren via WeMeantWell.com,

It was a humid June on the east coast 50 years ago when the New York Times began publishing the Pentagon Papers. The anniversary is worth marking, for reasons sweeping and grand, and for reasons deeply personal.

In 1971 Daniel Ellsberg leaked the Pentagon Papers, a secret U.S. government history of the Vietnam War, to the Times. No one had ever published such classified documents before, and reporters feared prosecution under the Espionage Act. A federal court ordered the Times to cease publication after an initial flurry of excerpts were printed, the first time in U.S. history a federal judge had invoked prior restraint and shattered the 1A.

In a legal battle too important to have been written first as a novel, the NYT fought back. The Supreme Court on June 30, 1971 handed down a victory for the First Amendment in New York Times Company v. United States, and the Times won the Pulitzer Prize. The Papers helped convince Americans the Vietnam War was wrong, their government could not be trusted, and The People informed by a free press could still have a say in things.

This 50 year anniversary rightfully marks all that.

Today, journalists expect a Pulitzer for a snarky tweet that mocks Trump. In our current shameful state where the MSM serves as an organ of the Deep State, the anniversary of the Papers also serves as a reminder to millennials OnlyFansing as journalists that there were once people in their jobs who valued truth and righteousness. Perhaps this may inspire some MSM propagandist to realize he might still run with lions instead of slinking home to feed his cats.

The 50th anniversary of the Papers is also a chance to remember how fragile the victory in 1971 was. The Supreme Court left the door open for prosecution of journalists who publish classified documents by focusing narrowly on prohibiting the government from prior restraint. Politics and public opinion, not law, have kept the feds exercising discretion in not prosecuting the press, a delicate dance around an 800-pound gorilla loose in the halls of democracy. The government, particularly under Obama, has meanwhile aggressively used the Espionage Act to prosecute whistleblowers who leak to those same journalists.

There is also a very personal side to this anniversary.

When my book, We Meant Well, turned me into a State Department whistleblower and set off a wall of the bad brown falling on me, Pentagon Papers leaker Daniel Ellsberg sent me two of his books, unannounced, in the mail.

He wrote a personal message inside each one, explaining to me what I was doing was hard, scary, and above all, a duty. It changed me and my understanding of what was happening to me. I wasn’t arguing procedure with the State Department and grubbing for my pension, I was defending the First Amendment itself. I wrote Dan a thank you note. Here’s some of it.

Thank you for sending me copies of your books, and thank you even more for writing “with admiration for your truth telling” inside the cover flap of one. I am humbled, because I waited my whole life to realize today I had already met you.

In 1971 I was 10 years old, living in Ohio. The Vietnam War was a part of our town’s life, same as the Fruehauf tractor-trailer plant with its 100 percent union workforce, the A&P and the Pledge of Allegiance. Nobody in my house went to war, but neighbors had gold stars in their windows and I remember one teacher at school, the one with the longer hair and the mustache, talking about Vietnam.

It meant little to me, involved with oncoming puberty, but I remember my mom bringing home from the supermarket a newsprint quickie paperback edition of the Pentagon Papers. There of course was no Internet and you could not buy the Times where I lived. Mom knew of politics and Vietnam maybe even less than I did, but the Papers were all over the news and it seemed the thing to do to spend the $1.95. When I tried to make sense of the names and foreign places it made no impact on me.

I didn’t understand then what you had done. While I was trying to learn multiplication, you were making photocopies of classified documents. As you read them, you understood the government had knowledge early on the war could not be won, and that continuing would lead to many times more casualties than was ever admitted publicly.

A lot of people inside the government had read those same Papers and understood their content, but only you decided that instead of simply going along with the lies, or privately using your new knowledge to fuel self-eating cynicism, you would try to persuade U.S. Senators Fulbright and McGovern to release the papers on the Senate floor.

When they did not have the courage, even as they knew the lies continued to kill Americans they represented, you brought the Papers to the New York Times. The Times then echoed the courage of great journalists and published the Papers, fought off the Nixon administration by calling to the First Amendment, and brought the truth about lies to America. That’s when my mom bought a copy of the Papers at the A&P.

You were considered an enemy of the United States because when you encountered something inside of government so egregious, so fundamentally wrong, you risked your own fortune, freedom, and honor to make it public. You almost went to jail, fighting off charges under the same draconian Espionage Act the government still uses today to silence others who stand in your shadow.

In 2009 I volunteered to serve in Iraq for my employer of some 23 years, the Department of State. While I was there I saw such waste in our reconstruction program, such lies put out by two administrations about what we were (not) doing in Iraq, that it seemed to me that the only thing I could do — had to do — was tell people about what I saw. In my years of government service, I experienced my share of dissonance when it came to what was said in public and what the government did behind the public’s back. In most cases, the gap was filled only with scared little men and women, and what was left unsaid hid their flaws.

What I saw in Iraq was different. There, the space between what we were doing (the waste), and what we were saying (the chant of success) was filled with numb soldiers and devastated Iraqis, not nerveless bureaucrats. It wasn’t Vietnam in scale or impact, but it was again young Americans risking their lives, believing for something greater than themselves, when instead it was just another lie. Another war started and run on lies, while again our government worked to keep the truth from the people.

I am unsure what I accomplished with my own book, absent getting retired-by-force from the State Department for telling a truth that embarrassed them. So be it; most people at State will never understand the choice of conscience over career, the root of most of State’s problems.

But Dan, what you accomplished was this. When I faced a crisis of conscience, to tell what I knew because it needed to be told, coming to realize I was risking at the least my job if not jail, I remembered that newsprint copy of the Papers from 1971 which you risked the same and more to release. I took my decision in the face of the Obama administration having already charged more people under the Espionage Act for alleged mishandling of classified information than all past presidencies combined, but more importantly, I took my decision in the face of your example.

Later, whistleblowers like Chelsea Manning, Julian Assange, and Edward Snowden would do the same. I know you have encouraged them, too, through your example and with personal messages.

So thank you for the books you sent Dan. Thank you for your courage so that when I needed it, I had an example to assess myself against other than the limp men and women working now for a Department of State too scared of the truth to rise to claim even a whisper of the word courage for themselves.

Fast-forward to 2021. In these last few years the term “whistleblower” has been co-opted such that a Deep State operative was able to abuse the term to backdoor impeachment against a sitting president. The use of anonymous sources has devolved from brave individuals speaking out against a government gone wrong into a way for journalists to manufacture “proof” of anything they want, from claims the president was a Russian spy to the use of the military to create a photo op in Lafayette Park.

On this anniversary we look at individuals like Ellsberg and reporters like those at the Times and know it is possible for individuals with courage to make a difference. That is something worth remembering, and celebrating.

Tyler Durden Wed, 06/30/2021 - 00:05
Published:6/29/2021 11:17:39 PM
[Entertainment] Patricia Reilly Giff, popular and prolific children’s author, dies at 86 Over nearly half a century, she wrote more than 100 books for young readers, including the Newbery Honor recipients ‘Lily’s Crossing’ and ‘Pictures of Hollis Woods.’ Published:6/29/2021 2:45:11 PM
[Markets] Several Observations Ahead Of Didi's Massive IPO Tonight Several Observations Ahead Of Didi's Massive IPO Tonight

With the Didi Chuxing US IPO set to price tonight at the top of its $13-$14 share range (the IPO was covered multiple times early on the first day of the bookbuild last week and the investor books were closed on Monday, one day ahead of schedule), below we present two observations ahead of what will be the biggest US share sale by a Chinese company since Alibaba raised $25 billion in 2014 in what is already a year of record IPOs.

The first, and more downbeat one, comes from Bloomberg's Julia Fioretti who notes that despite a record year for global initial public offerings, companies are still finding their valuation targets being adjusted downwards by investors.

Take Didi Global Inc. The Chinese ride-hailing giant finally launched a U.S. IPO last week which could raise as much as $4 billion. The Softbank Group Corp.-backed company is looking at a valuation of about $67 billion in the IPO, far below the $100 billion that had been floated earlier. It’s also only a minimal step up from its price tag in 2019.

That probably explains why the offering is smaller than some had anticipated. People familiar with the matter had said Didi could raise as much as $10 billion in its IPO, though the final amount always comes down to valuation.

China’s regulatory crackdown on its internet giants is likely having a ripple effect on the IPO, given the uncertainty around outcomes. Didi was among 34 internet firms ordered by regulators in April to correct excesses, and it has warned in U.S. filings that it couldn’t assure investors that government officials would be satisfied with its efforts or that it would escape penalties.

Investors have also been pushing back against lofty valuations as creeping inflation worries have dented high-growth stocks. Mixed performances from market debutantes have also injected some caution among buyers. Unprecedented liquidity and ultra-low interest rates pushed stock prices up last year, but 2021 has proved a lot more volatile.

For the second, and more cheerful take, we go to DataTrek's Nicholas Colas who has been going through the F-1 and has 3 thoughts about the deal, the company, and what it says about the current state of global disruptive innovation (he is quick to note that he does not advise buying on the IPO, as he remains concerned about the Chinese government’s ongoing local Big Tech crackdown).

#1: Corporate structure.

Back in 1992 I was the lead equity analyst on the IPO of China Brilliance Automotive, the first Chinese IPO in the NYSE’s history. The shares offered were of a Bermuda holding company, which had a stake in a Hong Kong company, which had stakes in Chinese auto assembly plants. That was the “hack” we needed to be able to offer stock in the US, and it was very opaque.

Fast forward almost 30 years, and Didi’s corporate structure is not much better. There are offshore entities in the Cayman Islands, the British Virgin Islands, and Hong Kong. On the mainland, there are 6 entities and some have different ownership percentages.

Takeaway: even after close to 3 decades since the first Chinese US IPO not much has changed with respect to what you actually own when you invest. The technology changes – China Brilliance made minivans, Didi operates the country’s largest ride sharing platform – but not the inevitable governance issues western investors must accept in order to invest.

* * *

#2: The company.

Didi presents very differently from a typical US tech disruptor. Its Founders’ Letter, for example, is humble in tone and focuses on practical issues.

China’s personal vehicle infrastructure is very different from the West. It’s hard to get a permit to own a car in many cities because local governments need to manage congestion and pollution. Ride hailing is a sensible answer, and as the country grows increasingly affluent more people will be able to afford the service.

On top of that, China is having greater success than the West at introducing electrical vehicles. Didi has developed its own, and operating costs are lower than traditional internal combustion engine vehicles. Rolling these out improves drivers’ profits and helps reduce pollution.

Takeaway: the Didi Chuxing story is pretty simple - China has a very large and unique personal mobility market, Didi owns that space and it’s actively developing/promoting next-gen technology. Which is also the problem with the story, because the national government is concerned the ride hailing market is too concentrated. How that plays out is simply unknowable.

* * *

#3: Valuation.

Based on published price talk, Didi’s value is between $62 and $67 billion. Uber’s market cap is $96 bn. But… Didi has substantially higher revenues: $6.4 bn in Q1 2021 versus $2.9 bn for Uber.

So, is Didi really worth less than Uber despite having a lock on a great growth market, +2x the revenue base, at least as strong a management team, and after the deal a currency to make acquisitions (just like Uber)? We’ll find out in the coming weeks as the IPO discount wears off.

Takeaway: Didi versus Uber is shaping up to be another chapter in the ongoing story of US Big Tech enjoying much higher valuations than their Chinese counterparts. Amazon, $1.7 tn; Alibaba, $620 billion. Facebook, $1.0 trillion, Google $1.7 tn; Tencent $740 bn, Baidu $73 bn. Part of this obviously comes from US Big Tech enjoying dominance in more affluent markets (US/Europe), so fair enough. How these differentials change in the next 5-10 years will be an important global equity market story. We’re essentially long US Big Tech and short Chinese Big Tech, and feel very comfortable with that position.

Tyler Durden Tue, 06/29/2021 - 12:35
Published:6/29/2021 11:45:18 AM
[Markets] Politics, Profit, & Poppies: How The CIA Turned Afghanistan Into A Failed Narco-State Politics, Profit, & Poppies: How The CIA Turned Afghanistan Into A Failed Narco-State

Authored by Alan Macleod via MintPresNews.com,

The COVID-19 pandemic has been a death knell to so many industries in Afghanistan. Charities and aid agencies have even warned that the economic dislocation could spark widespread famine. But one sector is still booming: the illicit opium trade. Last year saw Afghan opium poppy cultivation grow by over a third while counter-narcotics operations dropped off a cliff. The country is said to be the source of over 90% of all the world’s illicit opium, from which heroin and other opioids are made. More land is under cultivation for opium in Afghanistan than is used for coca production across all of Latin America, with the creation of the drug said to directly employ around half a million people.

This is a far cry from the 1970s, when poppy production was minimal, and largely for domestic consumption. But this changed in 1979 when the CIA launched Operation Cyclone, the widespread funding of Afghan Mujahideen militias in an attempt to bleed dry the then-recent Soviet invasion. Over the next decade, the CIA worked closely with its Pakistani counterpart, the ISI, to funnel $2 billion worth of arms and assistance to these groups, including the now infamous Osama Bin Laden and other warlords known for such atrocities as throwing acid in the faces of unveiled women.

“From statements by U.S. Ambassador [to Iran] Richard Helms, there was little heroin production in Central Asia by the mid 1970s,” Professor Alfred McCoy, author of “The Politics of Heroin: CIA Complicity in the Global Drug Trade,” told MintPress. But with the start of the CIA secret war, opium production along the Afghanistan-Pakistan border surged and refineries soon dotted the landscape. Trucks loaded with U.S. taxpayer-funded weapons would travel from Pakistan into its neighbor to the west, returning filled to the brim with opium for the new refineries, their deadly product ending up on streets worldwide. With the influx of Afghan opium in the 1980s — Jeffrey St. Clair, co-author of “Whiteout: The CIA, Drugs and the Press,” alleges — heroin addiction more than doubled in the United States.

“In order to finance the resistance for a protracted period, the Mujahideen had to come up with a livelihood beyond the weapons that the CIA was providing,” McCoy said, noting that the weapons issued could not feed the fighters’ families, nor reimburse them for lost labor:

So what the resistance fighters did was they turned to opium. Afghanistan had about 100 tons of opium produced every year in the 1970s. By 1989-1990, at the end of that 10-year CIA operation, that minimal amount of opium — 100 tons per annum — had turned into a major amount, 2,000 tons a year, and was already about 75% of the world’s illicit opium trade.”

The CIA achieved its goal of giving the U.S.S.R. its Vietnam, the Soviets failing to quash the Mujahideen rebellion by the time they finally pulled out in 1989. But American money and weapons also turned Afghanistan into a dangerously unstable place full of warring factions that used opium to fund their battles for internal supremacy. By 1999, annual production had risen to 4,600 tons. The Taliban eventually emerged as the dominant force in the country and attempted to gain international legitimacy by stamping out the trade.

In this, they were remarkably successful. A 2000 ban on opium cultivation by the Taliban-led government led to an almost overnight drop to just 185 tons harvested the following year, as frightened farmers chose not to risk attracting their wrath.

The Taliban had hoped that the eradication program would win favor in Washington and entice the United States to provide humanitarian aid. But unfortunately, history had other ideas. On September 11, 2001, the U.S. experienced a massive case of blowback, as Bin Laden’s forces launched attacks on New York and Washington. The U.S. ignored the Taliban’s offer to hand him over to a third party, instead opting to invade the country. Less than a month after the planes hit the World Trade Center, U.S. troops were patrolling the fields of Afghanistan.

The world’s first true narco-state

The effect of the occupation was to expand drug production to unprecedented new proportions, Afghanistan becoming, in Professor McCoy’s estimation, the world’s first true narco-state. McCoy notes that by 2008, opium was responsible for well over half of the country’s gross domestic product. By comparison, even in Colombia’s darkest days, cocaine accounted for only 3% of its GDP.

Today, the United Nations estimates that around 6,300 tons of opium (and rising) is produced yearly, with 224,000 hectares — an area almost the size of Rhode Island — planted with poppy fields.

Source | Dyfed Loesche | Statista

But even while it was financing a widespread and deadly aerial spraying campaign in Colombia, the United States refused to countenance the same policy in Afghanistan. “We cannot be in a situation where we remove the only source of income of people who live in the second poorest country in the world without being able to provide them with an alternative,” said NATO spokesman James Appathurai.

Not everyone agreed, however, that a passionate commitment to defending the quality of life of the poorest was the actual reason for rejecting the policy. Matthew Hoh, a former captain in the U.S. Marine Corps is one skeptic. Hoh told MintPress that airborne fumigation was not carried out because it would be outside the control of Afghan government officials, who were deeply implicated in the drug trade, owning poppy fields and production plants themselves. “They were afraid that, if they went to aerial eradication, the U.S. pilots would just eradicate willy nilly and a lot of their own poppy fields would be hit.” In 2009, Hoh resigned in protest from his position at the State Department in Zabul Province over the government’s continued occupation of Afghanistan. He told MintPress:

NATO forces were more or less guarding poppy fields and poppy production, under the guise of counterinsurgency. The logic was ‘we don’t want to take away the livelihoods of the people.’ But really, what we were doing at that point was protecting the wealth of our friends in power in Afghanistan. “

According to Hoh, there was widespread disillusionment within the military among service members who had to risk their lives on a day to day basis. “What are we doing here? This is bullshit,” was a common sentiment among the rank and file.

A US Marine stands in a poppy field during a foot patrol at Sangin, Afghanistan. Photo | DVIDS

The heroin trade implicated virtually everyone in power, including Afghan President Hamid Karzai’s brother Ahmed Wali, among the biggest and most notorious drug kingpins in the south of the country, a man widely understood to be in the pay of the CIA.

U.S. attempts to stymie the opium trade, such as the policy of paying domestic militias to destroy poppy fields, often backfired. Locals came up with ways of profiting, such as refraining from planting in one area, collecting large sums of money from occupying forces, and using that cash to plant elsewhere — effectively getting paid both to plant and not to plant. Even worse, local warlords and drug bosses would destroy their rivals’ crops and collect money from the U.S. for doing so, leaving themselves both enriched and in a stronger position than before, having gained NATO forces’ favor.

One notable example of this is local strongman Gul Agha Sherzai, who eradicated his competitors’ crops in Nangarhar Province (while quietly leaving his own in Kandahar Province untouched). But all the U.S. saw was a local politician seemingly committed to stamping out an illegal drug trade. They therefore showered him with money and other privileges. “We literally gave the guy $10 million in cash for rubbing out his competition,” Hoh said. “If you were going to write a movie about this, they’d say ‘This is too far fetched. No one is going to believe this. Nothing is this insane or stupid.’ But that is the way it is.”

McCoy noted that the Taliban was one of the prime beneficiaries of the drug trade, and used it to increase their power and vanquish the U.S.:

That booming opium production, and the U.S. failure to curb it, provided the bulk of the financing for Taliban, who captured a significant but unknown share of the local profits from the drug traffic, which they used to fund guerrilla operations over the past 20 years, becoming a determinative factor in the U.S. defeat in Afghanistan.”

‘The needle and the damage done’

It is not particularly difficult to grow opium. Opium poppies flourish in warm and dry conditions, away from the damp and the wind. Consequently, they have found a fertile home across much of central and western Asia. The plant has flourished in Afghanistan, particularly in southern provinces like Helmand, close to the tripoint where Afghanistan meets Pakistan and Iran. Much of the irrigation system in Helmand was underwritten by USAID, an organization that acts as the CIA’s public-facing front. In full bloom, the poppy fields look spectacular, with beautiful flowers of vibrant pink, red or white. Underneath the flowers, one can find a large seed pod. Farmers harvest these, draining them of a sap which dries into a resin. This is often transported out of the country through the so-called “Southern Route” via Pakistan or Iran. But, as with any pipeline, much of the product is spilled along the way, causing an epidemic of addiction across the region.

The effect on the Afghan population has been nothing short of a disaster. Between 2005 and 2015, the number of adult drug users jumped from 900,000 to 2.4 million, according to the United Nations, which estimates that almost one in three households are directly affected by addiction. While Afghanistan also produces copious amounts of marijuana and methamphetamine, opioids are the drug of choice for most, with around 9% of the adult population (and a growing number of children) addicted to them. Added to this has been a spike in HIV cases, as users share needles, Professor Julien Mercille, author of “Cruel Harvest: U.S. Intervention in the Afghan Drug Trade,” told MintPress.

Only contributing further to the despair has been 20 years of war and U.S. occupation. The number of Afghans living in poverty rose from 9.1 million in 2007 to 19.3 million in 2016. A recent poll conducted by Gallup found that Afghans are the saddest people on Earth, with nearly nine in ten respondents “suffering” and zero percent of the population “thriving,” in their own words. When asked to rate their lives out of a score of ten, Afghans gave an average answer of 2.7, a record low for any country studied. Worse still, when asked to predict the quality of their life in five years, the mean answer was even lower: 2.3.

The effects of the CIA operation to bleed the Soviets dry in Afghanistan have also produced a humanitarian crisis in neighboring Pakistan. As McCoy noted, in the late 1970s, Pakistan had barely any heroin addicts. But by 1985, Pakistani government statistics reported over 1.2 million, turning the two nations into “the global epicenter of the drugs trade” almost overnight.

The problem has only grown since. A 2013 U.N. report estimated that almost 7 million Pakistanis use drugs, with 4.25 million requiring urgent treatment for dependency issues. Nearly 2.5 million of these people were abusing heroin or other opioids. Around 700 people die every day from overdoses. The highest rate of dependency is, unsurprisingly, in provinces on the Afghan border where heroin is manufactured. The same U.N. study notes that 11% of people in the northwestern province of Khyber Pakhtunkhwa use illicit substances — primarily heroin.

The drug crisis, of course, is also a medical crisis, with overstretched public hospitals filled with drugs-related maladies. The social stigma of addiction has ripped families apart while the money and power illicit drugs have brought has turned many towns into hotspots of violence.

Iran has a similar number of opioid users, generally estimated at between two and three million. In towns close to the Afghan/Pakistani border, a gram of opium can be bought with loose change — between a quarter and fifty cents. Thus, despite the extremely harsh penalties for drug possession and distribution on the official books, the country has the highest addiction rate in the world

On a micro level, addiction tears apart families and ruins lives. On an international scale, however, the opium boom has placed an entire region under significant strain. Therefore, one consequence of U.S. policy in the Middle East — from supporting jihadists to occupying nations — has been to unleash a worldwide opium addiction that has made a few people fantastically wealthy and destroyed the lives of tens of millions.

Domestic despair

The boom in production has also led to a worldwide disaster. In the past decade, opioid-related deaths increased by 71% globally, according to the United Nations. Much of the product grown by Afghan warlords ends up on Western streets. “I don’t see how it can be a coincidence that you have that explosive growth in poppy production in Afghanistan and then you have the worldwide opioid epidemic,” Hoh stated, a connection that raises the question of whether users in Berlin, Boston, or Brazil should be seen as victims of the war in Afghanistan as much as fallen soldiers are. If so, the numbers would be staggering. Nearly 841,000 Americans have died of a drug overdose since the war in Afghanistan began, including more than 70,000 in 2019 alone. The majority of these have involved opioids.

Officially, the DEA claims that essentially all illicit opioids entering the U.S. are grown in Latin America. Hoh, however, finds this unconvincing. “When you look at their own information and their reports on the illicit opioid production hectarage in Mexico and South America, it is clear that there is not enough production in the Western hemisphere to meet the demand for illicit opiates in the U.S.,” he told MintPress.

A dirty history

The U.S. government has a long history of directly involving itself with the worldwide narcotics trade. In Colombia, it worked with President Alvaro Uribe on a nationwide drug war, even as internal U.S. documents identified Uribe as one of the nation’s most important drug traffickers, an employee of the infamous Medellin Cartel and a “close personal friend” of drugs kingpin Pablo Escobar. Profits from drug-running funded Uribe’s election runs in 2002 and 2006.

General Manuel Noriega was also a key ally of the U.S. For many years, the Panamanian was on the CIA payroll — despite Washington knowing he was involved in drug trafficking since at least 1972. When he became de facto dictator of Panama in 1984, little changed. But the director of the Drug Enforcement Agency initially praised him for his “vigorous anti-drug trafficking policy.” Eventually, however, the U.S. decided to invade the country and capture Noriega, sentencing him to 40 years in federal prison for drug crimes largely committed while he was still in the CIA’s pay.

At the same time as this was going on, investigative journalist Gary Webb exposed how the CIA helped fund its dirty war against Nicaragua’s leftist government through sales of crack cocaine to black neighborhoods across the United States, linking far-right paramilitary armies with U.S. drug kingpins like Rick Ross.

An Afghan farmer collects raw opium from poppy plants in his field in Chaparhar, Afghanistan. Nisar Ahmad | AP

To this day, the U.S. government continues to support Honduran strongman Juan Orlando Hernandez, despite the president’s well-established connections to the cocaine trade. Earlier this year, a U.S. court sentenced Hernandez’s brother Tony to life in prison for international drug smuggling, while Juan himself was an unindicted co-conspirator in the case. Nevertheless, President Hernandez has proven himself effective at suppressing the anti-imperialist Left inside his country and cementing the U.S.-backed 2009 military coup, one reason he is unlikely to face charges in the near future.

Using the illegal drug trade and the profits from it to fund imperial objectives has been a constant of great empires going back centuries. For instance, in the 1940s and 1950s, the French Empire utilized opium crops in the so-called “Golden Triangle” region of Indochina in order to help beat back a growing Vietnamese independence movement. Going further back, the British used its opium machine to subdue and economically conquer much of China. Britain’s insatiable thirst for Chinese tea was beginning to bankrupt the country, as the Chinese would accept only gold or silver as payment. It therefore used the power of its navy to force China to cede Hong Kong, from which Britain began flooding China with opium it grew in its possessions in South Asia.

The humanitarian impact of the Opium War was staggering. By 1880, the British were inundating China with over 6,500 tons of opium every year — equivalent to many billions of doses, causing massive social and economic dislocation as China struggled to cope with a crippling, empire-wide addiction. Today, many Chinese still refer to the era as “the century of humiliation.” In India and Pakistan, too, the effect was no less dramatic, as colonists forced farmers into planting inedible poppy fields (and, later, tea) rather than subsistence crops, causing waves of huge famines, the frequency of which had never been seen before.

Millions of losers

The story is much more nuanced than some “CIA controls the world’s drugs” conspiracy theories make out. There are no U.S. soldiers loading up Afghan carts with opium. However, many commanders are knowingly enabling warlords who do. “The U.S. military and CIA bear a large responsibility for the opium production boom in Afghanistan,” Professor Mercille said, explaining:

Post-9/11, they basically allied themselves with a lot of Afghan strongmen and warlords who happened to be involved in some way in drug production and trafficking. Those individuals were acting as local allies for the U.S. and NATO, and therefore were largely protected from retribution or arrest for drug trafficking because they were U.S. allies.”

From the ground, the war in Afghanistan has looked a lot like the war on drugs in Latin America and previous colonial campaigns in Asia, with a rapid militarization of the area and the empowerment of pliant local elites, which immediately begin to embezzle the massive profits that quietly disappear into black holes. All the while, millions of people pay the price, suffering inside a militarized death zone and turning to drugs as a coping mechanism. In the story of the opium boom, there are few winners, but there are millions of losers.

Tyler Durden Sun, 06/27/2021 - 23:45
Published:6/27/2021 11:04:13 PM
[Markets] Ford Electric Mustang Breaks Quarter-Mile Record, Challenges Elon Musk To "Race"  Ford Electric Mustang Breaks Quarter-Mile Record, Challenges Elon Musk To "Race" 

So while the Tesla fanboy cult salivates over the Plaid Model S zipping down the quarter-mile stretch at 9.25 seconds at 152.6 mph (data via Motor Trend), the Mustang Cobra Jet 1400, a concept car Ford revealed last year, broke the quarter-mile world record for full-body electric cars this weekend. 

Bob Tasca III, sponsored by Ford, drove the full-body electric Mustang called Cobra Jet 1400, on Saturday and hit a new world record. The vehicle shot down the quarter-mile stretch with all 1,502 horsepower silently screaming, recording a mindboggling 8.12 seconds at 171.97 mph. 

Tasca tweeted at Tesla owner Elon Musk: "Let's Race!" 

Decades ago, the battle was "Ford vs. Ferrari," now it's "Ford vs. Tesla." 

Tyler Durden Sun, 06/27/2021 - 15:30
Published:6/27/2021 2:33:44 PM
[Markets] Happy Birthday, Global Warming: Climate Change At 33 Happy Birthday, Global Warming: Climate Change At 33

Authored by Rupert Darwell via RealClearEnergy.com,

This month, climate change celebrates its 33rd birthday. On June 23, 1988, NASA scientist James Hansen testified that the greenhouse effect had been detected. “Global Warming Has Begun,” The New York Times declared the next day. Indeed, it had.

A year older than Alexander the Great when he died, climate change took less than one-third of a century to conquer the West.

Four days earlier, the Toronto G7 had agreed that global climate change required “priority attention.” Before the month was out, the Toronto climate conference declared that humanity was conducting an uncontrolled experiment “whose ultimate consequences could be second only to a global nuclear war.” In September, Margaret Thatcher gave her famous speech to the Royal Society, warning of a global heat trap. “We are told,” although she didn’t say by whom, “that a warming of one degree centigrade per decade would greatly exceed the capacity of our natural habitat to cope,” an estimate that turned out to be a wild exaggeration. Observed warming since then has been closer to one-tenth of one degree centigrade per decade. Two months later, the Intergovernmental Panel on Climate Change (IPCC) held its inaugural meeting in Geneva.

The tendency to catastrophism was present at the outset of global warming. The previous year, at a secretive meeting of scientists that included the IPCC’s first chair, it had been recognized that traditional cost-benefit analysis was inappropriate, on account of the “risk of major transformations of the world of future generations.” The logic of this argument requires that climate change be presented as potentially catastrophic—otherwise, the cure would appear worse than the putative disease.

Although catastrophism gave climate change emotive power, the most consistent feature of climate change is the failure of predictions of catastrophe to materialize. In 1990, Martin Parry, a future cochair of an IPCC working group, produced a report claiming that the world could suffer mass starvation and soaring food prices within 40 years. Yet the prevalence of undernourishment in developing countries has been on a downward trend since the 1970s and was nearly halved, from 23.3% in 1991 to 12.9% in 2015.

Although global warming conquered the West, it failed in the East. The model for international environmental cooperation was the 1987 Montreal Protocol on protecting the ozone layer. Its negotiation and ratification was led by the Reagan administration, which recognized that the U.S. would be the biggest beneficiary from having a strong treaty. Thanks to U.S. leadership, the negotiations were conducted quickly (in a matter of months) and the protocol has teeth, containing strong incentives for countries to join and the threat of trade sanctions for those that do not.

This path was quickly blocked for climate change. At the end of 1988, the Maltese government sponsored a resolution of the UN General Assembly on the conservation of the climate as mankind’s common heritage, the subtext being that rich countries shouldn’t negotiate a climate change treaty and then impose it on the rest of the world. The advantage of going down the UN route was that it led to the creation of a permanent and growing bureaucratic infrastructure with annual meetings to keep global warming’s place in public discourse. The downside is that negotiating texts must be agreed by consensus, foreclosing the possibility of a Montreal-like negotiating process and outcome. In 1990, the General Assembly adopted a resolution establishing the Intergovernmental Negotiating Committee for a Framework Convention on Climate Change, which produced a final text in time for the 1992 Rio Earth Summit.

The most important features of the 1992 climate convention are its ground plan, carving the world in two, with the developed North listed in Annex I, and the doctrine of “common but differentiated responsibilities” (the first principle listed in the convention and arguably its governing one). The bifurcation was made concrete in 1995 at the first conference of the parties in Berlin. Presided over by Angela Merkel as Germany’s environment minister, the Berlin Mandate stipulated that Annex I parties should strengthen their commitment to decarbonize on condition that non–Annex I parties did not, preparing the way for the Kyoto Protocol two years later.

The Clinton administration hadn’t given much thought to the implications of the Berlin Mandate. The Senate did. In July 1997, by 95 votes (including those of then-senators Biden and Kerry) to zero, it adopted the Byrd-Hagel resolution: America should not sign any protocol that imposed limits on Annex I parties unless it also imposed specific, time-tabled commitments on non–Annex I countries. Although the Clinton administration signed the Kyoto Protocol, the Senate had killed U.S. participation; it was left to the incoming president, George W. Bush, to garner the opprobrium for stating the obvious. Both he and Barack Obama pursued essentially the same post-Kyoto strategy of trying to get China and other major emerging economies to make treaty commitments to decarbonization, an attempt that failed at the 2009 Copenhagen climate conference, when China, India, South Africa, and Brazil vetoed a new climate treaty.

In picking up the pieces, Todd Stern, President Obama’s climate negotiator, had the twin objectives of crafting something that China would accept but that didn’t require the Senate’s advice and consent. The outcome was the Paris climate agreement. It embodies the climate equivalent of Mikhail Gorbachev’s Sinatra Doctrine of allowing individual parties to the agreement to “do it their way.” Hailed as a game changer in the fight to save the planet, the reality of Paris was rather different. Just as Gorbachev’s Sinatra Doctrine was an admission that the Soviet Union had lost the Cold War, the Paris agreement signaled that the West had given up on having a global decarbonization regime, with credible sanctions against free riding.

Although the Obama administration played an essential role in its gestation, the U.S. is the biggest loser from the Paris agreement. America is to forfeit its recently won position as the world’s largest producer of hydrocarbon energy. For what?

The story of carbon dioxide emissions is acceleration in the declining share of Western emissions. The year 1981 was the last one in which the West’s energy and cement manufacture carbon dioxide emissions were greater than the rest of the world’s (the latter includes Japan—culturally non-Western, ambivalent about climate change, and the only nation to have hosted a major climate conference presided over by a foreign national). By 1988, despite the economic expansion of the 1980s, the West’s emissions had grown by only 3.8%, while the rest of the world’s had grown by 27.0%.

After 2002, non-Western emissions grew even faster. In the 12 years before 2002, non-Western emissions grew by 21.2%; and in the subsequent 12 years, by 76.8%. By 2014, with Western emissions broadly flat over the 24-year period, Western emissions had shrunk to 26% of the total, and the share of non-Western emissions had risen to 74%. In less than a decade and a half, the increase in non-Western emissions outstripped the combined total of U.S. and E.U. emissions. In terms of affecting the physics of global warming, it doesn’t really matter what the West does any more.

William Nordhaus, the world’s preeminent climate economist, offers a brutal assessment of climate policy. “After 30 years, international policy is at a dead end,” he said in a little-noticed October 2020 presentation to the European Central Bank. “We have policies, but they have not been effective, and they’re getting us basically nowhere.” The culprit, in Nordhaus’s view? The free-rider problem. Nordhaus’s solution is to replace the current structure with a “club” whose members agree on a uniform price for carbon dioxide (he suggests $50 per ton of CO2) plus a straight 3% penalty tariff on imports from non-club members. What Nordhaus proposes, in essence, is the Montreal Protocol structure adapted for climate change.

Joe Biden campaigned to restore U.S. climate leadership and rejoin the Paris agreement. The two are contradictory. Following the Europeans down the dead end of a three-decade-old UN process hardly constitutes leadership. Heeding Nordhaus’s advice and abandoning the UN process is something that only an American president can do. But that would be to assume that the purpose of the UN is to moderate global warming.

Days before the Paris conference, Maurice Strong died. A committed environmentalist, no person did more to put environmentalism on the international agenda, leading the 1972 Stockholm UN conference on the environment and the Rio Earth summit 20 years later. A small gathering was held at the Paris conference to share reminiscences about Strong and his achievements. One of his aides at the Stockholm conference recalled asking him what the policy of the conference should be. “The process is the policy,” Strong replied.

Strong’s genius was to understand that a self-perpetuating UN process would continuously accrete money, influence, and, above all, power. Environmentalism would not have become the dominant ideology in the West without the deployment of the UN’s climate apparatus: the annual cycle of climate conferences spliced periodically with ones that are going to save the planet (Kyoto in 1997; Bali in 2007; Copenhagen in 2009; Paris in 2015; and Glasgow in 2021). Then there’s the IPCC, set up by the UN Environment Programme and the World Meteorological Organization, and its five—soon to be six—generations of assessment reports.

“Embedded in the goal of limiting warming to 1.5°C is the opportunity for intentional societal transformation,” the IPCC says in its scientific assessment of the 1.5°C target. All ideologies seek power. Seen in this light, global warming gave environmentalism the means for it to conquer the West and become the dominant ideology of our age. Environmentalism’s attitude toward nuclear power provides a test for this proposition. If the paramount concern of environmentalists had been to reduce emissions of carbon dioxide and slow down climate change, they would campaign to keep existing nuclear power stations and build new ones. Yet viable nuclear power stations are being prematurely closed in California, New York, Germany, and Belgium. Why?

Nuclear power is a Promethean crime of humanity stealing the deepest secrets of nature to release unlimited quantities of energy, in the eyes of environmentalists—a crime far worse than global warming. Instead, humanity must live within the rhythms and constraints decreed by nature; hence environmentalists’ belief that power stations should be replaced by inefficient, weather-dependent wind and solar farms.

The growth of wind and solar generation is not a market-driven phenomenon of a superior technology displacing an obsolete one. It’s what happens when governments heavily subsidize zero-marginal cost output, flooding wholesale markets with unwanted electricity when there’s too much sun and wind and risking power failures when there’s too little. The ubiquity of wind and solar symbolizes environmentalism reversing the logic of the Industrial Revolution in transforming predominantly agrarian societies at the mercy of climate to weather-resistant ones and helps explain the contrasting fortunes of environmentalism and Marxism. Environmentalism succeeded in the West and has become part of the political mainstream, to the extent that it defines politically acceptable opinion. Marxism lost in the West but thrived in preindustrial societies, because the political priority remains economic development. In practical terms, this is synonymous with industrialization and carbonizing their economies.

The outcome has been to shift the balance of climate power from the West to the rest of the world and the major emerging economies, in particular. Yet the lopsided arithmetic of the West versus the rest’s emissions has not softened the effectiveness of global warming as an ideological weapon because it is not based on any rational calculus but derives from its threat of planetary catastrophe. The future, as it had been in Marxism, again becomes “the great category of blackmail,” as the French philosopher Pascal Bruckner writes in “The Fanaticism of the Apocalypse.”

Climate change does represent an existential threat to Western civilization, although not in the way environmentalists say. Net-zero climate policies threaten to undermine the internal cohesiveness of Western societies and drain them of economic vitality. Externally, they will accelerate the redistribution of power away from the West to those nations that decide not to decarbonize, especially to China. Decarbonization will see the progressive elimination of high-paying, high-productivity blue-collar employment such as coal mining, oil and gas, steelmaking, and energy-intensive manufacturing. The aristocracy of labor will become an extinct social class; instead, as social mobility stagnates and class stratifications solidify, social geographer Joel Kotkin foresees the coming of neo-feudalism.

Accompanying these regressive social developments is the atrophying of democratic politics. Net-zero climate policies require reorganizing society around the principle of decarbonization—not through a couple of election cycles but over the next three decades. Net-zero must therefore be put beyond the reach of democratic politics so that voters cannot reverse a decision that was taken for them. This provides a better fit for a post-democratic polity such as the European Union. Britain has a statutory climate change committee to hold the government to account for meeting decarbonization targets.

Although the Biden administration has adopted a target of net-zero by 2050 and of halving greenhouse gas emissions by 2030, Congress has not passed—and is unlikely to pass—climate legislation mandating these targets. Nonetheless, American corporations in droves are pledging their own net-zero targets. Wall Street and ESG (environmental, social, and governance) investing and climate disclosures, which the SEC intends to mandate, have opened an alternative route on the basis of what gets measured gets managed.

Larry Fink, CEO of BlackRock, the world’s largest asset manager, candidly admits that forcing companies to disclose their emissions isn’t transparency for transparency’s sake: “disclosure should be a means to achieving a more sustainable and inclusive capitalism.” This collusion between the administrative state and climate activists to bypass Congress has been condemned by Republicans on the Senate Banking Committee. “Activists with no fiduciary duty to the company or its shareholders are trying to impose their progressive political views on publicly traded companies, and the country at large, having failed to enact change via the elected government,” Senator Toomey and his colleagues wrote in a letter to SEC chair Gary Gensler earlier this month.

In addition to this usurpation of the political prerogatives of democratic government, forcing business to take on governmental functions to address societal problems will see them, over time, acquire the modes and culture of government bureaucracies. This subtracts from the core economic function of the business corporation in a capitalist economy. “The capitalist economy,” in the words of the growth economist William Baumol, “can usefully be viewed as a machine whose primary product is economic growth.” What distinguishes it most sharply from all other economic systems are free-market pressures that force firms to engage in a continuous, competitive process of innovation. “This does not happen fortuitously,” writes Baumol, “but occurs when the structure of payoffs in an economy is such as to make unproductive activities such as rent-seeking (or worse) more profitable than activities that are productive.”

If CEO remuneration is aligned with ESG objectives and decarbonization targets and if directors risk being voted off boards for not having them, businesses will increasingly focus their efforts on meeting these non-business objectives. As this incurs costs and impairs business performance, businesses will turn to politicians to seek protection from their antisocial competitors that refrain from doing the government’s work. Capitalism’s legitimacy rests on its record of raising living standards through its prodigious capacity to generate productive wealth. Should that slow down to a trickle, capitalism becomes hard to justify, even though the explanation is that the system is no longer a capitalistic, free-market one.

Global warming flourished during a period when the world had taken a holiday from geopolitics. It had entered the world as geopolitical tensions were easing. Six months earlier, in December 1987, Ronald Reagan and Mikhail Gorbachev signed the INF treaty, eliminating intermediate nuclear missiles. By the time of the Rio Earth Summit, the Soviet Union was gone. Geopolitics is now back. There is a broad consensus in Washington that President Xi’s China is a strategic rival to the U.S. Yet the new strategic realism ceases when it comes to climate change.

According to the IPCC, net-zero requires “transformative systemic change” that involves “unprecedented policy and geopolitical challenges.” The International Energy Agency calls decarbonizing the energy sector “perhaps the greatest challenge humankind has faced.” The West embarking on this process when China does not is akin to signing a strategic arms-control treaty binding on only one side: it can only be to China’s strategic advantage. So far, the grip of environmentalism on Western policymakers lulls them into the belief that global warming operates in a strategic vacuum, insulated from the factors that constitute geopolitical weight and ambition. It is in that sense that climate change constitutes an existential threat to the West.

Tyler Durden Sun, 06/27/2021 - 09:20
Published:6/27/2021 8:29:30 AM
[Markets] The Con Job Of The Century? The Con Job Of The Century?

Authored by Laurie Calhoun via The Libertarian Institute,

Over the course of the past century, a number of truly awe-inspiring heists have been carried out by con artists, whose modus operandi is to exploit human frailties such as credulity, insecurity and greed. Con is short for confidence, for the con artist must first gain the trust of his targets, after which he persuades them to hand their money over to him. A con job differs from a moral transaction between two willing, fully informed trading partners because one of the partners is deceived, and deception constitutes a form of coercion. In other words, the person being swindled is not really free. If he knew what was really going on, he would never agree to invest in the scheme.

The "Ponzi scheme" was named after Charles Ponzi, who in the 1920s persuaded investors to believe that he was generating impressive profits by buying international reply coupons (IRCs) at low prices abroad and redeeming them in the United States at higher rates, the fluctuating currency market being the secret to his seemingly savvy success. In reality, Ponzi used his low-level investors' money to pay off earlier investors, support himself, and expand his business by luring more and more investors in. More recently, Bernie Madoff managed to abscond with billions of dollars by posing as an investment genius who could deliver sizable, indeed exceptional, returns on his clients’ investments.

It is plausible that at least some of the early investors in such gambits, who are paid as promised, suppress whatever doubts may creep up in their minds as they bask in the splendor of their newfound wealth. But even those who begin consciously to grasp what is going on may turn a blind eye as the scheme grows to engulf investors who will be fleeced, having been persuaded to participate not only by the smooth-talking con artist, but also by the reported profits of previous investors. Eventually, however, the house of cards collapses, revealing the incredible but undeniable truth: there never were any investments at all. No trading ever took place, and all of the company’s transactions were either deposits or withdrawals of gullible investors’ cash.

Before a con artist is unmasked, nearly everyone involved plays along, either because they stand to gain, or because they truly believe. Sometimes the implications of having been wrong are simply too devastating to admit, and these same psychological dynamics operate in many other realms where most people would never suspect anything like a Ponzi scheme. It is arguable, for example, that the continuous siphoning of U.S. citizens’ income to pay for misguided military interventions abroad constitutes a form of Ponzi scheme. If President George H. W. Bush had never used taxpayers’ dollars to wage the First Gulf War on Iraq in 1991 and to install permanent military bases in the Middle East, then Osama bin Laden would likely never have called for jihad against the United States. If the U.S. military had not invaded Iraq in 2003, then ISIS would never have emerged and spread to Syria and beyond. Such implications are deeply unsettling, and even in the face of mounds of evidence, most people prefer to cling to the official story according to which the 1991 Gulf War was necessary and just, while the terrorist attacks of September 11, 2001, were completely unprovoked, and all subsequent interventions a matter of national self-defense.

The series of bombing campaigns in the Middle East beginning in 1991 are plausibly regarded as a type of Ponzi scheme because the "investors" (taxpayers), have actually paid to make themselves worse, not better, off. Not only have the "blowback" attacks perpetrated in response to U.S. military intervention abroad killed many innocent persons, but the lives of thousands of soldiers have been and continue to be wrecked through dubious deployments abroad. Along with all of the blood spilled, much treasure has been lost. The more than $28 trillion national debt (as of June 2021) is due in part to the massive Pentagon budget, rubber-stamped annually by Congress, to say nothing of the many other "discretionary" initiatives claimed to be necessary in national defense. Afghanistan is a perfect example of how billions of taxpayer dollars continue to be tossed into the wind even as the formal U.S. military presence winds down. The reason why the War on Terror continues on is not because it is protecting the citizens who pay for it or helping the people of the Middle East but because it has proved to be profitable to persons in the position to influence U.S. foreign policy.

One might reasonably assume that anyone who stands to enrich himself from government policies should be excluded from consequential deliberations over what ought to be done, and in certain realms, the quite rational concern with conflict of interest still operates to some degree. With regard to the military, however, there has been a general acquiescence by the populace to the idea that because only experts inside the system are capable of giving competent advice, they must be consulted, even when they will profit from the policies they promote, such as bombing, which invariably increases the value of stock in companies such as Raytheon. Throughout history, there has always been a push by war profiteers to promote military interventions, but Dick Cheney, who served as Secretary of Defense under George H.W. Bush and vice president under his son, George W. Bush, took war profiteering to an entirely new level. By privatizing many military services through the Logistics Civilian Augmentation Program (LOGCAP), Cheney effectively ushered in a period of war entrepreneurialism, beginning with Halliburton (of which he was CEO from 1995-2000), which continues on today, making it possible for a vast nexus of subcontractors to profit from the never-ending War on Terror, and to do so in good conscience. When more people have self-interested reasons for supporting military interventions, then they become more likely to take place.

With the quelling of concerns that conflict of interest should limit the persons who advise the president on matters of foreign policy, the formal requirement that the secretary of defense be not a military officer but a civilian has been effectively dropped, with both James Mattis and Lloyd Austin easily confirmed as "exceptions" to the rule, despite the fact that, not only did both have significant financial interests in promoting war, but each also had a full career in the military before retiring and being invited to lead the DoD. Military men are inclined to seek military solutions to conflict, which is undoubtedly why high-ranking officers are invited to join the boards of military companies, making Mattis and Austin textbook examples of "revolving door" appointments.

Arguably even more ruinous to the republic in the longterm than the rampant conflict of interest inherent to "revolving door" appointments between the for-profit military industry and the government has been the infiltration of the military into academia, with many universities receiving large grants from the Defense Department for research. Academia would be a natural place for intellectual objections to the progressive militarization of society, but when scholars and scientists themselves benefit directly from DoD funds, they have self-interested reasons to dismiss or discredit those types of critiques—whether consciously or not—in publishing, retention and promotion decisions. In addition to the institutional research support provided by DARPA (the Defense Advanced Research Projects Agency), successful academics may receive hefty fees as consultants for the Pentagon and its many affiliates, making them far more likely to defend the hegemon than to raise moral objections to its campaigns of mass homicide euphemistically termed "national defense".

As a result of the tentacular spread of the military, Cui bono? as a cautionary maxim has been replaced by Who cares? People seem not at all bothered by these profound conflicts of interest, and the past year has illustrated how cooption and corruption may creep easily into other realms as well. Indeed, there is a sense in which today we have two MICs: the military-industrial-complex and, now, in the age of Covid-19, the medical-industrial-complex. This latter development can be viewed, in part, as a consequence of the former, for in recent decades the military industrial complex has sprouted tentacles to become the military-industrial-congressional-media-academic-pharmaceutical-logistics banking complex. Long before Covid-19 appeared on the scene, the Veterans Administration (VA) adopted pro-Big Pharma policies, including the prescription of a vast array of psychotropic medications in lieu of "talk therapy" to treat PTSD among veterans and to preemptively medicate soldiers who expressed anxiety at what they were asked to do in Afghanistan and Iraq. The increase in the prescription of drugs to military personnel generated hefty profits for pharmaceutical firms, allowing them to expand marketing and lobbying efforts to target not only physicians but also politicians and the populace.

Since the initial launch of Prozac in 1986, the pharmaceutical industry has become an extremely powerful force in Western society, made all the more so in the United States when restrictions on direct-to-consumer advertising were lifted by the Food and Drug Administration (FDA) in 1997. Already by 2020, about 23% of Americans (nearly 77 million out of a population of 331 million) were taking psychiatric medications, and those numbers appear to have increased significantly during the 2020 lockdowns, which took a toll on many people’s psychological well-being. As medications are prescribed more and more throughout every sector of society, drug makers exert a greater and greater influence on policy, even as the heroin/fentanyl overdose epidemic, caused directly by the aggressive marketing and rampant overprescription of opioid painkillers, continues on.

Just as the military industry is granted the benefit of the doubt on the assumption that they are helping to protect the nation, the pharmaceutical industry accrues respectability from its association with the medical profession. Who, after all, could oppose "defense" and "health"? In reality, however, for-profit weapons and drug companies are beholden not to their compatriots, nor to humanity, but to their stockholders. War and disease are profitable, while peace and health are not. The CEOs of military and pharmaceutical companies, like all businesspersons, seek to ensure that their profits increase by all means necessary, the prescription opioid epidemic being a horrific case in point. Just as academics may enjoy Defense Department funding, many doctors and administrators of medical institutions today derive essential funding from drug companies and the government, whether directly or indirectly. These connections are immensely important because many politicians receive generous campaign contributions from Big Pharma, which by now has more lobbyists in Washington, DC, than there are congresspersons, and not without reason. Formulary decisions at the VA regarding the appropriateness of prescribing, for example, dangerous antipsychotic medications such as Astrazeneca’s Seroquel to soldiers as sleep aids are made by administrators who are political appointees, as are public health officials more generally.

Charles Ponzi. Image source: Wikimedia Commons.

With a functional Fourth Estate, it would be possible to question if not condemn the conflicts of interest operating in the for-profit military and medical realms. Unfortunately, however, we no longer have a competent press. Throughout the Coronavirus crisis, this has become abundantly clear as alternative viewpoints on every matter of policy have been squelched, suppressed, and outright censored in the name of the truth, when there may have been ulterior motives at play. In fact, the complete quashing of any directives regarding non-vaccine therapies for mitigating the effects of Covid-19—including Ivermectin and Hydroxychloroquine—may be best explained by the simple fact that FDA emergency use authorization of vaccines in the United States is possible only when "there are no adequate, approved, and available alternatives," as is stated plainly on the specification sheets for the Pfizer and Moderna vaccines.

Regarding the origins of the virus, early claims by some researchers that Covid-19 may have been produced in the virology lab in Wuhan and released accidentally were swiftly dismissed as "conspiracy theories." Anyone who suggested this eminently plausible origin of the virus was immediately denounced by the media and deplatformed or censored by the big tech giants. "Gain-of-function" research, often funded by the military, involves making existent viruses deadlier to human beings and is said by its proponents to be necessary in order to be prepared for future natural pandemics or in the event that some enemy might use such a virus as a bioweapon. The latter is a familiar line of reasoning among military researchers, invoked also (mutatis mutandis) in nuclear proliferation and the military colonization of space: we must develop the latest and greatest nuclear bombs and effect total spectrum domination of the galaxy before any other government has the chance to do so! Many of the scientists involved in these endeavors may have the best of intentions, but that does nothing to detract from the propensity of human beings to commit errors.

Read the rest of the full essay here.

Tyler Durden Sat, 06/26/2021 - 23:45
Published:6/26/2021 10:56:21 PM
[Markets] Do You Hear The Bells Ringing? Do You Hear The Bells Ringing?

Authored by MN Gordon via EconomicPrism.com,

There’s an old Wall Street adage, you’ve likely heard it, “No one rings a bell at the top (or bottom) of the market.”

The bell, of course, is the signal to sell at the market top.  Here we pause to take exception with this adage. 

As far as we can tell, bells do ring at market tops.  Yet few hear them.  Most people’s ears are plugged with the prospects of easy riches.

Bull markets often give way to manias…where an asset’s intrinsic value becomes less important than the hope that an overpriced asset can be later offloaded at a higher price to a greater fool.  Certainly, irrational pricing based on greater fool dynamics is the sound of a ringing bell.  Though this can go on for years.

The current ratio of total market capitalization to GDP (now over 200 percent) is most definitely the sound of a ringing bell.  Another ringing bell is the $500 million batch in junk bonds recently sold by MicroStrategy for the sole purpose of buying bitcoin.  These bitcoin junk bonds pay a generous 6.125 percent coupon rate.

How will MicroStrategy pay the coupon if bitcoin goes down?  Will they sell more junk bonds?  Will anyone buy them?

Do you hear any bells ringing?

At the moment (at the market top), few people do.  These bells won’t be heard until after the market craters.  In retrospect, it becomes obvious that, at the market top, bells had been ringing practically every day.

The sound of a bell ringing at the market bottom is much more grim.  At real market bottoms, people kill themselves.  That’s when the great frauds are revealed.  And some former titans of industry are revealed to be great swindlers.

Today we look back nearly 100 years to one of the great Wall Street swindlers.  We squint for parallels to the present.  There is instruction to be found…and frauds to avoid…

The “Swedish Match King”

On March 12, 1932, just several months before the market bottom of the Great Depression, Ivar Kreuger shot himself through the heart with a 9mm semi-automatic gun in his hotel room in Paris.  The world was shocked.  Why would the savior of Europe, the most respected business man in the world, an advisor to the President of the United States, off himself?

Many of today’s investors have never heard of Kreuger, the “Swedish Match King.”  They should.  Knowing his story could help protect their lifesavings in the months ahead.

Kreuger was a Swedish civil engineer, financier, and industrialist.  He got his start in the construction business.  In 1908, he co-founded Kreuger & Toll.  The company had early success and went on to construct the Stockholm Olympic Stadium and completed the foundation work for Stockholm City Hall.

Kreuger soon moved into matches.  Between 1913 and 1932, Kreuger built a global match empire, which owned manufacturing operations in 36 countries, had monopolies in 16 countries, and controlled two thirds of the world’s match production.

Kreuger quickly expanded his global monopoly by loaning money to governments in Europe, Latin America, and Asia in exchange for national match monopolies.  This business model required Kreuger to come up with ever deeper pools of money to loan. Thus, to further his expanding reach, sometime between 1923 and 1924 Kreuger transformed from a moderately honest industrialist to a dishonest stock promoter.

What compelled this transformation is anyone’s guess.  In a three part series that ran in Fortune in May, June, and July 1933, writer and poet Archibald MacLeish offered the following motivation.

“When, in that year [1923], Kreuger with his passion for power, discovered, through and not by Lee Higginson [the most prestigious bank in the world at the time], the New York glut of gold and the inexhaustible New York appetite for stocks he also discovered the superiority of the stock market to the match factory as a means of conquest. 

“If that discovery implies a weakening of the mind then there were many other Wall Street idiots in the ‘20s.  […]  Other men before Krueger have believed their schemes were fateproof and have believed it with less reason than Kreuger had.  For it was always a prime consideration in Kreuger’s plans that some day—and some day not too far—the Swedish Match Monopoly would become a monopoly of the world, in which case all his claims and frauds and thefts would be made good.  And the Kreuger companies came within gunshot of that goal.”

Indeed, stock promotion and financial engineering, like an apple from a serpent, can offer the alluring promise of an easier softer way to attain wealth than actual production.

Confidence in Confidence

Kreuger relied on Wall Street capital markets to finance acquisitions and monopoly deals.  American investors were eager to get in on the outsized returns.

By 1929, the stocks and bonds of Kreuger’s companies, some which paid 25 percent annual dividends, were the most widely held securities in the United States and the world.  However, after Kreuger’s surprising suicide, forensic auditors at Price Waterhouse discovered that Kreuger had operated a giant Ponzi scheme.

His accounts were full of fictitious assets that were dispersed through a maze of over 400 subsidiary companies.  By late February 1932, Kreuger could no longer stay ahead of his creditors with his shell company money shuffling scheme.  The gig was up.  Several weeks later Kreuger made his final escape.

Price Waterhouse, following their post-mortem of Kreuger’s businesses, provided the following assessment:

“We do not think more need be said about these published accounts except that the manipulations were so childish that anyone with but a rudimentary knowledge of bookkeeping could see the books were falsified.  […] Entries in its general books were palpably false, few entries even looking reasonable on the surface.”

What’s the point?

We’re presently 12 years into a bull market.  Many investors, like those in the 1920s, believe the current rise in the stock market will continue.  They also believe the promises of financial engineering, many which were pioneered by Kreuger, will keep financial markets stuffed full of cash.  They believe this time is different.

More likely, however, it won’t be different.  More likely, a similar fraud will be discovered.

In the introduction to, “Kreuger: Genius and Swindler,” by Robert Shaplen, published in 1960, John Kenneth Galbraith remarked:

“Kreuger flourished during the boom years of the twenties; it is the nature of the boom that the men who have confidence and do not ask questions look with uneasiness on the suspicious men who do.  And we may lay it down as an absolute rule that, given an excess of confidence, there will be confidence men to take advantage of it.”

Do You Hear the Bells Ringing?

Here at the Economic Prism we’re suspicious.  We have little confidence in confidence men.  We ask questions…though not to be construed as accusations of fraud.  What follows are merely questions…

  • Why is Tesla trading at over 200 times earnings?

  • Why is total issuance of collateralized loan obligations projected to grow to $850 billion outstanding by the end of the year?

  • Why was JPMorgan’s CEO Jamie Dimon paid $31.5 million in 2020?

  • Why is the Cyclically Adjusted Price Earnings Ratio (CAPE Ratio) for the S&P 500 at 37.84…more than double its long term mean of 16.82?

  • Why did the Federal Reserve’s reverse repurchase operation hit a record $813.573 billion on Wednesday…up from $791.6 billion on Tuesday…what’s going on?

  • Why is the yield on the 10-Year Treasury note just 1.5 percent when consumer price inflation is ‘officially’ rising at a 5 percent annualized rate?

  • Why did the NASDAQ and S&P 500 indexes just hit new record highs?

  • Why is the U.S. national debt now over $28.4 trillion?

  • Why do statists despise gold?

  • And much, Much, More…

Countless bells are ringing.  Do you hear them?

Tyler Durden Sat, 06/26/2021 - 10:30
Published:6/26/2021 9:52:50 AM
[] Woke General: We Have to Indoctrinate Our Troops in Marxist Critical Race Theory So We Can Understand Our Nation; The January 6 Incident Was Borne of "White Rage" Mark Milley, the head of the Joint Chiefs of Staff appointed by the moderate, centrist, conservative-leaning candidate relentlessly vouched for by the True Conservatives of NeverTrump, says that it's critical for the troops to read books by hardcore anti-white... Published:6/25/2021 11:17:17 AM
[Markets] The "Conspiracy Theory" Charade The "Conspiracy Theory" Charade

Authored by James Bovard via JimBovard.com,

How government and media use the phrase to suppress opposition...

Biden’s “National Strategy for Countering Domestic Terrorism” report last week declared that “enhancing faith in American democracy” requires “finding ways to counter the influence and impact of dangerous conspiracy theories.” In recent decades, conspiracy theories have multiplied almost as fast as government lies and cover-ups. While many allegations have been ludicrously far-fetched, the political establishment and media routinely attach the “conspiracy theory” label to any challenge to their dominance.

According to Cass Sunstein, Harvard Law professor and Obama’s regulatory czar, a conspiracy theory is “an effort to explain some event or practice by reference to the machinations of powerful people, who have also managed to conceal their role.” Reasonable citizens are supposed to presume that government creates trillions of pages of new secrets each year for their own good, not to hide anything from the public.  

In the early 1960s, conspiracy theories were practically a non-issue because 75 percent of Americans trusted the federal government. Such credulity did not survive the assassination of John F. Kennedy. Seven days after Kennedy was shot on November 22, 1963, President Lyndon Johnson created a commission (later known as the Warren Commission) to suppress controversy about the killing. Johnson and FBI chief J. Edgar Hoover browbeat the commission members into speedily issuing a report rubberstamping the “crazed lone gunman” version of the assassination. House Minority Leader Gerald Ford, a member of the commission, revised the final staff report to change the location of where the bullet entered Kennedy’s body, thereby salvaging Hoover’s so-called “magic bullet” theory. After the Warren Commission findings were ridiculed as a whitewash, Johnson ordered the FBI to conduct wiretaps on the report’s critics. To protect the official story, the commission sealed key records for 75 years. Truth would out only after all the people involved in any coverup had gotten their pensions and died.

The controversy surrounding the Warren Commission spurred the CIA to formally attack the notion of conspiracy theories. In a 1967 alert to its overseas stations and bases, the CIA declared that the fact that almost half of Americans did not believe Oswald acted alone “is a matter of concern to the U.S. government, including our organization” and endangers “the whole reputation of the American government.” The memo instructed recipients to “employ propaganda assets” and exploit “friendly elite contacts (especially politicians and editors), pointing out… parts of the conspiracy talk appear to be deliberately generated by Communist propagandists.” The ultimate proof of the government’s innocence: “Conspiracy on the large scale often suggested would be impossible to conceal in the United States.”

However, the CIA did conceal a wide range of assassinations and foreign coups it conducted until congressional investigations in the mid-1970s blew the whistle. The New York Times, which exposed the CIA memo in 1977, noted that the CIA “mustered its propaganda machinery to support an issue of far more concern to Americans, and to the C.I.A. itself, than to citizens of other countries.” According to historian Lance deHaven-Smith, author of Conspiracy Theory in America, “The CIA’s campaign to popularize the term ‘conspiracy theory’ and make conspiracy belief a target of ridicule and hostility must be credited…with being one of the most successful propaganda initiatives of all time.” (In 2014, the CIA released a heavily-redacted report admitting that it had been “complicit” in a JFK “cover-up” by withholding “incendiary” information from the Warren Commission.)

The Johnson administration also sought to portray critics of its Vietnam War policies as conspiracy nuts, at least when they were not portraying them as communist stooges. During 1968 Senate hearings on the Gulf of Tonkin incident, Defense Secretary Robert McNamara denounced the “monstrous insinuations” that the U.S. had sought to provoke a North Vietnamese attack and declared that it is “inconceivable that anyone even remotely familiar with our society and system of government could suspect the existence of a conspiracy” to take the nation to war on false pretenses. Three years later, the disclosure of the Pentagon Papers demolished the credibility of McNamara and other top Johnson administration officials who indeed dragged America into the Vietnam War on false pretenses.

Condemnations of conspiracy theories became a hallmark of the Clinton administration. In 1995, President Bill Clinton claimed that people who believed government threatened their constitutional right were deranged ingrates: “If you say that Government is in a conspiracy to take your freedom away, you are just plain wrong…. How dare you call yourselves patriots and heroes!” The same year, the White House compiled a fevered 331-page report entitled “Communication Stream of Conspiracy Commerce,” attacking magazines, think tanks, and others that had criticized President Clinton. In the following years, many of the organizations condemned in the White House report were targeted for IRS audits, including the Heritage Foundation and the American Spectator magazine and almost a dozen individual high-profile Clinton accusers, including Paula Jones and Gennifer Flowers. Despite Clinton’s protestations that he posed no threat to freedom, even the ACLU admitted in 1998 that the Clinton administration had “engaged in surreptitious surveillance, such as wiretapping, on a far greater scale than ever before… The Administration is using scare tactics to acquire vast new powers to spy on all Americans.”

Some “conspiracy theory” allegations comically expose the naivete of official scorekeepers. In April 2016, Chapman University surveyed Americans and announced that “the most prevalent conspiracy theory in the United States is that the government is concealing information about the 9/11 attacks with slightly over half of Americans holding that belief.”  That survey did not ask whether people believed the World Trade Centers were blown up by an inside job or whether President George W. Bush secretly masterminded the attacks. Instead, folks were simply asked whether “government is concealing information” about the attacks. Only a village idiot, college professor, or editorial writer would presume the government had come clean. Three months after the Chapman University survey was conducted, the Obama administration finally released 28 pages of a 2003 congressional report that revealed that Saudi government officials had directly financed some of the 9/11 hijackers in America. That disclosure shattered the storyline carefully constructed by the Bush administration, the 9/11 Commission, and legions of media accomplices. (Lawsuits continue in federal court seeking to force the U.S. government to disclose more information regarding the Saudi government role in the attacks.)

“Conspiracy theory” is often a flag of convenience for the media. In 2018, the New York Times asserted that Trump’s use of the term “Deep State” and similar rhetoric “fanned fears that he is eroding public trust in institutions, undermining the idea of objective truth and sowing widespread suspicions about the government and news media.” However, after allegations by anonymous government officials spurred Trump’s first impeachment in 2019, New York Times columnist James Stewart cheered, “There is a Deep State, there is a bureaucracy in our country who has pledged to respect the Constitution, respect the rule of law… They work for the American people.” New York Times editorial writer Michelle Cottle proclaimed, “The deep state is alive and well” and hailed it as “a collection of patriotic public servants.” Almost immediately after its existence was no longer denied, the Deep State became the incarnation of virtue in Washington.

The media elite can fabricate “conspiracy theory” designations almost with the flip of a headline. A week after Election Day 2020, the New York Times ran a banner headline across the top of the front page: “Election Officials Nationwide Find No Fraud.” How did the Times know? Their reporters effectively called each state and asked, “Did y’all see any fraud?” Election officials answered “no,” thus proving that anyone who subsequently questioned Biden’s victory was promoting a groundless conspiracy. While top liberal politicians denounced electronic voting companies as unaccountable and dishonest in 2019, any doubts about such companies became “conspiracies” after that headline in the Times. The Times helped spur a media cacophony drowning out anyone complaining about ballot harvesting, illegal mass mailing of absentee ballots, or widespread failures to verify voter identification.

Actually, “conspiracy theory” accusations helped Biden win the 2020 presidential election. As Sen. Lindsey Graham (R-SC) recently noted, if Americans believed that the COVID-19 virus was created in a Chinese government lab, Trump would have likely won the election because voters would have sought a leader who could be tough on China. But the lab origin explanation was quickly labeled a pro-Trump heresy. The Washington Post denounced Sen. Tom Cotton (R-AR,) for suggesting the virus originated in the lab, which supposedly was a “conspiracy theory that was already debunked.” Twenty-seven prominent scientists signed a letter in the Lancet: “We stand together to strongly condemn conspiracy theories suggesting that COVID-19 does not have a natural origin… Conspiracy theories do nothing but create fear, rumours, and prejudice that jeopardise our global collaboration in the fight against this virus.” The Lancet did not reveal until last week that one of the signers and the person who organized the letter signing campaign ran an organization that received U.S. government subsidies for its work at the Wuhan Institute of Virology lab. President Biden has ordered U.S. intelligence agencies to take another look to seek to determine the origin of COVID-19.

Will “conspiracy theory” charges provide a “get out of jail free” card for the FBI and other federal agencies regarding the January 6 clash at the Capitol? After Fox News’s Tucker Carlson featured allegations that FBI informants or agents may have instigated the ruckus, the Washington Post speedily denounced his “wild, baseless theory” while Huffington Post denounced his “laughable conspiracy theory.” It doesn’t matter how often the FBI instigated terrorist plots or political violence in the past 60 years (including the plot to kidnap the Michigan’s Governor Gretchen Whitmer last November). Instead, decent people must do nothing to endanger the official narrative of Jan. 6 as a horrific private terrorist event on par with the War of 1812, Pearl Harbor, and the 9/11 attacks.

“Conspiracy theory” is a magic phrase that expunges all previous federal abuses. Many liberals who invoke the phrase also ritually quote a 1965 book by former communist Richard Hofstadter, The Paranoid Style in American Politics. Hofstadter portrayed distrust of government as a proxy for mental illness, a paradigm that makes the character of critics more important than the conduct of government agencies. For Hofstadter, it was a self-evident truth that government was trustworthy because American politics had “a kind of professional code… embodying the practical wisdom of generations of politicians.”

 Much of the establishment rage at “conspiracy theories” has been driven by the notion that rulers are entitled intellectual passive obedience. The same lese-majeste mindset has been widely adopted to make a muddle of American history. Arthur Schlesinger, Jr., the court historian for President John F. Kennedy and a revered liberal intellectual, declared in a 2004 article in Playboy, “Historians today conclude that the colonists were driven to revolt in 1776 because of a false conviction that they faced a British conspiracy to destroy their freedom.” Was the British imposition of martial law, confiscation of firearms, military blockades, suspension of habeas corpus, and censorship simply a deranged fantasy of Thomas Jefferson? The notion that the British would never conspire to destroy freedom would play poorly in Dublin. Why would anyone trust academics who were blind to British threats in the 1770s to accurately judge contemporary perils to liberty?

How does the Biden administration intend to fight “conspiracy theories”? The Biden terrorism report called for “enhancing faith in government” by “accelerating work to contend with an information environment that challenges healthy democratic discourse.” Will Biden’s team rely on the “solution” suggested by Cass Sunstein: “cognitive infiltration of extremist groups” by government agents and informants to “undermine” them from within? A 1976 Senate report on the FBI COINTELPRO program demanded assurances that a federal agency would never again “be permitted to conduct a secret war against those citizens it considers threats to the established order.” Actually, the FBI and other agencies have continued secretly warring against “threats” and legions of informants are likely busy “cognitively infiltrating” at this moment.

“Conspiracy theory” will remain a favorite sneer of the political-media elite. There is no substitute for Americans developing better B.S radars for government claims as well as wild-eyed private balderdash. In the meantime, there’s always the remedy a Washington Post health article touted late last year: “Try guided imagery. Visualizing positive outcomes can help clamp down on the intense emotions that might make you more vulnerable to harmful conspiracy theories.”

Tyler Durden Fri, 06/25/2021 - 00:05
Published:6/24/2021 11:13:49 PM
[Markets] Does First Transgender Olympian Signal The Death Knell Of Female Sport? Does First Transgender Olympian Signal The Death Knell Of Female Sport?

Authored by Robert Bridge via The Strategic Culture Foundation,

It seems ridiculous to have to remind anyone of the obvious anatomical differences between males and females, but such is the state of the current world we live in.

Laurel Hubbard will go down in the history books at the Tokyo Olympics as the first transgender athlete to compete at the Games.

But the consequences of this decision for female athletes and women in general will be devastating and long-lasting.

The day may be imminent when natural-born females are no longer represented on the Olympic medal podium as biological males start to make serious inroads into their sports.

Laurel Hubbard, 43, is among five weightlifters chosen to represent New Zealand in the Tokyo Olympics to compete in the women’s 87-kilogram category. As an aside, he is also the progeny of Dick Hubbard, the former liberal mayor of Auckland. The criticism and controversy that has greeted the news of the first transgender athlete to participate in the Games does not seem misplaced. First, Hubbard, whose inclusion won the approval of New Zealand Prime Minister Jacinda Ardern, will enjoy a competitive advantage over his contenders that has been scientifically proven to come with inborn male attributes.

It seems ridiculous to have to remind anyone of the obvious anatomical differences between males and females, but such is the state of the current world we live in.

According to one study, published by the British Journal of Sports Medicine, “trans women still had a 9% faster mean run speed after the 1 year period of testosterone suppression that is recommended by World Athletics for inclusion in women’s events.”

The developmental biologist Dr. Emma Hilton seconded this opinion.

“Males can run faster, jump longer, throw further and lift heavier than females,” Hilton confirmed in a 2019 discussion.

“They outperform females by 10% on the running track to 30% when throwing various balls.”

Hilton went on to produce some sports trivia to support her claim:

  • there are 9,000 males between 100m world record holders Usain Bolt and Florence Griffith Joyner, the fastest woman of all time;

  • the current female 100m Olympic champion, Elaine Thompson, is slower than the 14 year old schoolboy record holder;

  • under-15 boys squad beat the U.S. Women’s National Team in a scrimmage.

And so on.

Those raw statistics are not meant to diminish, of course, the tremendous achievements made by female athletes. Rather, they are meant to demonstrate the very definite boundary that exists – or should exist – between male and female contenders. In fact, the physical differences between the sexes could actually come down to a matter of life and death. Already blood has been spilt.

Consider, for example, the 2014 Mixed Martial Arts contest between Fallon Fox and Tamikka Brents. Fox, the first transgender fighter in MMA history, subjected Brents to a violent beating that resulted in a fractured skull and concussion. How long before a female athlete suffers serious injury – possibly even death – at the hands of a transgender woman on the field of dreams?

As worrisome as that possibility may be, the real issue for female athletes is that these biological males are simply seen as interlopers trespassing on their territory, disqualifying them from the right to perform. Just ask Kuinini ‘Nini’ Manumua, 21, the woman who was deprived of making the Kiwi team due to the inclusion of Hubbard, who lived 35 years as a male before transitioning. As for Manumua, it would have been her first Olympics.

Criticism on the decision to include Hubbard on the New Zealand team has been fierce.

Belgian weightlifter Anna Vanbellinghen said that allowing Hubbard to compete at Tokyo was unfair to female athletes, calling it “a bad joke.”

New Zealander Daniel Leo, a former professional rugby player turned CEO, remarked in a tweet that the decision to include Hubbard “tarnishes [New Zealand’s] reputation BIG TIME.”

Meanwhile, the British advocacy group, Fair Play for Women, slammed the IOC’s policy as “blatantly unfair.”

“The IOC stated in its 2015 transgender guidelines that the overriding sporting objective is, and remains, the guarantee of fair competition,” remarked Nicola Williams, FPFW director.

“But its current rules are blatantly unfair to women, and to trans gender women, who both want to play by rules which are fair to everybody.”

In the United States, meanwhile, resistance to the madness has taken root. A number of state legislatures are opposed to the idea of permitting transgender women to play sports alongside women. Alabama, Arkansas, Georgia, Idaho, Indiana, Iowa and Kentucky, for example, are just some of the states that have passed legislation strictly forbidding the participation of biological males in female sports unless they have undergone full reassessment surgery and taken the relative hormones.

Louisiana law, by way of example, states that the student-athlete is eligible to compete in the reassigned gender when, among other procedures, “surgical anatomical changes have been completed, including external genitalia changes and gonadectomy.” They even demand that “legal recognition of the sex reassignment has been conferred with all the proper governmental agencies (Driver’s license, voter registration, etc.).”

Meanwhile, in ultra-liberal states, like California, Connecticut and Colorado, public schools are prohibited from discriminating on the basis of gender identity and gender expression. Now with Biden’s executive order on gender identity and sexual orientation in effect, schools are even legally required to let transgender females use the bathroom and changing facilities that match their gender identity, thereby invading the privacy of female students both on the field and in the locker room.

?Clearly, what needs to happen in order to ensure fairness and safety on the playing field (and in the locker room) is for more professional athletes to speak out on this alarming trend. One such brave woman is Czech-born American tennis star, Martina Navratilova, who is among a group of female athletes that launched the Women’s Sports Policy Working Group, which operates according to the idea that “if sports were not sex-segregated, female athletes would rarely be seen in finals or on victory podiums.”

The 18-time winner of the Grand Slam title opposed a situation where “trans men and women, just based on their self-id, would be able to compete with no mitigation … that clearly would not be a level playing field.”

Unfortunately, it appears that the IOC, by permitting Laurel Hubbard the right to compete alongside biological females, has taken a radically different view and approach on the matter, and this decision has all the potential to set back women sports by decades, if not make it altogether redundant.

Speak up now, ladies, or forever forfeit your rightful place on the Olympic podium.

Tyler Durden Thu, 06/24/2021 - 22:05
Published:6/24/2021 9:14:54 PM
[Markets] The Forgotten History Of Banking (And What Happens Next) The Forgotten History Of Banking (And What Happens Next)

Authored by Tuomas Malinen via GnSEconomics.com,

Banking is at the heart of modern economic systems. The history of banking is also very long. The first banks appeared around 2,500 years ago, according to the latest historical research.

As we have explained previously, banks generate most of the new money in circulation. They have also enabled major economic and societal upheavals, including the Industrial Revolution. Now, banks are central to the approaching change, or ‘battle’, within our economic systems.

In this second blog of our financial history series, we go through the development of banking from that of early money exchangers to the rise of the ‘shadow banking’ sector, and we explain how the modern banking system operates.

Photo by Brock Wegner on Unsplash

The origins

As we explained in the previous blog, banking practices developed in Ancient Greece, more precisely in the harbor city of Piraeus, where the local bankers, or trapezitai, took deposits and provided loans at the end of the fifth century BCE.

Still, the first known banks that truly resembled modern banks operated in Imperial Rome. The argentarii, who appear in the Roman history in mid-fourth century BCE, took deposits, advanced money to clients, lent to bidders at auction and transferred money via bills of exchange. Due to the sophistication of this banking system, it is no surprise that Rome also experienced the first banking crises. More on this later.

Simple merchant banks, usually in the service of the rulers, appeared to Europe in the 14th century. They were concentrated in financing the production of and trade in commodities. While the Chinese had invented bookkeeping, it only appeared at the center of western development and civilization through Italian banks and the scholastic work of Lucca Pacioli in 1494.  The first modern banks and payment systems arose from merchant fairs where commodity trades were settled.

At the merchant fairs of Lyons, in the mid-1500s, merchants realized that the trustworthiness of well-known international merchants made it possible to pass their promissory notes (a promise to reimburse at a later date) to lesser-known local merchants to create a credit system, where bilateral promises between local and international merchants were paid out as liquid liabilities. These could then easily be assigned from creditor to creditor and, in essence, create money and credit.

There, basically, the fractional reserve banking system was born.

Fractional reserve banking

In a fractional banking system only a small portion—or “fraction”—of the liabilities, like deposits, and assets, like loans, are covered by the reserves or the capital of a bank.

A bank is an exceptional entity in the sense that while, for example, the output of a tractor company is tractors, the output of a bank is debt. This debt is given out as an IOU or, more precisely, as a bank deposit. Basically, the bank promises that whatever sum you may deposit there, you can get it back whenever you want; a contractual warranty of a sort.  

The problem in fractional reserve banking system is that only a fractional share of this bank debt is covered at any point in time. So, a banking crisis will develop when the holders of bank debt—also known as “depositors”—demand to convert their claims to cash or other liquid forms of assets in excess of the reserves of the bank. In addition to deposits, this bank debt can be bonds, derivatives or interbank funding obtained from interbank markets.

Reserves and central banks

Before the creation of the Federal Reserve in 1914, banks in the U.S. established reserves by themselves through clearinghouses. Because banks wanted to earn interest on their reserves, they lent reserves to other banks. Reserves were re-lent and re-lent between banks until they eventually were lent out to earn enough to cover the interest promised on the reserves. These became known as “fictitious reserves”.  The Banking Act of 1933 prohibited interest payments on all demand deposits in the U.S.

The inputs used to create bank debt include the capital of the bank, assets, and the regulatory environment, which dictates, for instance, what “reserve ratio” banks must meet.  Due to technological and financial innovations, the proportion of bank capital required as a factor for determining bank debt levels has declined, basically, ever since the creation of modern banks. So, the capital banks are required to hold against liabilities has declined similarly throughout the development of modern banking.

As banking officials often consider strong capital levels as a source of stability, boosting the trustworthiness of a bank, it has been regulated since the 1980s. However, because banking crises are essentially about capital flight—either in physical or digital form—against bank liabilities, they cannot be stopped by high capital or reserve requirements.  This is something history shows very clearly.

‘Shadow banking

Since the birth of banking, banks have been at the forefront of risk distribution through diversification and hedging. In the U.S., banks started to sell mortgage-backed debt obligations to investors in the 1960s.  The idea was to distribute risk outside the balance sheet of banks, which would make more funds available for lending. This is essentially the point, when ‘shadow banking’ was born.

In the 1990s, diversification and hedging took a big leap forward when the credit default swap, CDS, was developed. In it, the risk of a loan is offset by a third party to which the bank—or, more generally, the issuer of a loan—pays a fee for the insurance.

This new system of risk distribution through diversification and hedging was elevated to a new level after the derivatives team at J.P. Morgan invented a sort of shell-company, or SPV (“Special Purpose Vehicle”), to carry certain bank loans off the bank’s balance sheet. An SPV bundled risky loans and sold them on to investors according to calculated risk tranches, which investors then received interest income based on the riskiness of each tranche in their possession. The construct was called Bistro (“Broad index secured trust offering”).

Further innovations included the synthetic collateralized debt obligation, or CDO. It was standardized, a more general version of the Bistro, and it could be constructed from not just CDS and other derivatives, but also from different debt securities, such as mortgages.

The shadow banking sector can be said to consist of all financial entities that provide loans, but are not regulated under the standard banking regulatory framework.

These include investment banks, SPVs, structured investment vehicles (SIVs), hedge funds, conduits and money market funds.

The Global Financial Crisis of 2008 was caused by the cascading failures of ‘shadow banks’.

Banks and liberty

So, banks and banking have been around since the early days of human civilization.  

Athenian banks decoupled finance from other enterprises making it easier to support distant maritime trade. Egypt set up state banks as early as the third century BCE, under Macedonian rule.  The Roman Empire developed the principles of modern banking, which were finalized in Europe in the Middle-Ages.

Central banks, fairly new creations, started to dominate the banking system in the 1920s. Since then, their grip on the banking and financial systems has intensified. Through the issuance of central bank digital currencies, CBDCs, they could rise to rule the whole banking system and thus the economy. Alas, CBDCs are likely to become the single biggest threat to banking industry since its inception.

Those who champion centralized control over the economy naturally applaud the idea of CBDCs. They may even see the banking industry as “evil” and welcome the “relief” brought by such centralized control. However, they also should acknowledge that modern commercial banks, and their ancestors, have been crucial in building our current standards of living. They should also remember the historical lessons, the horrors and the poverty of centrally-controlled economic systems, such as under communism.

Thus, everyone should also ask themselves what the world would look like if a government entity, like a central bank, dictates who gets funding for what project? This is the road we are heading down with the issuance of CBDCs—and we fear the answer.

Historical accounts are based on: William Goetzmann: Money Changes Everything: How Finance Made Civilization Possible; Gary B. Gorton: Misunderstanding Financial Crises: Why We Don’t See Them Coming; and Felix Martin: Money: The Unauthorized Biography. Gillian Tett: Fool’s Gold.

*  *  *

We provide in-depth analysis and forecasts on the risks haunting the global economy and the financial markets in our Q-Review reports and Deprcon Service. They are are available at our Store. See our Crisis Preparation -reports for guidelines how to prepare for the coming financial crash.

Tyler Durden Thu, 06/24/2021 - 19:25
Published:6/24/2021 6:41:43 PM
[Podcasts] Podcast: Crisis of the Two Constitutions, with Charles Kesler (Steven Hayward) This week’s Power Line Classic format show features me in conversation with Prof. Charles R. Kesler, editor of the Claremont Review of Books, talking about his brand new book, Crisis of the Two Constitutions: The Rise, Decline, and Recovery of American Greatness. Crisis collects several of Kesler’s old and new essays and details how we got to and what is at stake in our increasingly divided America. In addition to explaining Published:6/24/2021 6:14:16 PM
[Markets] It Always Ends The Same Way: Crisis, Crash, Collapse It Always Ends The Same Way: Crisis, Crash, Collapse

Authored by Charles Hugh Smith via OfTwoMinds blog,

Risk has not been extinguished, it is expanding geometrically beneath the false stability of a monstrously manipulated market.

One of the most under-appreciated investment insights is courtesy of Mike Tyson: "Everybody has a plan until they get punched in the mouth." At this moment in history, the plan of most market participants is to place their full faith and trust in the status quo's ability to keep asset prices lofting ever higher, essentially forever.

In other words, the vast majority of punters are convinced they will never suffer the indignity of getting punched in the mouth by a market crash. What makes this confidence so interesting is massively distorted markets always end the same way: crisis, crash and collapse.

The core dynamic here is distorted markets provide false feedback and misleading information which then lead to participants making catastrophically misguided decisions. Investment decisions made on poor information will also be poor, leading participants to end up poor, to their very great surprise.

The surprise comes from the falsity of the feedback, as those who are distorting markets want punters to believe "the market" is functioning transparently. If you're manipulating the market, the last thing you want is for the unwary marks to discover that the market is generating false signals and misleading information on risk, as knowing the market is being distorted would alert them to the extraordinary risks intrinsic to heavily distorted markets.

The risks arise from the disconnect between the precariousness of the manipulated market and the extreme confidence punters have in its stability and predictability. The predictability comes not from transparent feedback and market signals but from the manipulation. This stability is entirely fabricated and therefore it lacks the dynamic stability of truly open markets.

Markets that are being distorted/manipulated to achieve a goal that is impossible in truly open markets--for example, markets that only loft higher with near-zero volatility--lull participants into a dangerous perception that because markets are so stable, risk has dissipated.

In actuality, risk is skyrocketing beneath the surface of the artificial stability because the market has been stripped of the mechanisms of dynamic stability. This artificial stability derived from sustained manipulation has the superficial appearance of low-risk markets, i.e., low levels of volatility, but this lack of volatility derives not from transparency but from behind-the-scenes suppression of volatility.

Another source of risk in distorted markets is the illusion of liquidity: in low-volume markets of suppressed volatility, participants are encouraged to believe that they can buy and sell whatever securities they want in whatever volumes they want without disturbing market pricing and liquidity. In other words, participants are led to believe that the market will always have a bid due to the near-infinite depth of liquidity: no matter how many billions of dollars of securities you want to sell, there will always be a bid for your shares.

In actual fact, the bid is paper-thin and it vanishes altogether once selling rises above very low levels. Heavily manipulated markets are exquisitely sensitive to selling because the entire point is to limit any urge to sell while encouraging the greed to increase gains by buying more.

The illusions of low risk, essentially guaranteed gains for those who increase their positions and near-infinite liquidity generate overwhelming incentives to borrow more and leverage it to the hilt to maximize gains. The blissfully delusional punter feels the decision to borrow the maximum available and leverage it to the maximum is entirely rational due to the "obvious" absence of risk, the "obvious" guaranteed gains offered by markets lofting ever higher like clockwork and the "obvious" abundance of liquidity, assuring the punter they can always sell their entire position at today's prices and lock in profits at any time.

On top of all these grossly misleading distortions, punters have been encouraged to believe in the ultimate distortion: the Federal Reserve will never let markets decline again, ever. This is the perfection of moral hazardrisk has been disconnected from consequence.

In this perfection of moral hazard, punters consider it entirely rational to increase extremely risky speculative bets because the Federal Reserve will never let markets decline. Given the abundant evidence behind this assumption, it would be irrational not to ramp up crazy-risky speculative bets to the maximum because losses are now impossible thanks to the Fed's implicit promise to never let markets drop.

This is why distorted, manipulated markets always end the same way: first, in an unexpected emergence of risk, which was presumed to be banished; second, a market crash as the paper-thin bid disappears and prices flash-crash to levels that wipe out all those forced to sell by margin calls, and then the collapse of faith in the manipulators (the Fed), collapse of the collateral supporting trillions of dollars in highly leveraged debt and then the collapse of the entire delusion-based financial system.

Gordon Long and I illuminate the many layers of distortion, manipulation and moral hazard in our new video presentation, It Always Ends The Same Way (34:33). Amidst the ruins generated by well-meaning manipulation and distortion, the "well meaning" part will leave an extremely long-lasting bitter taste in all those who failed to differentiate between the false signals and distorted information of manipulated markets and the trustworthy transparency of signals arising in truly open markets.

In summary: risk has not been extinguished, it is expanding geometrically beneath the false stability of a monstrously manipulated market. As I often note here, risk cannot be extinguished, it can only be transferred. By distorting markets to create an illusion of low-risk stability, the Federal Reserve has transferred this fatal supernova of risk to the entire financial system.

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

*  *  *

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Tyler Durden Thu, 06/24/2021 - 16:19
Published:6/24/2021 3:44:27 PM
[World] On Booksellers and ‘Fair Trade’

Against the monopoly of Amazon, a free marketplace for books may mean coordination of resale pricing.

The post On Booksellers and ‘Fair Trade’ appeared first on The American Conservative.

Published:6/23/2021 11:06:28 PM
[Markets] Journalists Hit New Low By Betraying Source Journalists Hit New Low By Betraying Source

Authored by J Peder Zane via RealClearPolitics.com,

The New York Times has decided it is fine to out a confidential source -- provided his name is Tucker Carlson. Its media columnist, Ben Smith, reports that the Fox News star is “the go-to guy for sometimes-unflattering stories about Donald J. Trump and for coverage of the internal politics of Fox News (not to mention stories about Mr. Carlson himself).”

Breaking a cardinal rule of journalistic ethics, Smith identifies Carlson as one of his own “off-the-record” sources. So, too, did “16 other journalists … [who] told me on background that he has been, as three of them put it, ‘a great source.’”

Betraying no self-awareness of his cynicism, Smith underscores the transgressive nature of these disclosures by noting that none of the 16 work at the Times because “it would put my colleagues in a weird position if I asked them” to betray a source. Translation: He’s happy to have his competitors violate sacred rules.

The one offender Smith does name is Brian Stelter, the host of CNN’s “Reliable Sources” (and Times alumnus) who routinely casts himself as the conscience of journalism, who told him “you can see Tucker’s fingerprints all over” his anti-Fox book, “Hoax.”

Given the left’s hatred of Carlson – who is their current Bogeyman No. 2, after Donald Trump – and its habit of reporting fake news, Smith’s article could be a smear aimed at stirring up conflict on the right and problems for Carlson with his employer. That thought would not have occurred to me even five years ago, but that’s where we are.

If Carlson does dish dirt off the record, Smith’s piece is a yet another new low for our increasingly partisan press. As my RealClearInvestigations colleague Tom Kuntz observed, “Protecting confidential sources is, of course, one of the bedrocks of journalism. The free flow of information depends on people being able to share hard truths without jeopardizing their careers or lives.”

It is why journalists have gone to jail to protect their sources. Outing Carlson sends the message that trust is dead in American journalism. No source is safe if reporters decide they don’t like or agree with them. Today it’s the Fox News anchor, tomorrow it’s the whistleblower who uncovered malfeasance in the Biden administration.

Still, the protection of confidentiality is not ironclad. All bets are off when a source lies. For example, false disclosures from dishonest anonymous sources were a prime driver of the bogus Trump/Russia scandal that dominated the news for several years. Smith’s paper was a prime dumping ground of misinformation, as was the publication he edited before coming to the Times, BuzzFeed, publisher of the now-infamous and largely fabricated Steele dossier. Smith also oversaw the seminal but deeply misleading BuzzFeed work of Ali Watkins (now also at the Times) that commenced the years-long media smearing of former Trump campaign adviser Carter Page.

Kuntz argues, “When sources engage in gross deception on a matter of such import, even committing national security crimes in the process, the news media involved should honor their higher duty – to their readers or viewers – to expose the malfeasance and correct the record.”

Even as the Times outs Carlson – who is not accused of misleading anyone – it continues to protect those who perpetrated devastating frauds upon the nation. That silence is a scandal; instead of honoring trust, it betrays it. If Smith truly cares about the fate of American journalism, he should insist that his editors identify the anonymous sources of their many debunked stories during the Trump years:

The paper could start by unmasking the unnamed “law enforcement” source who told the paper that Capitol Hill police officer Brian Sicknick had died after “pro-Trump rioters … struck him in the head with a fire extinguisher.” Although this claim was cited by Democrats as grounds for impeachment, it was apparently invented. And what about the anonymous sources who told the Times and other news outlets that former New York City mayor and Trump confidant Rudy Giuliani had received “a formal warning” about potential Russian disinformation. The Times issued a correction to this whopper, but never said where the disinformation came from. Likewise, Times readers still don’t know the identity of the source who maintained – anonymously, of course -- that the 2016 Trump campaign had “repeated contacts” with Russian intelligence agents, a claim Robert Mueller could find no evidence to support.

Although the Times never named any of these sources, something tells me it wasn’t Tucker Carlson.

Tyler Durden Wed, 06/23/2021 - 17:20
Published:6/23/2021 4:34:36 PM
[Entertainment] Judith Farr, scholar of Emily Dickinson and poet in her own right, dies at 85 A longtime Georgetown University professor, she published two seminal books about Dickinson, as well as a novel and poetry collection influenced by the belle of Amherst. Published:6/23/2021 2:34:32 PM
[Markets] Navy Chief Defends Recommending Sailors Read "Anti-Racist" Book Navy Chief Defends Recommending Sailors Read "Anti-Racist" Book

Authored by Zachary Stieber via The Epoch Times,

The high-level U.S. Navy officer on Tuesday defended including a so-called anti-racist book on his recommended reading list.

Adm. Mike Gilday, chief of naval operations, said he does not agree with everything in the book, “How to Be an Antiracist” by Ibram Kendi, but believed in exposing his sailors to the ideology outlined in it.

“I chose a variety of books. There are over 50 books on my reading list to give my sailors a wide range of information from which I hope they can make facts-based decisions on both their ability to look outwardly at potential aggressors like China and Russia, as well as looking inwardly and being honest with themselves in areas they need to improve.

“In talking to sailors over the past year, it’s clearly obvious to me and others that the murder of George Floyd and the events surrounding that, the discussions in this country about racism which go back for years and years and years, are still a painful part of our culture and that talking about them, understanding them, is the best approach,” Gilday told Sen. Tom Cotton (R-Ark.) during a Senate panel hearing in Washington.

“They don’t have to agree with every assertion that Kendi makes - I don’t accept every assertion that Kendi makes, and I wouldn’t think that all sailors would as well, but they need to be exposed to it, so that they’re making facts-based - we need critical thinkers in the Navy and throughout the military, and our enlisted force. Again, we don’t only think outwardly but inwardly so they make objective, hopefully objective, facts-based decisions or draw conclusions in a world that it’s increasingly more difficult to get an unbiased view of a really tough problem,” he added.

Kendi’s book is among the fast-growing segment of works that attempt to promote “racial equity and justice,” an ideology that has Marxist roots. Critics like Cotton argue that the book pushes racial discrimination.

Cotton said the segment of works include “the notion that capitalism is essentially racist and racism is essentially capitalist; that the only remedy for past discrimination is present discrimination; the only remedy for present discrimination is future discrimination; that some individuals by virtue of his or her race are inherently oppressive or privileged while others are victimized or oppressed; that individuals can bear some kind of collective responsibility or collective guilt for the actions committed by members of his or her race,” he said.

Ibram Kendi discusses the book “Stamped: Racism, Antiracism and You” at Build Studio in New York City on March 10, 2020. (Michael Loccisano/Getty Images)

Pressed on whether he believes capitalism is racist, Gilday said he wouldn’t engage “without understanding the context of statements like that.”

“In what context could the claim that capitalism is essentially racist possibly be something with which you would agree?” Cotton wondered.

“I’d have to go back to the book to take a look at that,” Gilday responded.

While Republicans have criticized Kendi’s work and others like it, some Democrats have praised the author. Rep. Jim McGovern (D-Mass.), for instance, dubbed Kendi among the “extraordinary leaders” that were part of a council meeting last year.

A week earlier, Gilday was questioned on the same book recommendation while appearing before the House Armed Services Committee.

“Do you personally consider advocating for the destruction of American capitalism to be extremist?” Rep. Jim Banks (R-Ind.) asked, before quoting other portions of the book.

“Here’s what I know: there is racism in the United States Navy. … I am not going to sit here and defend cherry-picked quotes from somebody’s book. This is a bigger issue than Kendi’s book. What this is really about is trying to paint the United States military, and the United States Navy, as weak, as woke,” Gilday said at the time, confirming he read the book before adding later: “We are not weak. We are strong.”

Gilday’s reading list attracted pushback earlier this year, with Banks denouncing it as promoting views that are “explicitly anti-American.” Gilday reportedly responded by saying he included the book because “it evokes the author’s own personal journey in understanding barriers to true inclusion, the deep nuances of racism and racial inequalities.”

Tyler Durden Wed, 06/23/2021 - 12:20
Published:6/23/2021 11:33:51 AM
[Politics] Bill O'Reilly Confounds the Times From Atop Its Bestsellers List When in 2017 Bill O'Reilly was forced out of Fox News amid MeToo-era reports of complaints about his behavior, the New York Times concluded its account of his ouster by predicting, "sales of his books will almost certainly decline without the benefit of his position at Fox, which he used to promote his books to millions of viewers." The Sunday June 27, 2021 Times combined ebook and print nonfiction bestseller list has O'Reilly and Martin Dugard's "Killing the Mob" at number one. It's the book's... Published:6/21/2021 8:01:22 PM
[Markets] Front-Running The Crash Front-Running The Crash

Authored by Charles Hugh Smith via OfTwoMinds blog,

What if everyone in the market realizes it's now the moment to front-run the crash?

We have a fine-sounding word for running with the herd: momentum. When the herd is running, those who buy what the herd is buying and sell what the herd is selling are trading momentum, which sounds so much more professional and high-brow than the noisy, dusty image of large mammals (and their trading machines) mindlessly running with the herd.

We also have a fine-sounding phrase for anticipating where the herd is running: front-running. So when the herd is running into stocks, those who buy stocks just ahead of the herd are front-running the market.

When the Federal Reserve announces that's it's going to make billionaires even wealthier with some new financial spew, those betting that stocks will never go down because the Fed has our back are front-running the Fed.

There are two remarkable assumptions at the heart of momentum and front-running: The momentum herd and those front-running the herd base their behavior on the assumption that there will always be other rich people who will sell all the shares they want to buy at today's prices before the run-up to new highs.

Since only rich people own stocks, we know that those selling stocks are selling to other rich people and those buying stocks are buying from other rich people. So the assumption of those front-running the market is that there is a large enough sub-herd of rich people who for whatever reason aren't smart enough to front-run the herd, and who will foolishly sell their stocks just before they double in value.

The second assumption is that there will also be a large enough sub-herd of rich people who will buy all the shares they want to sell at the top, just before the bubble pops and the value of the newly purchased shares falls in half.

There are various ways to state this, but the bottom line is that momentum and front-running are only profitable if you sell at the top, just before the bubble bursts. You would be forgiven for anticipating that the same sub-herd front-running the herd and the Fed on the way up to the top of the bubble would be just as prescient and active in front-running the inevitable bursting of the bubble, but this is not how running with the herd works.

Short interest recently plumbed multi-year lows, indicating that very few are front-running the market crash.

Those trading momentum and front-running the herd/Fed are making a remarkable assumption, an assumption which is visible in a great volume of financial-media content: the stock market, we're told, will continue to make new highs like clockwork until some point in the third or fourth quarter, at which point there may well be a spot of bother, i.e., a crash.

The assumption is that all the rich people who own stocks will be so splendidly stupid that they will hold their shares until the crash and then sell them at prices far lower than they can fetch today. Put another way, the market participants who decide this is close enough to the top to liquidate their positions today and not wait around for the crash to wipe them out assume that that the herd of other rich people who will be delighted to buy their insanely overvalued shares at today's prices is large enough to absorb all their selling with no downward pressure on valuations.

In other words, the assumption being made is: I can wait until just before the crash to sell, because there will be boatloads of splendidly stupid rich people who will buy all the shares I want to sell at today's lofty prices--or higher, and this liquidation won't push valuations off a cliff.

As a general rule, people don't all become rich by being splendidly stupid, i.e., failing to anticipate what other rich people are about to do, and so this raises the question: what if everyone in the market realizes it's now the moment to front-run the crash?

Perhaps Wile E. Coyote could offer some useful perspective on what happens next.

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World (Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

Tyler Durden Mon, 06/21/2021 - 09:20
Published:6/21/2021 8:28:08 AM
[Markets] Bovard Blasts Biden's Buffoonish War On Extremism Bovard Blasts Biden's Buffoonish War On Extremism

Authored by James Bovard via JimBovard.com,

The Biden administration revealed on Tuesday that guys who can’t get laid may be terrorist threats due to “involuntary celibate–violent extremism.” That revelation is part of a new crackdown that identifies legions of potential “domestic terrorists” that the feds can castigate and investigate. But there is no reason to expect Biden administration anti-terrorism and anti-extremism efforts to be less of a farce and menace than similar post-9/11 campaigns.

Since the French Revolution, politicians have defined terrorism to stigmatize their opponents, a precedent followed by the Biden administration’s National Strategy for Countering Domestic Terrorism. The report labels the January 6 clash at the Capitol as a “domestic terrorism” incident but fails to mention it spurred a mushroom cloud of increasingly far-fetched official accusations. Capitol Police acting Chief Yogananda Pittman told Congress that January 6 was “a terrorist attack by tens of thousands of insurrectionists.” Less than a thousand protestors entered the Capitol that day but apparently any Trump supporter who hustled down the Mall towards the Capitol became the legal equivalent of Osama Bin Laden. Unfortunately, this “seen walking in the same zip code” standard for guilt could be the prototype for Biden era domestic terrorist prosecutions.

The Biden report did not bestow the same “terrorist” label on the mobs who burned U.S. post offices in Minneapolis or assailed a federal courthouse in Portland last year. In its litany of terrorist incidents, the report cites “the vehicular killing of a peaceful protestor in Charlottesville” at the 2017 Unite the Right ruckus but omits the 49 people killed in 2016 by a Muslim enraged by U.S. foreign policy at the Pulse Nightclub in Orlando. Maybe that case was excluded because the murderer was the protected son of a long-term FBI informant and FBI falsehoods derailed the subsequent trial of his widow. Nor did the report mention the worst terrorist incident since 9/11—the Las Vegas bloodbath where a single shooter killed 58 people and injured 900 others. The FBI claimed it could never find a motive for that slaughter and its “final report” on the incident was only three pages long. Never mind.

The White House claims its new war on terrorism and extremism is “carefully tailored to address violence and reduce the factors that… infringe on the free expression of ideas.” But the prerogative to define extremism includes the power to attempt to banish certain ideas from acceptable discourse. The report warns that “narratives of fraud in the recent general election… will almost certainly spur some [Domestic Violent Extremists] to try to engage in violence this year.” If accusations of 2020 electoral shenanigans are formally labeled as extremist threats, that could result in far more repression (aided by Facebook and Twitter) of dissenting voices. How will this work out any better than the concerted campaign by the media and Big Tech last fall to suppress all information about Hunter Biden’s laptop before the election?

The Biden administration is revving up for a war against an enemy which the feds have chosen to never explicitly define. According to a March report by Biden’s Office of the Director of National Intelligence, “domestic violent extremists” include individuals who “take overt steps to violently resist or facilitate the overthrow of the U.S. government in support of their belief that the U.S. government is purposely exceeding its Constitutional authority.” But that was the same belief that many Biden voters had regarding the Trump administration. Does the definition of extremism depend solely on which party captured the White House?

The report notes that the “Department of Defense is reviewing and updating its definition of prohibited extremist activities among uniformed military personnel.” Bishop Garrison, the chief of the Pentagon’s new Countering Extremism Working Group, is Exhibit A for the follies of extremist crackdowns on extremism. In a series of 2019 tweets, Garrison, a former aide to Hillary Clinton, denounced all Trump supporters as “racists.” Garrison’s working group will “specifically define what constitutes extremist behavior” for American soldiers. If Garrison purges Trump supporters from the military, the Pentagon would be unable to conquer the island of Grenada. Biden policymakers also intend to create an “anti-radicalization” program for individuals departing the military service. This initiative will likely produce plenty of leaks and embarrassing disclosures in the coming months and years.

The Biden report is spooked by the existence of militia groups and flirts with the fantasy of outlawing them across the land. The report promises to explore “how to make better use of laws that already exist in all fifty states prohibiting certain private ‘militia’ activity, including…state statutes prohibiting groups of people from organizing as private military units without the authorization of the state government, and state statutes that criminalize certain paramilitary activity.” Most of the private militia groups are guilty of nothing more than bluster and braggadocio. Besides, many of them are already overstocked with government informants who are counting on Uncle Sam for regular paychecks.

As part of its anti-extremism arsenal, DHS is financing programs for “enhancing media literacy and critical thinking skills” and helping internet users avoid “vulnerability to…harmful content deliberately disseminated by malicious actors online.” Do the feds have inside information about another Hunter Biden laptop turning up, or what? The Biden administration intends to bolster Americans’ defenses against extremism by developing “interactive online resources such as skills-enhancing online games.” If the games are as stupefying as this report, nobody will play them.

The Biden report stresses that federal law enforcement agencies “play a critical role in responding to reports of criminal and otherwise concerning activity.” “Otherwise concerning activity”? This is the same standard that turned prior anti-terrorist efforts into laughingstocks.

Fusion Centers are not mentioned in the Biden report but they are a federal-state-local law enforcement partnership launched after 9/11 to vacuum up reports of suspicious activity. Seventy Fusion Centers rely on the same standard—“If you see something, say something”—that a senior administration official invoked in a background call on Monday for the new Biden initiative. The Los Angeles Police Department encouraged citizens to snitch on “individuals who stay at bus or train stops for extended periods while buses and trains come and go,” “individuals who carry on long conversations on pay or cellular telephones,” and “joggers who stand and stretch for an inordinate amount of time.” The Kentucky Office of Homeland Security recommended the reporting of “people avoiding eye contact,” “people in places they don’t belong,” or homes or apartments that have numerous visitors “arriving and leaving at unusual hours,” PBS’s Frontline reported. Colorado’s Fusion Center “produced a fear-mongering public service announcement asking the public to report innocuous behaviors such as photography, note-taking, drawing and collecting money for charity as ‘warning signs’ of terrorism,” the ACLU complained.

Various other Fusion Centers have attached warning labels to gun-rights activists, anti-immigration zealots, and individuals and groups “rejecting federal authority in favor of state or local authority.” A 2012 Homeland Security report stated that being “reverent of individual liberty” is one of the traits of potential right-wing terrorists. The Constitution Project concluded in a 2012 report that DHS Fusion Centers “pose serious risks to civil liberties, including rights of free speech, free assembly, freedom of religion, racial and religious equality, privacy, and the right to be free from unnecessary government intrusion.” Fusion Centers continue to be bankrolled by DHS despite their dismal record.

The Biden report promises that the FBI and DHS will soon be releasing “a new edition of the Federal Government’s Mobilization Indicators booklet that will include for the first time potential indicators of domestic terrorism–related mobilization.” Will this latest publication be as boneheaded as the similar 2014 report by the National Counterterrorism Center entitled “Countering Violent Extremism: A Guide for Practitioners and Analysts”?

As the Intercept summarized, that report “suggests that police, social workers and educators rate individuals on a scale of one to five in categories such as ‘Expressions of Hopelessness, Futility,’ … and ‘Connection to Group Identity (Race, Nationality, Religion, Ethnicity)’ … to alert government officials to individuals at risk of turning to radical violence, and to families or communities at risk of incubating extremist ideologies.” The report recommended judging families by their level of “Parent-Child Bonding” and rating localities on the basis in part of the “presence of ideologues or recruiters.” Former FBI agent Mike German commented, “The idea that the federal government would encourage local police, teachers, medical, and social-service employees to rate the communities, individuals, and families they serve for their potential to become terrorists is abhorrent on its face.”

The Biden administration presumes that bloating the definition of extremists is the surest way to achieve domestic tranquility. In this area, as in so many others, Biden’s team learned nothing from the follies of the Obama administration. No one in D.C. apparently recalls that President Obama perennially denounced extremism and summoned the United Nations in 2014 to join his “campaign against extremism.” Under Obama, the National Security Agency presumed that “someone searching the Web for suspicious stuff” was a suspected extremist who forfeited all constitutional rights to privacy. Obama’s Transportation Security Administration relied on ludicrous terrorist profiles that targeted American travelers who were yawning, hand wringing, gazing down, swallowing suspiciously, sweating, or making “excessive complaints about the [TSA] screening process.”

Will the Biden crackdown on extremists end as ignominiously as Nixon’s crackdown almost 50 years earlier? Nixon White House aide Tom Charles Huston explained that the FBI’s COINTELPRO program continually stretched its target list “from the kid with a bomb to the kid with a picket sign, and from the kid with the picket sign to the kid with the bumper sticker of the opposing candidate. And you just keep going down the line.” At some point, surveillance became more intent on spurring fear than on gathering information. FBI agents were encouraged to conduct interviews with anti-war protesters to “enhance the paranoia endemic in these circles and further serve to get the point across that there is an FBI agent behind every mailbox,” as a 1970 FBI memo noted. Is the Biden castigation campaign an attempt to make its opponents fear that the feds are tracking their every email and website click?

Biden’s new terrorism policy has evoked plenty of cheers from his Fourth Estate lapdogs. But a Washington Post article fretted that the administration’s report did not endorse enacting “new legal authority to successfully hunt down, prosecute, and imprison homegrown extremists.” Does the D.C. media elite want to see every anti-Biden scoffer in the land put behind bars? This is typical of the switcheroo that politicians and the media play with the terms “terrorists” and “extremists.” Regardless of paranoia inside the Beltway, MAGA hats are not as dangerous as pipe bombs.

The Biden report concludes that “enhancing faith in American democracy” requires “finding ways to counter the influence and impact of dangerous conspiracy theories.” But permitting politicians to blacklist any ideas they disapprove won’t “restore faith in democracy.” Extremism has always been a flag of political convenience, and the Biden team, the FBI, and their media allies will fan fears to sanctify any and every government crackdown. But what if government is the most dangerous extremist of them all?

*  *  *

James Bovard is the author of Lost RightsAttention Deficit Democracy, and Public Policy Hooligan. He is also a USA Today columnist. Follow him on Twitter @JimBovard.

Tyler Durden Sat, 06/19/2021 - 23:30
Published:6/19/2021 10:47:28 PM
[Markets] The Long History Of Money The Long History Of Money

Authored by Tuomas Malinen via GnSEconomics.com,

We are approaching a critical turning point in the history of financial systems.

Since the Great Financial Crisis, central banks have exerted control over the financial markets through their QE-programs and plan to extend their influence over the monetary system through the introduction of national digital currencies.  Opposing forces include, as usual, those of financial innovation, which include independent cryptocurrencies.

In the June issue of our Q-Review series, we will delve deep into the world of digital currencies and the future of monetary systems. To accompany our report, we intend to publish a series of blogs which examine the long history of monetary and financial systems.

Today we will start with a brief summary of the history of money.

The early days

Current archaeological research has established that the measurement of economic interactions, i.e. accounting, predates writing. The clay tablets discovered at the birthplace of Mesopotamia, the Temple of Uruk, were used as an accounting tool for commodities and even for human labor as early as 3100 B.C.

The foundations of banking practices were developed in Ancient Greece, in the harbor city of Piraeus, where the local bankers, or trapezitai, took deposits and provided loans. While borrowing and lending in commodities follows the principles of banking practices then in use in Mesopotamia, the establishment of the concept of a unified monetary value for all economic units, such as commodities, assets, services, human labor, etc. was created in Ancient Greece. This also made the eventual emergence of modern banking practices possible later.

Still, the first banks known that truly resembled modern banks operated in Imperial Rome. It has been said that Rome’s financial system was so sophisticated that it was matched only by the banking sector created during the Industrial Revolution over a millennium later.

Birth of fractional reserve banking

While simple merchant banks—usually in the service of a sovereign—appeared in Europe in the 14th century, the first modern banks and payment systems were only created in the 16th century. They arose from merchant fairs where commodity trades were settled.

By 1555, the merchant fair of Lyons had become a clearing house for credit and debit balances of merchant houses across the continent. The merchants realized that the trustworthiness of well-known international merchants made it possible to pass their promissory notes (a promise to reimburse at a later date) to lesser-known local merchants to create a credit system, where bilateral promises between local and international merchants were paid out as liquid liabilities. These could then easily be assigned from creditor to creditor and, in essence, create money and credit. There, basically, the fractional reserve banking system was born.

In a fractional banking system only a small portion—or a “fraction”—of the liabilities, such as deposits, and assets, such as loans, are covered by the actual reserves or the capital of a bank.

Money creation by banks, and its stability

In modern economies, most money creation occurs in commercial banks.

When a person or a company receives a loan, the bank creates a double entry on its balance sheet. One entry adds the loan to the asset side of the borrower and the other credits the deposits of the borrower’s account. When the loan is paid back, that money is “destroyed”, and the double-entry on the bank’s books disappears. There is a natural restriction on money creation by banks, however. If a bank makes too many risky loans, loan defaults can lead to substantial losses and eventually to insolvency, bankrupting the bank.

Simple accounting rules and rules of the market economy generally tend to hold money creation at bay, but it’s also restricted through regulation by the government and reserve requirements issued by the central bank. So, banks need to obey the budgetary limit, which is partly set by the economic agents, and partly by the central bank through interest rate decisions and reserve requirements.

A crucial feature of money is stability.

When everything is valued in a particular currency, it’s value needs to be stable for people to be willing to accept it, use it, and hold it—to trust that its purchasing power will be preserved into the future.

Hyperinflations, where money loses over 50% of its purchasing power in a month, are driven by a collapse in public confidence in a currency. Hyperinflations come to be through the combination of excess money creation and diminishing productive capacity. Ominously, these prerequisites for hyperinflation are currently close to being met.

Photo by Blogging Guide on Unsplash

Free banking, and its limits

History illustrates other periods when the value of money has not been stable. The U.S. experienced an era of “free” or “wildcat” banking between 1837 and 1863. During the “free banking” era, capital alone was required to start a bank, without the approval of any banking authority.

There were three other conditions:

1) state or federal bonds were required on deposit as collateral for  notes issued by the bank

2) the banks were required to redeem the note on demand in gold or silver specie, and

3) banks were limited liability companies.

The main problem of the ‘wildcat banking era’ was that bank notes did not trade at par across the country. Distance was a factor in determining discounts. For example, some notes issued by a bank in the South did not circulate in the East and because the issuing bank was not known, the discount was higher.

When a note was presented in payment for goods or services, the shopkeeper, etc., would need to identify the name of the issuer in a small newspaper called a “banknote detector”, which would specify the market discount on the bank’s note. Approximately 1,500 bank notes were in circulation at varying discounts from par. The highest reported discount was 25%.

The requirements for money

During the U.S. Civil War, the National Bank Act was legislated which created national banks and national bank notes, i.e., money issued by the federal government. This stabilized the value of bank notes across the U.S. However, while the Act was not passed to create an efficient medium of exchange for the system, but rather to finance the war, it did recognize two important provisions:

  • Money needs to be backed by collateral that is safe.

  • Only government is able to provide completely riskless collateral.

So, the “free banking” era ultimately proved that bank notes need to backed by collateral and only money backed by a government will be trusted and traded ‘at par’, that is, it will be accepted in transactions at full face value.

The monetary revolution ahead

Now, we are on the verge of a massive upheaval of the monetary system from two opposing forces: freely created cryptocurrencies and digital currencies of central banks. The history of monetary systems gives rather clear indications as to how they should operate and what caveats may pertain to different systems.

In essence, money needs to be backed by collateral, up to a point, and thus far only governments have been able to provide sufficient (enough “trust-worthy”) collateral. Whether this will change in the future remains to be seen, but it seems far-fetched that people would begin to trust a monetary unit with no collateral.

The stability of the value of the monetary unit has also been an issue in history, and it’s likely to be an issue now as well. It just does not make any sense to even attempt to base a monetary system upon something, like Bitcoin, characterized by such wild swings in price.

However, it’s also plainly obvious that a centrally-controlled system, like digital currencies issued by central banks, would have serious and far-reaching implications for the banking sector and, worryingly, for economic freedom in general.

*  *  *

We will focus more closely on these issues in the June issue of our Q-Review to be published later this month.

Historical accounts are based on: William Goetzmann: Money Changes Everything: How Finance Made Civilization Possible; Gary B. Gorton: Misunderstanding Financial Crises: Why We Don’t See Them Coming; and Felix Martin: Money: The Unauthorized Biography.

We provide in-depth analysis and forecasts on the risks haunting the global economy and the financial markets in our Q-Review reports and Deprcon Service. They are are available at our Store. See our Crisis Preparation -reports for guidelines how to prepare for the coming financial crash.

Tyler Durden Sat, 06/19/2021 - 10:30
Published:6/19/2021 9:44:17 AM
[Markets] USA 2021: Capitalism For The Powerless, Crony-Socialism For The Powerful USA 2021: Capitalism For The Powerless, Crony-Socialism For The Powerful

Authored by Charles Hugh Smith via OfTwoMinds blog,

The only dynamic that's even faintly "capitalist" about America's Crony-Socialism is the price of political corruption is still a "market."

The supposed "choice" between "capitalism" and "socialism" is a useful fabrication masking the worst of all possible worlds we inhabit: Capitalism for the powerless and Crony-Socialism for the powerful. Capitalism's primary dynamics are reserved solely for the powerless: market price of money, capital's exploitive potential, free-for-all competition and creative destruction.

The powerful, on the other hand, bask in the warm glow of socialism: The Federal Reserve protects them from the market cost of money--financiers and the super-wealthy get their money for virtually nothing from the Fed, in virtually unlimited quantities--and the Treasury, Congress and the Executive branch protect them from any losses: their gains are private, but their losses are transferred to the public. The Supreme Court ensures the super-rich maintain this cozy crony-socialism by ensuring they can buy political power via lobbying and campaign contributions--under the laughable excuse of free speech.

Cronies get the best political system money can buy and you--well, you get to carry a sign on the street corner, just before you're hauled off to jail for disturbing the peace (and you're banned by social media/search Big Tech, i.e. privatized totalitarianism, for good measure).

The Federal Reserve is America's financial Politburo: cronies get a free pass, the powerless get nothing. While the three billionaires who own more wealth than the bottom 165 million Americans can borrow unlimited sums for next to nothing thanks to the Fed (i.e. Crony-Socialist Politburo), the 165 million Americans pay exorbitant interest on payday loans, used car loans, student loans, credit cards and so on.

Capitalism (market sets price of money) for the powerless, Crony-Socialism (nearly free money) for the powerful--thanks to America's Crony-Socialist Politburo, the Fed. Consider the "free market" plight of America's working poor: earning low wages that are rapidly losing their purchasing power makes them a credit risk, i.e. prone to defaulting, so lenders (i.e. capital's exploitive potential) charge high interest rates on loans to the working poor.

Since they pay such high rates of interest and earn so little, they default on their debt at higher rates--just what the lenders expected, and what the lenders created by charging sky-high rates of interest: gee, you're having trouble paying 24% interest? Too bad you're poor. You see the point: low wages, poverty and exorbitant rates of interest are mutually reinforcing: a primary driver of defaults and poverty is paying sky-high rates of interest and all the late fees, bounced check fees, etc. that go with 24% interest rates.

The Crony-Socialists have a much different deal with the Fed and its crony-bankers: the super-wealthy arrange for the corporations they own shares in to borrow billions of dollars to fund stock buybacks (which in a less exploitive era were illegal market manipulation). The super-wealthy Crony-Socialist's personal wealth rises by $100 million thanks to the stock buybacks, and then the super-wealthy Crony-Socialist borrows $10 million for next to nothing against this newly conjured "wealth" (thanks, Fed!) to fund living large.

Crony-Socialist corporations pay no income tax thanks to loopholes and the Crony-Socialists who own the shares report $1 in salary and zero income because they borrowed their living expenses against their Fed-conjured wealth. Do you discern the difference between capitalism for the powerless and crony-socialism for the super-wealthy?

If you can't yet discern the difference, then ask yourself: can you borrow $1 billion from the Fed's cronies to buy back shares of your own company, and then borrow $10 million for near-zero rates of interest against the newly conjured "wealth"? You can't? Well, why not?

If you answer "I don't have enough collateral," you missed the key point here: thanks to America's Crony-Socialist Politburo (the Fed), the super-wealthy have no exposure to the market price of money. The Fed manipulates the cost of money to near-zero, and then funnels unlimited sums of this nearly-free money to corporations, financiers and the super-wealthy.

Collateral is unnecessary in Crony-Socialism; that's just a excuse given to the powerless. Crony-Socialists borrow $1 billion for next to nothing, buy Treasuries with the free money, put the Treasuries up as collateral (but wait, didn't they borrow the money? Never mind, it doesn't matter), originate some financial instruments (CDOs, etc.), post those as collateral, and then leverage up another bet on that fictitious collateral.

If the bets all go bad, the Crony-Socialist claims the whole fraud is now a systemic risk and so the losses are transferred to the public / taxpayers to "save the financial system from collapse." Isn't Crony-Socialism fantastic?

Just as the rich kid caught with smack gets a suspended sentence and probation while the powerless kid gets a tenner in the War on Drugs Gulag, the super-wealthy Crony-Socialists avoid all the consequences of their gambles and frauds. America's Crony-Socialist Politburo (the Fed) takes care of its cronies and the powerless bear the brunt of predatory exploitation that's passed off as "capitalism."

The only dynamic that's even faintly "capitalist" about America's Crony-Socialism is the price of political corruption is still a "market": what's the current price of protecting your monopoly or cartel from competition? It's moving up fast, so better get those bribes (oops, I mean campaign contributions for the 2022 election) in now before the price of corrupting "democracy" goes even higher.

*  *  *

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World (Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 (Kindle), $10 (print), ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 (Kindle), $8.95 (print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 (Kindle), $15 (print) Read the first section for free (PDF).

Tyler Durden Fri, 06/18/2021 - 16:20
Published:6/18/2021 3:38:44 PM
[Markets] Fragile Order Failing - Do You Hear Me Now, Butterfly? Fragile Order Failing - Do You Hear Me Now, Butterfly?

Via The SwarmBlog.com,

“The woods are lovely, dark and deep, and I have promises to keep, and miles to go before I sleep. Do you hear me, Butterfly? Miles to go before you sleep.”

Down the Market Hole, Down in Mexico

Death Proof is an amazing movie. Even if the quality of the second half of film is a bit lower in my opinion, the first half is a masterpiece. Quentin Tarantino managed to a write a story that gradually and subtly become intriguing before destroying everything with one of the most brutal and violent car crashes ever filmed.

Somehow, one could regard that scenario and its epilogue as a metaphor for 2021 capital markets, as the mother of all crashes is likely to be the conclusion of one the largest speculative bubbles in all human history.

For months, people have argued that the best thing to do was “to ride the bubble,” as everyone knows that in some circumstances the trend can be “your friend.” This is what Benoit Mandelbrot called “Joseph effect,” meaning that movements over time tend to be part of larger trends and cycles more often than being random . And to be fair, most trend followers have done pretty well for years.

Many technical analysts keep claiming that they will be able to identify the top and to reverse their positions when we reach that moment. Besides, stop-loss orders are seen as a protection against any bad surprise such as a black swan event.

However, few of them take into account discontinuities of asset prices, also known as “Noah effect.”

Inspired by Mandelbrot’s works on fractal geometry, asset manager Edgard Peters put forward the “fractal markets hypothesis” at the beginning of the 1990s. According to him, the price of an asset can evolve by random walk, a persistent trend or mean reverts. When there is a persistent trend, the bull run is fueled by investors who have the longest time horizon. In other words, each sell-off will be bought, even if participants with a shorter time horizon might occasionally become net seller. In such a BTD environment, the trend is definitely “your friend.”

A brutal reversal may happen when investors with the longest time horizon finally decide to change their allocation. Given the convexity of the order book, the transition phase can be severe according to researchers Karp and van Vuuren: “If the trader’s horizon becomes dominant, and liquidity evaporates when sell orders far outweigh the number of buy orders, the fractal structure of the market collapses and violent price corrections become manifest.”

Sometimes, the avalanche is so massive that no one can see the crash coming, and stops are not always proven effective (e.g. October 1987).

Other times, some big players manage to quickly detect the beginning of a crisis, but do not count on them to help you get out this mess. Remember what Michael Lewis wrote in The Big Short: “In 2008, Goldman Sachs did not leave the house before it began to burn; it was merely the first to dash through the exit – and then it closed the door behind it.”

Therefore, the idea that there will always be someone to bid could lead to one of the worst crises ever as almost no one is prepared for that.

Stuntman Jay

But of course, there is the Fed.

However, Powell and his team have a problem. There is too much liquidity in the system, and they do not know how to deal with the monster they have unleashed in March 2020. What is more, money injections do not mean that order books will always be liquid from a market perspective.

FinTwit is very helpful to measure participants sentiment, and you may have noted that most people believe that a crash is not possible. That the bull market will continue until at least 2023. That authorities would never let stocks go down.

They may be right. But all of them are structurally short on volatility. In other words, if anything goes wrong, then the whole thing will blow up. And it will be too late to act (see Into the Swarm #2: The Greatest Trick Wall Street Ever Pulled).

What could go wrong? Well, a simple look at technicals shows us how weak this “invincible” market has gradually become: bearish divergences everywhere, bear flags, record leverage, extreme valuations, excessive concentration on a few assets, maximum exposure to US equities, and no more bearish positions.

Perhaps the most interesting signal comes from the VIX compression pattern, as regularly highlighted by Sven Henrich (Northmantrader.com).

The VIX is a fascinating indicator. Indeed, it is a proxy for stocks instantaneous volatility, and thus spikes are equivalent to earthquakes in geology (displaying the same type of power law distribution).

Such a compression pattern means that a narrative has become so dominant that most participants believe that there is no more uncertainty, leading to those intriguing fractal structures with decreasing spikes as long as everything seems under control. Somehow, they may be associated with wedges on stock indices.

But that fragile order will collapse as soon as something goes against the dominant narrative, creating a brutal form of dissipation of “energy” (i.e. a volatility spike), also known as “an avalanche.”

More interestingly, history shows us that such compression patterns always result in an upside breakout (at least since 1990). While further research based on chaos theory might help us to model those non-linear dynamics and perhaps to try to anticipate future spikes, it is already worth paying attention to Sven Henrich’s charts, especially as the level of complacency in the system has never been so extreme.

Whether people will like it or not (probably not), corrections are necessary phases as overwhelming narratives tend to create distortions in the economy and generate social issues that may translate into political crises afterwards.

If you regard the financial system as a car, then the questions is, where do you sit in the car? Stuntman Mike already warned you: “This car is 100% death proof. Only to get the benefit of it, you really need to be sitting in my seat.”

Tyler Durden Fri, 06/18/2021 - 11:53
Published:6/18/2021 11:07:23 AM
[Health Care] With Obamacare Still on the Books, People Are Still in Dire Need of Better Insurance Options

Now that the Supreme Court has just—yet again—left the Affordable Care Act on the books, it’s a good time to ask just how well the... Read More

The post With Obamacare Still on the Books, People Are Still in Dire Need of Better Insurance Options appeared first on The Daily Signal.

Published:6/17/2021 3:31:43 PM
[Markets] Is Inflation "Transitory"? Here's Your Simple Test Is Inflation "Transitory"? Here's Your Simple Test

Authored by Charles Hugh Smith via OfTwoMinds blog,

Is inflation "transitory" in your household budget? Really? Where?

The Federal Reserve has been bleating that inflation is "transitory"--but what about the real world that we live in, as opposed to the abstract funhouse of rigged statistics? Here's a simple test to help you decide if inflation is "transitory" in the real world.

Let's start with some simple stipulations: price is price, there are no tricks like hedonics or substitution. Nobody cares if the truck stereo is better than it was 40 years ago, the price of the truck is the price we pay today, and that's all that matters.

(Funny, the funhouse statistical adjustments never consider that appliances that used to last 30 years now break down and are junked after 3 years--if we adjusted for that, the $500 washer would be tagged at $5,000 today because it has lost 90% of its durability over the past 30 years.)

Second, inflation must be weighted to "big ticket" nondiscretionary items. The funhouse statistical trickery counts a $10 drop in the price of a TV (which you buy every few years at best) as equal to a $100 rise in childcare, which you pay monthly. No, no, no: a 10% rise in rent, healthcare insurance and childcare is $400 a month or roughly $5,000 a year. A 10% decline in a TV you buy every three years is $50. Even a 50% drop in the price of a TV ($250) is $83 per year--absolutely trivial, absolutely meaningless compared to $5,000 in higher big-ticket expenses.

You can forego the new TV but not the rent, childcare or healthcare. That's the difference between "big ticket" nondiscretionary and discretionary (meals out, 3rd TV, etc.).

Third, we jettison the painfully obvious manipulation of "owners equivalent rent" for housing costs. Housing costs are the prices we pay for rent, owning a home and paying property taxes, insurance and maintenance costs to own the home. (Have you priced having a new roof put on your house by a licensed, reputable contractor? No? Well, it's become a lot more expensive than it was a few years ago. Where is that enormous price leap in "owners equivalent rent"? Just how stupid does the Fed reckon we are?)

OK, here's the test: let's say markets finally take a deflationary dive from overvalued heights. Housing, stocks and other risk assets fall 30%. Trillions of dollars in "wealth" (that didn't exist prior to the Everything Bubble inflating) has vanished, generating a reverse wealth effect as all the owners of these assets feel poorer and less inclined to borrow and spend. This is classically considered highly deflationary: demand drops, prices drop.

The three billionaires who own more assets than the bottom 50% of Americans (165 million Americans) will be crying, but how does life change for the 165 million Americans who own a vanishingly thin slice of these assets? Does their rent drop? No, for the reasons I explained in The Fed Is Wrong: Inflation Is Sticky: the big corporate landlords have to keep rents high to placate their lenders. (And let's not forget greed: the greedy never want to lower prices, preferring to cling to the Fed's fantasy of "transitory" trouble.)

Now let's ask about the higher-income 150 million Americans who own homes and pay property taxes, who pay healthcare insurance, college tuition and fees, childcare and elderly care. Even if there is a deflationary crash in stocks and housing, what are the odds the overall costs of owning and maintaining your home will drop significantly?

What are the odds that local government will let property taxes drop with valuations? Shall we be honest and say zero? If real estate valuations plummet, then property tax rates will rise to compensate. Or other "creative" fees will be imposed to make up the shortfall in tax revenues.

What about childcare? What are the odds that childcare costs will drop 30%? Shall we be honest and say zero? The costs paid by childcare providers only go up, and so those who don't charge enough (marginal providers) will close down, generating a shortage of supply that elevates prices.

What about elderly care? Will assisted living facilities suddenly drop 30% just because asset bubbles pop? No. The costs of assisted living march higher regardless of what asset valuations and interest rates do.

What about healthcare? Will all those costs drop 30% because assets declined? No. Everyone exposed to real-world pricing of healthcare will be paying more.

But what about the roofing contractor? Won't they charge 30% less? The biggest expenses for the contractor are workers compensation insurance, liability insurance, disability insurance, FICA (Social Security and Medicare) and healthcare insurance, and none of those will drop a single dollar even if stocks drop 30%.

Just as 85% of local government expenses are labor-related, most of the expenses of the roofing contractor are labor-related. The roofing materials dropping a few bucks might lower the cost by a few percentage points, but the material costs are based on the costs of the manufacturers, distributors, truckers, etc., and these are also based on labor-related expenses, taxes, insurance and healthcare--none of which will drop a dime, regardless of what asset prices do.

Economist Michael Spence elucidated the difference between tradable and untradable goods and services. If you want your washer repaired, that service in untradable, as shipping your broken washer to China for repair is not financially viable. As labor costs rise in China and other offshore economies, that raises costs even for tradable goods.

The majority of essential services are untradable and the costs are dependent on "big ticket" expenses which cannot go down without imploding the economy and government: taxes, insurance, healthcare, childcare, elderly care, etc. cannot drop 30% because they're based on labor costs, highly profitable systemic friction (Big Pharma, the Higher Education Cartel, Big Ag, healthcare and other quasi-monopolies) and the need for ever-higher tax revenues to provide services which the public demands.

Let's also ponder the consequences of the extreme concentration of wealth and income in the top 5% of U.S. households. The top 10% own roughly 85% of all wealth, and the top 1% own more than half the financial wealth.

Any significant drop in financial assets will have almost no effect on the bottom 90% because they don't own enough of these assets to be consequential. So the deflationary effect of the reverse wealth effect will be concentrated in the discretionary spending of the top 10%: the luxury imported vehicles, the $100 per plate dinners (those $60 bottles of wine add up), the $500/day resort vacation, the $2,500/week AirBnB rental, etc.

The declines in the cost of these discretionary luxuries may well be noteworthy, but there are thresholds below which prices cannot drop. The high-end restaurant has equally high-end expenses, and so marginal providers will close, leaving only those few who can maintain profitability as demand for luxury dining craters.

The resort has high expenses as well, and once profitability has been lost, resorts will close just like other marginal providers. Supply shrinks along with demand, and the survivors keep prices high enough or they too will close.

So the essential "big ticket" costs will keep rising and the discretionary luxuries only the top 10% can afford will drop--but not by much as all those luxury providers have the same high fixed costs.

So to recap the test: what are the odds of these "big ticket" expenses dropping 30% if asset prices drop 30%?

  • Taxes: zero.

  • Healthcare: zero.

  • Childcare: zero.

  • Elderly care: zero.

  • Costs of doing business: zero.

As for housing: the mortgage doesn't drop if the market value of the house drops 30%, and any declines in insurance will be modest. The costs of maintenance won't drop much, either, and might actually increase as the supply of skilled workers declines. (Nothing is more expensive than the "cheap" repair that has to be redone correctly.)

Rents may drop in areas nobody wants to live anymore, but rents will rise in places people do want to live.

The larger point here is the long economic cycles have turned. The 40-year decline in interest rates has turned, whether we admit it or not. The 40-year decline in the prices of goods due to financialization (lower interest rates, higher speculative assets) and globalization has turned. The 40-year expansion of the workforce has turned. The 40-year decline of oil/fuel/resources prices has turned. The 40-year fantasy that we can depend on other nations for our essential resources and components is drawing to a close.

Untradable goods and services, cost thresholds, resource security, the end of financialization / globalization and declining interest rates matter. The fantasy that the top 10% can prop up the economy by borrowing and spending the phantom wealth of insanely overvalued asset bubbles is drawing to a close.

Is inflation "transitory" in your household budget? Really? Where?

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If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

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Tyler Durden Thu, 06/17/2021 - 09:50
Published:6/17/2021 8:59:13 AM
[Markets] Mao’s Cultural Revolution Has Arrived In America Mao’s Cultural Revolution Has Arrived In America

Commentary authored by Chris Talgo via The Epoch Times (emphasis ours),

From 1966 to 1976, Chinese society suffered under what we now call the Cultural Revolution.

Although the Cultural Revolution (previously known as the Great Proletarian Cultural Revolution) was a multifaceted affair, it was undergirded by a vicious, fanatical campaign to destroy the “Four Olds.”

A small group of Chinese youth walk past several dazibao, revolutionary placards, in February 1967 in downtown Beijing, during the "Great Proletarian Cultural Revolution." (Jean Vincent/AFP/Getty Images)

In 1971, The New York Times described the campaign thusly:

One of the early objectives of the Cultural Revolution in China … was to wipe out the ‘four olds’—old things, old ideas, old customs and old habits.

“The ‘four olds’ had already suffered setbacks in the years of Communist rule preceding the Cultural Revolution, but the Maoist leadership tried to use the new revolutionary upsurge launched in 1966 to eliminate them completely.

“In the turbulent years from 1966 to 1968, what remained of old religious practices, old superstitions, old festivals, old social practices such as traditional weddings and funerals, and old ways of dress were violently attacked and suppressed. Visual evidences of old things were destroyed, and there was an orgy of burning of old books and smashing of old art objects.”

Tragically, it seems as if the United States is in the midst of its own Cultural Revolution.

Like the Chinese Cultural Revolution, the current “revolution” in America is being waged by the youth, at the behest of radical leftists, of course.

Also, much like the Chinese Cultural Revolution of the 1960s, the American “Woke Revolution” is hellbent on destroying any and all vestiges of traditional society, especially those that celebrate freedom, individualism, and American exceptionalism, in general.

In China, during the Cultural Revolution, as The New York Times describes, old things, old ideas, old customs, and old habits had to be eliminated.

In America, during the Woke Revolution, we’re following the same path.

Old things, such as fossil fuels, the Founding Fathers, the Electoral College, etc. must go.

Old ideas, such as equality of opportunity and meritocracy, are now moot.

Old customs, such as standing for the National Anthem and vigorously defending one’s right to freedom of speech, are long gone.

And, old habits, such as the Protestant work ethic and rugged individualism, have been seriously undermined.

In place of these “old” aspects of our culture, the Woke Revolution desires to turn our society on its head.

The Woke Revolution, like the Cultural Revolution, is predicated on Marxist ideology.

Individualism is being replaced with communalism. Equity, better known as equality of outcome, now trumps equality of opportunity.

Sadly, even Martin Luther King Jr.’s “dream” of a color-blind society has given way to critical race theory, which is the epitome of racism.

And, above all else, class warfare reigns supreme. Rich versus poor. Privileged versus oppressed.

No longer is America the land of opportunity. Henceforth, it shall be known as the land of oppression. Or so we’re told.

Perhaps most disconcerting when one compares the Cultural Revolution to contemporary America is the disdain for the past.

In China, this manifested in mass book burnings and wanton destruction of historic monuments. That sounds a lot like what’s been happening in America recently.

The parallels between China’s Cultural Revolution and America’s Woke Revolution are becoming closer by the day.

As The New York Times article chronicling China’s Cultural Revolution concluded, “A new generation has appeared, and though much of the old China is too indelible to erase as yet, a new China with ways quite different from the old is in existence.”

The same could be said about America in 2021.

Chris Talgo is senior editor at The Heartland Institute.

Tyler Durden Wed, 06/16/2021 - 23:40
Published:6/16/2021 10:56:11 PM
[Markets] Taibbi: Has The Media's Russiagate Reckoning Finally Begun? Taibbi: Has The Media's Russiagate Reckoning Finally Begun?

Authored by Matt Taibbi via TK News Subastack,

Glenn Simpson, the former Wall Street Journal reporter turned high-priced “oppo” merchant, didn’t like to think of himself as a private investigator.

He preferred to describe what he and his firm, Fusion-GPS, did as “journalism for rent,” an activity a class above spying, because a journalist can’t just say what he or she thinks.

“You have to prove it,” Simpson said.

“And that imposes a discipline to the investigative process that people in other fields don’t really absorb… When you’re a spy, you really don’t have to get into a lot of that stuff.”

Spooked, the meticulous new book on private spying by former New York Times reporter Barry Meier, reads like a direct rebuttal to Simpson, the book’s central character.

“There is little question that private investigators take on legitimate assignments,” writes Meier at one point.

 “Still, everyone in the industry knows its secret — that the big money is made not by exposing the truth but by papering it over.”

Meier, a two-time Polk award winner who was also part of a team that won a Pulitzer in 2017, is the first mainstream press figure to break the industry omerta over the reporting failures of Russiagate. That Spooked is an important book can be judged by the nervous reaction to it. Though the Times did publish an excerpt and a review by William Cohan, and the Wall Street Journal commended him for saying “what hardly anyone else in his circle of elite mainstream journalists has had the courage to say,” much of the rest of the business has looked askance.

This reveals how much industry discomfort remains about the Steele story, still treated by media critics as a minor fender-bender and not the epic crackup Spooked describes.

Much of the point of Meier’s book is that there can be no such thing as “journalism for rent,” because the mere act of putting information up for sale corrupts the process Simpson claims to love. As Meier put it to me, “People who think of themselves as journalists and rent out those talents are no longer journalists.”

Although Spooked covers other private agencies like Black Cube (hired by Harvey Weinstein to dirty up his accusers) and K2 (the corporate descendant of Kroll Associates, who planted a phony documentarian to investigate health activists), the spine of the book is the story of Glenn Simpson’s Fusion-GPS. Simpson is the kind of half-absurd, half villainous character who makes for a great character study, and Spooked readers are fortunate he made the mistake of leaving a trail of unflattering stories before very gossipy witnesses across his years in the media business. Meier coldly gathers these tales together in a way that makes for a particularly entertaining read for anyone who’s ever worked in a newsroom (Simpson imploring his “dachsund-beagle mix named Irving” to take a dump on his editors’ desks on his last day at the Journal is just one of many amusing anecdotes).

Simpson had a rocky relationship to the journalism profession when he was in it. On one level, he apparently was well-liked, funny, a prankster. On another, editors were wary, finding him combative and, as Meier writes, “quick to see conspiracies where they didn’t exist”:

One Journal editor became so concerned about the conclusionary leaps that Simpson was capable of making that he asked another journalist on the paper’s staff to double-check Simpson’s reporting. His response to any pushback he got from editors was usually the same: they could go fuck themselves…

As Simpson soldiered on in a business whose ranks were shrinking, he drifted into a world where a thinker prone to “conclusionary leaps” might feel more comfortable, filling his rolodex with the names of private operatives who became his top sources. He did a series of reports about a fierce (if uninteresting) squabble between Kazakh dictator Nursultan Nazarbayev and his former son-in-law and political rival, Rakhat Aliyev, with Aliyev’s lawyers and operatives serving as Simpson’s sources.

Feeling less wanted in the newsroom, and tempted by the money and allure of the private spy world, Simpson made the jump to become an informational Pinkerton, to disastrous effect. Meier emphasizes that for all its flaws, the journalism business at least once imposed some constraints on personalities like Simpson’s, forcing them to stay stuck in the world of evidence. In private spying, those constraints are removed, and a person prone to skipping steps in the proof process can get themselves into some very nasty situations. As Meier put it, “things could go really wrong.”

As the world knows by now, things did go wrong, in what Meier describes as “a media clusterfuck of epic proportions.”

To read more, subscribe here...

Tyler Durden Wed, 06/16/2021 - 22:20
Published:6/16/2021 9:26:59 PM
[] Hunter Biden's New Hustle: Selling "Art" -- Which Is Just Colored Dots and Splattered Watercolors -- for $500,000 a Piece Democrats and their cronies and families already have a hustle going, where media companies give them huge stealth-donations in the form of outsized advances that their shitty books will never come close to earning. But crackhead whoremonger Hunter Biden's already... Published:6/16/2021 4:24:17 PM
[Entertainment] Washington Post paperback bestsellers A snapshot of popular books. Published:6/16/2021 7:54:51 AM
[Markets] France's Macron Just Gave Away The Plot With His Outside Voice France's Macron Just Gave Away The Plot With His Outside Voice

Authored by Tom Luongo via Gold, Goats, 'n Guns blog,

French President Emmanuel Macron, whose poll numbers are abysmal and needs a sincere shot in the arm, just gave away the plot with his outside voice.  

I’ve noticed this trend within The Davos Crowd in recent months, speaking with their outside voice what they only ever talk about internally.

That plot, by the way, is to transfer power over the global money supply to the International Monetary Fund (IMF) by eventually doing away with individual central banks.

To that end Macron’s latest proposal is to bailout Africa because COVID by coordinating $100 billion in gold sales of national reserves of the G-7. Who would they sell that gold to? The IMF. That money can then be distributed by the IMF, expanding the supply of SDRs — Special Drawing Rights — using the gold as collateral for the development loans.

He’s talking about $100 billion here.  That’s around 1600 tonnes of gold at current prices.  32150.7 ounces/tonne x $1900 per ounce. $0.06109 billion per tonne.  1610 tonnes of gold.

Now, interestingly, a reader on Twitter put a lot of pieces together with this, saying, in effect that that this is the humanitarian cover story for the upcoming liquidation of Italy.

Having spoken with the Mittdolcino.com, an Italian blog with a similar mission, it is well understood within Italian circles that his liquidation of Italy is well underway and Mario Draghi was put in power to effect this.

Italy, officially, has 2450 tonnes of gold, give or take.  Macron can ask them to pony up because they owe at least that much to the ECB and Germany through TARGET2.  Draghi has already made it explicit that there will be no Italeave without paying that debt.  He said this as ECB President. With Christine Lagarde in power that requirement is still there. Now that he’s Prime Minister, Italeave is off the table. Worse, he can effect this transfer once there is political cover for it.

I don’t think this plan has legs just yet, but it is another sign that they have to accelerate their plans because of the rising opposition to the basic framework of Davos’ agenda.  

So, Macron speaking on the eve of the G-7 conference to spill the plot is telling of just how bad his electoral prospects are in France, because he needs to improve his image and this is the best he can come up with? Sell some of France’s gold to the IMF to pay for a new colonization program in Africa?

No wonder he got slapped last week.

That said, since this plan is now out in the open what are the implications:

  1. It gives political cover for stealing Italy’s gold, humanitarian giving from the virtuous first world.

  2. It puts the IMF at the center of the post-COVID bailout strategy, neatly avoiding the EU’s naked aggression against its own members.

  3. It rolls the current western gold reserves into one institution rather than a bunch of disparate ones.

  4. Gives the IMF even more ammunition to combat China and Russia’s rampant accumulation of gold and set it up as the future for a world government enforced by the UN

  5. It tells everyone that Europe is losing ground to China and Russia in Africa for the future of rare earths and lithium necessary to pull off their Green Revolution.

  6. It puts the world on notice that the EU now feels confident of its ability to recolonize the third world because of the primacy of its central unelected authority.

  7. This fits right in with the global minimum corp. tax agreement… because once they all agree on this there will have to be an enforcement agency… that agency will be handed to the UN and collected through the IMF.

  8. It paves the way for national CBDC’s unmoored from gold but backed by a basket of “gold-backed SDR’s” and tax policy.  

  9. It’s also a frontal assault on Bitcoin and cryptocurrencies which are gaining traction very quickly in African countries most vulnerable to dollar supply and demand shock, now that Lightning Network has proven to be functional.

  10. It puts paid that the changes to Basel III’s Stable Funding Ratios are there to increase the price of gold, by removing the Fed’s ability to keep it under wraps through the futures markets and unallocated paper gold.

Macron will not be allowed to leave office next year unless something dramatic happens against Davos’ wishes in France, i.e. some form of violent uprising rather than just protests.  There is no doubt in my mind that there will be a number of attempts to prop him up to get him across the finish line, Marine Le Pen will get closer but she won’t be allowed to win.  

They stopped Trump, they’ll stop Le Pen.  It may be the last time they do such a thing and they may burn what political capital and cover they have left in the process, but don’t bet on them NOT DOING IT.   At this point no price is too high to pay.  They’ve garnered this political capital exactly for this reason, they will spend it.

What comes next is what my friend at The Duran, Alex Mercouris, talked about in my recent chat with him. The Biden / Putin summit will be a bribe and a threat from Biden to Putin. Get on board with this new post-COVID European Marshall Plan to recolonize Africa and we’ll pay you a few hundred million dollars or face a new round of massive sanctions.

This is supposed to create the new version of the Sino-Soviet split? The Russians bring in a few hundred million a month from the U.S. now, exporting 1.4 million barrels per day in May. The idea is laughable on its face and further advances my thesis that the U.S. is intentionally destroying relations with Russia and China through diplomatic ‘gaffes’ which preclude any rapprochement.

The goal is ultimately isolation of the U.S. as a world power diplomatically, while doing exactly what Davos wants to ensure they aren’t blamed for what comes next. So, expect a final break with the U.S. by Russia financially in the post-Summit environment.

This will not be a mistake, it will be part of the plan. Because, again, the goal is the political, economic and cultural dissolution of the U.S. and that only occurs by disrupting as much of the infrastructure of U.S. internal energy market as possible.

At the same time I’ve noted that the Fed was completely silent about this new plan of Macron’s while it’s also clear that Fed Chair Jerome Powell is not down with the ECB’s Christine Lagarde’s over-the-top push to coordinate central bank policy to fight climate change.

That public disagreement on the fulcrum issue for Davos was the most important headline from last week. It signals that whatever Davos has planned for the U.S. the Fed and the banking system is not going to go gently into that dark night.

So, there’s another crack in the Davos agenda. Another front in this war is opening up and it’s going to intensify from here. Powell is not a globalist in the same way that Lagarde, Draghi, Kuroda, Carney and Gordon Brown are.

He’s a private equity guy with a far different ethos and understanding of the situation. He represents similar, but not the same, people.

And he’s not going to sell or revalue one ounce of the U.S.’s gold nor give up the commercial banking sector in the U.S. because the word came down from Klaus Schwab.

That said, the central banks know they are done with the current system and need a new one. To survive they will have to disconnect money from value and work. By doing that they disconnect you from your own value in the work you do. It’s that simple. The most efficient way to do that is sell the gold and isolate those powers unwilling to go along with their plans.

And this all ties directly back to Macron’s innocent and innocuous sounding request for the world to come together and help out poor Africa recover post-COVID and sell their country’s only tangible measure of savings left backing their rapidly devaluing currencies, their gold.

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Tyler Durden Tue, 06/15/2021 - 22:45
Published:6/15/2021 9:48:38 PM
[Markets] Non-Fungible Tokens Are "Changing The Lives" Of Many In Southeast Asia Non-Fungible Tokens Are "Changing The Lives" Of Many In Southeast Asia

Just days after we noted that people in South Korea saw bitcoin as their "only chance of escape" from their social status, it looks as though non-fungible tokens are also catching on in Southeast Asia. 

At least that was the topic of a new report by Nikkei, which took at look at how skeptics and believers are clashing head-to-head about NFTs, whether they have any value and whether or not they could be the future of asset ownership and finance. 

"NFTs are indeed changing the lives of some Southeast Asians" the report notes, with some people using them to earn extra income. One such person is Gilbert Jalova, who has been buying and selling digital assets in a game called Axie Infinity. He can earn up to $550 a month doing so, the report notes, which is "more than he makes in his regular job". 

Jalova said: "It's a huge help to us and at the same time, it has become our family bonding."

The report estimates that more than 80% of Axie Infinity's player base comes from emerging economies where it is tough to find work or where inflation has run rampant. 

"People are turning to these games as a way to supplement their income or as an alternative means of employment," one Filipino game developer said. 

Riky Candra, a 20-year-old university student in Pekanbaru, said: "I've managed to earn a total of around 10 million rupiah ($700) in the year that I have been playing. I'm able to spend that on daily campus needs, such as books or other equipment, and I tend to set aside some for deposit as future assets."

Trung Nguyen, co-founder of the game's developer said an NFT is a way "to represent objects that are unique in nature. So it's a very good fit with game characters and game assets."

Artists in Southeast Asia are also cashing in on NFTs. One artist, who goes by the name Monez, sold his first NFT artwork in March of this year for 0.8 ETH, or about $1200. "In the real world ... people buy the first painting from the painter, which is usually very cheap, and can sell it for double the price, but the original artist is still poor because we get [only the first payment]," he said.

But there is still some skepticism about NFTs looming. Naohito Yoshida, founder and CEO of Digital Entertainment Asset, pointed out the lack of liquidity: "Liquidity in the NFT market could be a potential risk. If someone buys NFTs for purely collection purposes, there won't be much of a problem. But if people are buying for investment purposes, then low market liquidity will be an issue, as it means you will not be able to sell it when you want."

And there are already "signs that liquidity may be drying up, or that the NFT bubble is bursting," Nikkei writes. While $101 million of NFTs sold on May 3, that number has dropped to about $2 million per day by the end of may. 

Poltak Hotradero, business development manager at the Indonesia Stock Exchange, concluded: "For the digital natives of the younger generations, it will be easy. But for older generations, I don't think they can appreciate NFTs [on a] par with tactile arts which they can see and touch."

Tyler Durden Tue, 06/15/2021 - 19:45
Published:6/15/2021 6:49:25 PM
[Markets] The Margin: Bill Gates’s beach reads: The fall of GE, Obama’s latest memoir and the ‘complicated relationship’ between humans vs. nature Five books the Microsoft founder recommends for summer 2021.
Published:6/15/2021 5:17:57 PM
[Entertainment] Female-centered historical novels are dogged by questions of accuracy. Hence the author’s note. Resistance to books that cast heroines with agency and hidden talents has declined, but only after a hard-fought battle. Published:6/14/2021 5:32:20 PM
[Markets] "It Won't Be Pleasant" - Mark Carney Unveils Dystopian New World To Combat Climate 'Crisis' "It Won't Be Pleasant" - Mark Carney Unveils Dystopian New World To Combat Climate 'Crisis'

Authored by Peter Foster via NationalPost.com,

What Carney ultimately wants is a technocratic dictatorship justified by climate alarmism...

In his book Value(s): Building a Better World for All, Mark Carney, former governor both of the Bank of Canada and the Bank of England, claims that western society is morally rotten, and that it has been corrupted by capitalism, which has brought about a “climate emergency” that threatens life on earth. This, he claims, requires rigid controls on personal freedom, industry and corporate funding.

Carney’s views are important because he is UN Special Envoy on Climate Action and Finance. He is also an adviser both to British Prime Minister Boris Johnson on the next big climate conference in Glasgow, and to Canadian Prime Minister Justin Trudeau.

Since the advent of the COVID pandemic, Carney has been front and centre in the promotion of a political agenda known as the “Great Reset,” or the “Green New Deal,” or “Building Back Better.” All are predicated on the claim that COVID, and its disruption of the global economy, provides a once-in-a-lifetime opportunity not just to regulate climate, but to frame a more fair, more diverse, more inclusive, more safe and more woke world.

Carney draws inspiration from, among others, Marx, Engels and Lenin, but the agenda he promotes differs from Marxism in two key respects. First, the private sector is not to be expropriated but made a “partner” in reshaping the economy and society. Second, it does not make a promise to make the lives of ordinary people better, but worse. Carney’s Brave New World will be one of severely constrained choice, less flying, less meat, more inconvenience and more poverty: “Assets will be stranded, used gasoline powered cars will be unsaleable, inefficient properties will be unrentable,” he promises.

The agenda’s objectives are in fact already being enforced, not primarily by legislation but by the application of non-governmental — that is, non-democratic — pressure on the corporate sector via the ever-expanding dictates of ESG (environmental, social and corporate governance) and by “sustainable finance,” which is designed to starve non-compliant companies of funds, thus rendering them, as Carney puts it, “climate roadkill.” What ESG actually represents is corporate ideological compulsion. It is a key instrument of “stakeholder capitalism.”

Carney’s Agenda is promoted by the United Nations and other international bureaucracies and a vast and ever-growing array of non-governmental organizations and fora, especially the World Economic Forum (WEF), where Carney is a trustee. Also, perhaps most surprisingly, by its corporate victims. No one wants to become climate roadkill.

Carney clearly feels himself to be a man of destiny. “When I worked at the Bank of England,” he writes in Value(s), “I would remind myself each morning of Marcus Aurelius’ phrase ‘arise to do the work of humankind’.” One is reminded of French aristocrat and social reformer Henri de Saint-Simon, the “grand seigneur sans-culotte,” who ordered his valet to wake him with similar words: “Remember, monsieur le comte, that you have great things to do.”

That is not the only thing Carney has in common with Saint-Simon, who believed that society should be ruled by savants such as himself; an alliance of engineers and other technocratic intellectuals, along with bankers. Carney is very much a banker technocrat, not merely at ease gliding along the corridors of global bureaucratic power, but expert at framing arguments that support an ever-expanding role for his class.

His expansive pretensions first appeared at the Bank of Canada. If the economy is like a game of ice hockey, then central bankers should, ideally, be like Zamboni drivers, whose job is to keep the ice flat (Carney had in fact been a goalie during his academic years at both Harvard and Oxford). At the Bank of Canada, he often seemed like the Zamboni driver who thought he was Wayne Gretzky. He could never resist lecturing private businesses to stop sitting on “dead money,” or telling them they were too timid in the international arena, or advising consumers that they were spending too little, or borrowing too much. He promoted “macroprudence,” the idea that regulators, in their panoptic wisdom, would focus on the forest, not the trees. Now, he wants to establish himself as an intellectual.

Carney has a lot to put straight with the world. According to his new book, and the related BBC Reith Lectures that Carney delivered last year, the three great crises of credit (2008–09 version), COVID and climate are all rooted in a single problem: People in general, and markets in particular, are not as wise, moral or far-seeing as Mark Carney. He sums up this failing as the “Tragedy of the Horizon,” a phrase he concocted for a speech ahead of the 2015 Paris climate conference.

However, Carney is sophistic when it comes to the alleged moral shortcomings of capitalism. It has been one of the most tedious tropes of the left since at least The Communist Manifesto that the rise of commerce would drive out all that is virtuous in society, leaving nothing but the “cash nexus” of trade. One of Carney’s favourite philosophers is Harvard’s Michael Sandel, who produces endless trivial examples suggesting that we have moved from a “market economy” to a “market society.”

“Should sex be up for sale?” Carney thunders, following Sandel. “Should there be a market in the right to have children? Why not auction the right to opt out of military service? Why shouldn’t universities sell admission to raise money for worthy causes?” But the very fact that people reflexively feel uneasy about — or outright reject — such notions entirely disproves his point. People do not believe that everything is, or should be, for sale.

Carney notes the long debate, going back to classical times, on the nature of commercial value. This was theoretically resolved by the “marginalist revolution,” which put paid to the “paradox of value” that puzzled over the (usually) low price of useful water and the (usually) high price of useless diamonds. The marginalists pointed out that commercial value isn’t determined by usefulness or labour input. It is inevitably subjective, based on personal preferences and available resources. There is no paradox. Someone dying of thirst in the middle of the desert might be more than willing to offer a bucket of diamonds for a bucket of water.

Mark Carney is a UN Special Envoy on Climate Action. PHOTO BY TOLGA AKMEN/POOL VIA REUTERS/FILE

However, market valuations are essentially different from moral values, a distinction Carney continually muddles. He misrepresents the marginalist/subjectivist perspective, claiming that it implies that anything not commercially priced is not considered valuable. “Market value,” he writes, “is taken to represent intrinsic value, and if a good or activity is not in the market, it is not valued.” But who holds such an idiotic view? Nobody “prices” their family, children, friends, community spirit or the beauties of nature, although there is certainly lots of calculation going on in the background. Carney constantly berates “market fundamentalist” straw men who employ “standard economic reasoning” and who believe that people are rational and markets perfect.

He incorrectly claims that Adam Smith — in his first great book, The Theory of Moral Sentiments— said that a sense of morality was “not inherent.” In fact, Smith believed that we are born with such a sense, which is then fine-tuned by the society in which we grow up. However, Carney — like all leftists — leans towards the blank slate, nurture-over-nature perspective because it suggests that human nature might be beneficially reformed under the right (that is, left) social arrangements.

Carney believes our moral sentiments started going astray around the time of the publication of Smith’s better-known book, The Wealth of Nations, in 1776, when the Industrial Revolution was beginning to take off. He rightly suggests that one should read both books to gain a full appreciation of Smith’s insights, but he seems to have missed the significance of Smith’s putdown of “whining and melancholy moralists,” his cynicism about “insidious and crafty” politicians, and his thoroughgoing skepticism about those who would “trade for the public good” (that is, the ESG crowd). Moreover, Smith noted that the greatest corrupter of moral sentiments was not commerce but “faction and fanaticism,” that is, politics and religion, which come together in the toxic stew of climate alarmism and ESG.

ESG used to be called Corporate Social Responsibility, or CSR. The Nobel economist Milton Friedman warned against its subversive nature 50 years ago. He noted that taking on externally dictated “social responsibilities” beyond those directly related to a company’s business opened the floodgates to endless pressure and interference. The big questions are responsibility to whom? And for what?

Carney also typically misrepresents Friedman, suggesting that he claimed that shareholders should rank “uber alles,” and to the exclusion of other legitimate stakeholders such as employees and local communities. Carney claims that “At times, large positive gains could accrue to society if small sacrifices were made on behalf of shareholders.” But by what right would management “sacrifice” shareholders, and who would decide which sacrifices should be made?

Carney admits that the “integrated reporting” required by ESG is a morass: “ESG ratings consider hundreds of metrics, with many of them qualitative in nature… Putting values to work is hard work, but as with virtue, it should become easier with sustained practice.” No need to ask whose version of values and virtue is to prevail.

*  *  *

Despite his thorough castigation of market society, Carney somehow also believes this “corroded” society is clamouring to make great personal sacrifices for draconian climate actions and the UN’s Sustainable Development Goals.

Carney has been a prime pusher of “net-zero,” the notion that climate-related human emissions must be entirely eradicated, buried or offset by 2050 if the world is to avoid climate Armageddon. He claims that net-zero is “highly valued by society.” In reality, the vast mass of people have no clue what it entails; when Carney talks about this version of “society,” he is talking about a small, radical element of it.

Carney peddles the non-sequitur that because the world wasn’t ready for COVID, this confirms that the world is being short-sighted about climate catastrophe. But COVID is an obvious reality; an existential climate catastrophe is a hypothesis (frequently promoted — admittedly with great success — by those with agendas). He claims that “A good introduction to this subject can be found in journalist David Wallace-Wells’ The Uninhabitable Earth,” a work heavily criticized even by prominent climate-change scientists for its factual errors and exaggerations. Indeed, even its author admitted its tendentious purpose.

Carney also commends the knowledge and wisdom of Swedish teenager Greta Thunberg: “The power of Greta Thunberg’s message lies in the way she drives home both the cold logic of climate physics and the fundamental unfairness of the climate crisis.”

Anybody who cites an anxious 17-year-old as an authority on climate science and moral philosophy should be an object of deep suspicion, but then, according to Carney, climate science is easy. Greta’s “basic calculations” are ones that she could “easily master and powerfully project.” (Carney says he once gave Greta a tour of the Bank of England’s gold vaults. One wonders if she also offered up tips on monetary policy.) But then, in early 2020, Greta demonstrated her complete disconnect from reality when, at the WEF in Davos, she called for an immediate cessation of emissions, which would tank the world economy and potentially kill millions. Even Carney admits deviating from her wisdom on that point.

Far from demonstrating a firm knowledge of the climate system himself, Carney cites scary but misleading statistics. “Since the 1980s,” he writes, “the number of registered weather-related loss events has tripled, and the inflation-adjusted losses have increased fivefold. Consistent with the accelerated pace of climate change, the cost of weather-related insurance losses has increased eightfold in real terms over the past decade to an annual average of $60 billion.”

I asked Professor Roger Pielke, Jr., an expert on climate and economics at the University of Colorado, to comment. He replied “(Carney) has confused economics with weather. The increase in losses he describes is well understood to occur for two main reasons: more wealth and property exposed to loss and better accounting of those losses. To assess trends in extreme weather one should look at weather data, not economic loss data.”

Among Mark Carney’s current responsibilities since leaving the Bank of England as its governor is advising Prime Minister Justin Trudeau. PHOTO BY SEAN KILPATRICK/THE CANADIAN PRESS/FILE

Carney’s confusion is hardly innocent since his Agenda depends on incessantly claiming that “What had been biblical is becoming commonplace.”

Fortunately, Carney has been making claims about worsening weather for long enough that we can assess some of his predictions. In his recent book Unsettled: What Climate Science Tells Us, What It Doesn’t, and Why It Matters, Steven Koonin, former undersecretary for science at the Obama-era U.S. Energy Department, cites the speech Carney made to Lloyd’s of London before the Paris climate conference in 2015. The speech was designed to frighten the insurance industry into divestment from fossil fuels, on the basis that many oil and gas reserves would be “stranded” as we exhaust our allowable carbon “budget.” Carney pointed out that the previous U.K. winter had been the “wettest since the time of King George III.” He went on to say, “forecasts suggest we can expect at least a further 10% increase in rainfall during future winters.” For support he cited the U.K. Met Office’s forecast for the next five years. It turned out to be dead wrong. The six winters after 2014 averaged 39-per-cent less rainfall than the 2014 record. Meanwhile a Met Office report in 2018 acknowledged that the “largest source of variability in U.K. extreme rainfalls during the winter months was the North Atlantic Oscillation mode of natural variability, not a changing climate.”

“(I)t’s surprising,” notes Koonin, “that someone with a PhD in economics and experience with the unpredictability of financial markets and economies as a whole doesn’t show a greater respect for the perils of prediction — and more caution in depending upon models.”

During his BBC Reith Lectures last year, on the topic of “How We Get What We Value,” Carney received few challenges from his handpicked questioners, but a couple came from eminent historian Niall Ferguson. Ferguson asked Carney why, in his discussion of the climate issue, he made no reference to Bjorn Lomborg (a much more knowledgeable Scandinavian than Greta), and in particular to Lomborg’s book, False Alarm, in which Lomborg establishes — using “official” science — that there is no existential climate crisis, that adapting to climate change is manageable, and that the kinds of policies promoted by Carney are likely to be far more costly than any impact from extreme weather.

Carney of course hadn’t read that book, but he dismissed Lomborg by saying that “it’s 15 or 20 years ago when he first came out with his ‘Don’t worry about the climate.’ How’s that working out for us?” But Lomborg never said “Don’t worry about the climate,” he just suggested that we had to put risks into perspective. Meanwhile Lomborg’s non-alarmist thesis is working out much better than that of doomsayers such as Carney.

This offhand rejection of someone as widely respected as Lomborg exposes the hypocrisy of Carney’s statement in Value(s) that “experts need to listen to all sides…All of us as individuals have a responsibility to be more open and to engage respectfully with different views if we want constructive political debates and to make progress on important issues.” Except, climate-catastrophe dissenters don’t make it into the debate. There can be zero diversity of views on net-zero.

Ferguson put another thorny question to Carney at that Reith lecture: He pointed out that since the 2015 Paris agreement, China had been responsible for almost half the increase in global carbon emissions, and it was building more coal capacity in the current year than existed in the entire United States. What did China’s promises of net-zero by 2060 mean, Ferguson asked, if it was “actually leading the pollution charge”? Carney’s non response was that China is the largest manufacturer of zero-emission cars, and the leading producer of renewable energy.

Koonin notes in his book that Carney “is probably the single most influential figure in driving investors and financial institutions around the world to focus on changes in climate and human influences upon it…. So it’s important to pay close attention to what he says.”

*  *  *

Mark Carney cries crocodile tears at the possible viability of the Marxist perspective in today’s political environment. But if there is one sure sign of a Marxist, it’s a belief that capitalism is — or is about to be – in “crisis.” His new book has an appendix on Marx’s theory of surplus value: that all profits are wrung from the hides of labour. He also cites Marx’s collaborator, Friedrich Engels. In particular he notes “Engels’ pause,” the one period in capitalist history, early in the 19th century, when workers may not have shared the increases in productivity brought about by industrialization.

Carney projects that the “Fourth Industrial Revolution” (a phenomenon much invoked by the WEF) might bring about a similar period, thus providing a source of political unrest. “(I)t could be generations before the gains of the Fourth Industrial Revolution are widely shared,” he writes. “In the interim, there could be a long period of technological unemployment, sharply rising inequalities and intensifying social unrest… If this world of surplus labour comes to pass, Marx and Engels could again become relevant.”

He rather seems to hope so.

Carney claims powerful parallels between Marx’s time and our own. “Substitute platforms for textile mills, machine learning for the steam engine, and Twitter for the telegraph, and current dynamics echo those of that era. Then, Karl Marx was scribbling the Communist Manifesto in the reading room of the British Library. Today, radical viral blogs and tweets voice similar outrage.”

In fact, Marx wrote The Communist Manifesto, based on a tract by Engels, in Brussels, not at the British Library, but it’s more important to remember where Marx’s misguided and immutable outrage led: to a disastrous economic and political model that generated poverty and mass murder on an unprecedented scale. Meanwhile “outrage” is surely a dubious basis for policy. The outraged are certainly a useful constituency for those seeking power, however, which brings us to the influence on Carney of the man who first tried to put Marxism into practice.

When it comes to the COVID crisis, writes Carney, “We are living Lenin’s observation that there are ‘decades when nothing happens and weeks when decades happen’.” Strange that Carney would cite one of the most ruthless murderers in history for this rather bland insight, but then Carney’s Agenda is not without its own parallels to Lenin (minus, one presumes, the precondition of rampant bloodshed).

Although Vladimir Lenin didn’t know much about business or economics, he declared that “’Communism is Soviet power plus the electrification of the whole country.” Carney’s plan is global. “We need,” he claims, “to electrify everything and turn electricity generation green.” The problem is that wind- and solar-powered electricity needs both hefty government subsidies and fossil-fuel backup for when the wind doesn’t blow and the sun doesn’t shine. Green electricity is inflexible, expensive and disruptive to grids.

Carney cites Joseph Schumpeter’s concept of “creative destruction,” but his own version involves not the metaphorical and benign process of market innovation making old technologies redundant, but a deliberate suppression of viable technologies to make way for less reliable and less economic alternatives.

When Lenin wrecked the Russian economy after brutally seizing power in 1917, he was forced to backtrack and allow some private enterprise to prevent people starving. However, he assured his radical comrades that he would retain control of “the commanding heights” of heavy industry. Carney’s plan is to control the global economy by seizing the commanding heights of finance, not by nationalization but by exerting non-democratic pressure to divest from, and stop funding, fossil fuels. The private sector is to become a partner in imposing its own bondage. This will be do-it-yourself totalitarianism. Indeed, companies in our one-party ESG state are already pleading like show-trial defendants, making suicidal net-zero commitments, lest banks cut them off.

Left: A portrait of Karl Marx. Top right: Vladimir Lenin makes a speech in Red Square on the first anniversary of the Bolshevik Revolution. Below right: Teenage Swedish climate activist Greta Thunberg delivers brief remarkssurrounded by other student environmental advocates in 2019. Mark Carney draws on all three in his agenda to address the “climate emergency,” writes Peter Foster. PHOTO BY FILE; HULTON-DEUTSCH COLLECTION/CORBIS/CORBIS VIA GETTY IMAGES; SARAH SILBIGER/GETTY IMAGES/FILE

To further that end, Carney has helped to start a key organization, the Network for Greening the Financial System (NGFS), a collection of central banks and regulators. He has also signed up an ever-growing constituency of activist policy wonks who peddle emissions measurement and certification, eco audits and ESG rankings. This agenda is inevitably appealing to transnational organizations such as the International Energy Agency (IEA), the IMF, the World Bank and the OECD, whose empires are all lucratively intertwined with the global governance thrust. In May, the IEA issued a report calling for an immediate end to fossil fuel investment to get to net-zero.

Part of Carney’s strategy is to force “voluntary” standards on banking and industry, then have governments make those standards compulsory. The major accounting firms appear keen to promote the possibility of endless auditing extensions, under which the relatively straightforward metric of money is to be replaced by the infinitely malleable concepts of “purpose” and “impact.”

Carney has also helped turn the accounting screw though “carbon disclosure.” Companies are pressured to make explicit the kind of damage they might suffer if the alarmists’ worst nightmares are realized. Such disclosure is a variant on that famous loaded question “When did you stop beating your spouse?” Instead, carbon disclosure asks the climate equivalent of “If you were to beat your spouse, what sort of injuries might he/she suffer?” Companies must also disclose their plans to deal with the presumed crisis. No company dares to say “We do not believe your apocalyptic forecasts.” They meekly regurgitate the required climate porn about floods and droughts and hurricanes, and make elaborate fingers-crossed emissions-reductions commitments. This in turn leads them into arrangements such as buying emissions offsets, a complex scheme analogous to the medieval Catholic Church’s sale of indulgences. Carbon markets have inevitably led to a surge in work for offset generators, certifiers and auditors. Carney projects this market could be worth $100 billion.

Ironically, earlier this year Carney found himself tangled in the murky metrics of offsets. In 2020, he was appointed a vice chairman with Toronto-based Brookfield Asset Management, where he is in charge of “impact investing.” As historian Tammy Nemeth points out in her critical study of the “Transnational Progressive Movement,” of which Carney is a leading light: “(I)t is perhaps ethically murky for someone who is actively working within the UN and advising two different governments on how to change national and global financial rules to be working for a company that will be a direct beneficiary of those rule changes.” Still, who better to lead your company through a minefield than the person who planted the mines?

Except that Carney was hoist with his own petard when he claimed that Brookfield, which has major investments in fossil fuels and pipelines, was already “net-zero” due to emissions “avoided” as a result of its investing in renewable energy. Carney’s claim produced instant refutation and accusations of greenwashing. The Financial Times called it a “major stumble.” A representative of CDP (formerly the Carbon Disclosure Project) castigated those who attempt to hide “dirty coal issues.” Carney subsequently issued a qualified mea culpa on Twitter: “I have always been — and will continue to be — a strong advocate for net zero science-based targets, and I also recognize that avoided emissions do not count towards them.”

*  *  *

H. L. Mencken observed that “The urge to save humanity is almost always a false-front for the urge to rule.” So, just how big a threat is the agenda of Mark Carney and his fellow “transnational progressives”?

In his book, Value(s), Carney lays out rationalizations and autocratic pretensions, although he is less forthcoming about his motivations. He writes that “Leaders need to renounce power for its own sake and discern the power of service.” Mencken would be amused.

The shambolic response to COVID of many governments, not least in Canada, and the distinctly unsettled nature of pandemic “science,” have not done much for the credibility of either governments or experts. The Carney-backed agenda is not predicated on working through democratic institutions but on circumventing them. Still, he is also reported to have more conventional political aspirations, namely to join the federal Liberal party and rise within it, very possibly to prime minister. (Carney recently gave a speech at the Liberal national convention, where he pledged his full support.)

He thus has a rather ill-fitting section in Value(s) on “How Canada Can Build Value for All.” It reads like a Liberal party stump speech. According to Carney “We (in Canada) routinely transcend the limitations of our size to model values and policies for other countries.” It’s the old chestnut that no progressive Canadian leader ever seems to tire of: The world needs more Canada.

Carney is a classic example of what Friedrich Hayek called the “fatal conceit” of constructivist rationalism: the belief that the largely spontaneous institutions of the market order should be rejected in favour of more deliberately planned arrangements. Carney is undoubtedly an intelligent man, but Hayek stressed that the thing that intelligent people tend most to overestimate is the power of intelligence — particularly if they happen to be socialists.

Carney is also of the class that philosopher Karl Popper described as “enemies” of an “open society.” Popper noted that social upheavals tend to bring forth prophets who claim to understand the forces shaping the future, and promise salvation if they are given absolute power. Such was Plato’s model — in response to the upheavals of the Peloponnesian War and the first wave of democracy — of a necessary dictatorship in which the rulers lived as communists, using a specially bred military to control a cattle-like populace. Similarly, Marx’s communism was a response to the turmoil of the Industrial Revolution.

Considering the squalor of Manchester in the 1840s, one might forgive Marx and Engels for thinking a radical response was in order. But given the success of capitalism and the horrors of autocratic systems in the intervening period, it takes considerable chutzpah to be promoting net-zero totalitarianism.

Still, Carney claims that great crises demand great plans. He cites Timothy Geithner, secretary of the U.S. Treasury under president Obama, saying “plan beats no plan.” But Geithner was talking about the very real and immediate 2008–09 financial crisis. Carney’s climate plan is much closer to the notion of Soviet central long-term planning. Clearly, when it came to the subsequent welfare of the Russian people, “no plan” would certainly have beaten “plan.”

What Carney ultimately wants, like Saint-Simon, is a technocratic dictatorship justified by climate alarmism. He suggests that “governments can delegate certain aspects of the calibration of specific instruments… to Carbon Councils in order to improve the predictability, credibility and impact of climate policies.” These carbon councils will be able to demand that national governments “comply or explain” when they inevitably fall short of targets. How these commissars will bring governments into line is unclear, although Nobel economist William Nordhaus has suggested “Climate Clubs” that will punish recalcitrants with punitive tariffs.

The threat of punishment will clearly be necessary because governments are doing little more than hypocritical tinkering on climate policy. China and India are hardly even playing lip service to the “climate emergency.” Nevertheless, according to Carney “political technology” is needed to “build a broad consensus around the right goals.” No question of debating the goals, or the science, just building a consensus to support them.

Carney is a man on a mission to change global society. “Business as usual” — the most hated phrase in the socialist lexicon — is “ultimately catastrophic,” he writes. There is too much “misplaced acceptance of the status quo.” But somehow the new socialism will not be socialism as usual. This time it’s different. We can because we must. The threat is too great to permit any argument. It’s surprising that as he was picking out choice quotes from Lenin for his book, Carney missed this one: “No more opposition now, comrades! The time has come to put an end to opposition, to put the lid on it. We have had enough opposition!”

Tyler Durden Sat, 06/12/2021 - 23:30
Published:6/12/2021 10:56:24 PM
[Markets] The Fed Is Wrong: Inflation Is Sticky The Fed Is Wrong: Inflation Is Sticky

Authored by Charles Hugh Smith via OfTwoMinds blog,

The Fed's god-like powers will be revealed for what they really are: artifice and illusion.

The Fed will be proven catastrophically wrong about inflation for the simple reason that inflation isn't transitory, it's sticky: when prices rise due to real-world scarcities and higher costs, they stay high and then move higher as expectations catch up with reality.

Consider the dynamic of Fed-inflated bubbles raising rents. The house that once sold for $200,000 is sold to a pool of investors for $800,000, and the property taxes, insurance and debt service rise accordingly: even though the house didn't change, thanks to the Fed's bubble, the entire cost structure is higher.

So what happens next? The investors jack the rent up to cover the higher costs. As for refinancing to lower the monthly mortgage payment--that trend has reached the end of the line. As inflation gathers steam, mortgage rates can only go up, not down.

As for getting the county assessment office to lower the valuation on the house--good luck with that. The Ratchet Effect is in full force: assessed values rise easily and decline with great resistance.

So rents stay high even as real estate values decline. Landlords can't drop rents without triggering panic in their lenders, and so they leave units empty and try gimmicks such as "free month rent when you sign a lease," gimmicks which leave the skyhigh rent skyhigh so lenders look at the numbers and are assured that rents are high enough to cover their mortgage payments and other expenses.

Consider the orchard left to die during the drought. The farmer won't be replanting that orchard--it's simply too risky to assume there will be sufficient water in the future and prices will stay high enough to compensate for the heightened risk. So supply drops as marginal producers drop out and survivors avoid risk by not expanding production. Prices stay high.

Consider deglobalization. Having outsourced essential components, U.S. corporations are at the mercy of factors beyond their control: currency arbitrage, suppliers taking advantage of scarcity, other nations tightening the screws on exports of essentials, and so on.

Consider the pool of local restaurants. many have closed, some new ones are opening, but the reality is all those who can't raise prices enough to cover expenses and make a profit will burn through their cash and close. The survivors will raise prices because they have no choice: there is no alternative (TINA) to raising prices except closing down.

85% of local government expenditures are for labor, and labor costs never go down, they only go up: the ratchet Effect. Public unions are under pressure to secure higher wages and benefits, and the inexorable rise in healthcare costs is squeezing local government budgets. What to do? Raise taxes and fees--there is no alternative (TINA). Jack up parking fees and tickets, double or triple fines, slap on new junk fees, raise sales taxes, property taxes, taxes on mobile phone service--raise them all because TINA.

People are awakening to the Federal Reserve's Big Lie, which the Fed assumes will become "truth" if they repeat it often enough: inflation is transitory, blah, blah, blah: wrong, wrong, wrong. People are awakening to the embedded dynamics of inflation and their expectations have already started changing. Those who can't raise prices will close down, those who can will raise prices.

The Fed's trick of substituting debt for income has also reached the end of the line. As the chart below depicts, America has built an illusory castle of "prosperity" by borrowing trillions of dollars as a substitute for earnings from being productive. The costs of all these layers of debt can only rise now that interest rates are near-zero while inflation is at 5% officially and 10% or more by any real-world measure.

There's only so much disposable income left after servicing debt, and the more debt you pile on, the less income there is to spend on goods and services.

This is a longstanding cycle of civilization. As productivity rises, the human population expands up to the carrying capacity of the biosphere. Labor's earnings rise as producers expand production to meet rising demand. Human population and appetites for goodies keep expanding, overshooting sustainable supply while labor expands to the point that it is in oversupply. Wages decline and labor thus loses purchasing power just as prices of essentials soar. Discontent and disorder increase and states and economies fall.

The Fed's god-like powers will be revealed for what they really are: artifice and illusion. The Fed is wrong: inflation isn't transitory, it's sticky, and there's nothing the Fed can do about it. They might as well stand on the shore and order the tide to reverse.

*  *  *

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*  *  *

My recent books:

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

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Tyler Durden Sat, 06/12/2021 - 12:30
Published:6/12/2021 11:54:36 AM
[Markets] Media Converges On The Narrative That UFOs May Be Russian/Chinese Threat Media Converges On The Narrative That UFOs May Be Russian/Chinese Threat

Authored by Caitlin Johnstone via Medium.com,

So in case you haven’t been keeping up it’s been pretty thoroughly confirmed that the US government’s highly anticipated UFO report due this month won’t contain any significant revelations and certainly won’t verify anyone’s ideas about these phenomena being extraterrestrial in origin, but it absolutely will contain fearmongering that UFOs could be evidence that the US has fallen dangerously behind Russian and Chinese technological development in the cold war arms race.

Unknown US officials have done a print media tour speaking to the press on condition of anonymity (of course), with first The New York Times reporting their statements about the contents of the UFO report and then CNN and The Washington Post. Each of these outlets reported the same thing: the US government doesn’t know what these things are but is very concerned they constitute evidence that Russia and/or China have somehow managed to technologically leapfrog US military development by light years. All three mention these two nations explicitly.

This narrative was then picked up by cable news, with MSNBC inviting former CIA director and defense secretary Leon Panetta on to explain to their audience that the US government should assume UFOs are Russian or Chinese in origin until that possibility has been exhausted.

“Is it your assumption that it is Russia or China testing some crazy technology that we somehow don’t have, or are we sort of over-assuming the abilities of China and Russia and that the only other explanation is that if it is not us ourselves then it is something otherworldly?” MSNBC’s Chuck Todd asked Panetta.

I believe a lot of this stuff probably could be countries like Russia, like China, like others, who are using now drones, using the kind of sophisticated weaponry that could very well be involved in a lot of these sightings,” Panetta replied.

“I think that’s the area to go to very frankly in order to identify what’s happening.”

“It sounds like you think we should exhaust that out, exhaust that hypothesis first before you start dealing with other hypotheses,” Todd said.

Yeah, absolutely,” said Panetta, who for the record is every bit as much of a tyrannicalthuggish imperialist cold warrior as any other CIA director.

This UFOs-as-Chinese/Russian-threat narrative has quickly been picked up and thrust into mainstream orthodoxy by all the major branches of the mass media, from Fox News to Reuters to The Guardian to Today to the BBC to USA Today. Whenever you see the imperial media converge to this extent upon a single narrative, that’s the Official Narrative of the empire. We can expect to see a lot more of this going forward.

Interestingly, the only mass media segment I’ve seen on this topic since the New York Times story broke which doesn’t promote the UFOs-as-Chinese/Russian-threat narrative is a guest appearance on Tucker Carlson Tonight by Lue Elizondo, the military intelligence veteran who got the ball rolling on the new UFO narrative which emerged in 2017. Elizondo goes out of his way to tell Carlson (who himself has been promoting the idea that UFOs may be a foreign adversarial threat with cartoonish melodrama) that there’s no way these could be Russian or Chinese aircraft.

Elizondo, who seems to favor the UFOs-as-extraterrestrials narrative, argues that there are extensive records of military encounters with these phenomena stretching back seventy years, which rules out China since it could barely keep its head above water back then and rules out Russia because it shared its UFO knowledge with the US after the collapse of the Soviet Union.

I don’t know what’s going on with that last bit; I see no reason to trust that an American spook is acting in good faith on such an easily manipulated topic, but it is entirely possible that Elizondo set out on this road out of a sincere desire for government disclosure on UFOs and is now trying to regain control of the narrative now that he sees the cold war arms race direction it has taken.

Chris Melon, another major player in the new UFO narrative, recently complained on Twitter that “some important information was not shared” with the public in the UFO report. So who knows, maybe the initiators of this new UFO narrative were acting in good faith and their efforts were just swiftly hijacked by forces beyond their control to advance preexisting cold war agendas.

Regardless of whether or not that’s true, it was always inevitable that this strange new rabbit hole of UFOs going mainstream was going to lead to more cold war propaganda. I’ve been interacting a bit with the online UFO community for the first time ever, and it seems like they’re mostly decent people with good intentions and a lot of hope for this new governmental investigation. But it also seems like they’re largely a community which mostly just talks to itself and is only just beginning to meet the cold harsh light of day that is the impenetrable depravity of the US war machine.

The US government is pure swamp; you can’t use the swamp to fix the swamp. Democrats were never going to use a Special Counsel to remove Trump, Trump was never going to take down the Deep State, and the US government isn’t going to investigate itself and tell everyone that aliens are real.

If there are indeed extraterrestrials and they are indeed flying around our world in strange aircraft, we are more likely to get the truth about this from the extraterrestrials themselves than from the US military. The war machine only does killing and destruction; it’s not going to suddenly develop an interest in truth and transparency. The sooner UFO enthusiasts realize this the better.

*  *  *

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Tyler Durden Fri, 06/11/2021 - 19:40
Published:6/11/2021 6:48:11 PM
[Entertainment] Soman Chainani Shares His Must-Read LGBTQ+ Books E-Comm: Soman Chainani BooksWe independently selected these products because we love them, and we hope you do too. Shop with E! has affiliate relationships, so we may get a commission if you purchase something through our...
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[TC] Course Hero acquires LitCharts, founded by the creators of Sparknotes I’ll admit it: I was the student that tipped the teacher off that half of our English class, including me, was using Sparknotes to “read” Twelfth Night by Shakespeare, instead of actually reading the text itself. The site, which offered cliff notes and summary of books on a chapter by chapter basis, was the best […] Published:6/10/2021 1:39:01 PM
[Opinion] The Devil is in the Details – Details are Important and Worthy of Our Attention

By Cade Logue -

As I struggle to write what I hope to be a series of articles focused on some of the larger, enduring myths surrounding the American Civil War, I am reminded of the little details which have been allowed to perpetuate in the history books. For example, what comes to mind …

The Devil is in the Details – Details are Important and Worthy of Our Attention is original content from Conservative Daily News - Where Americans go for news, current events and commentary they can trust - Conservative News Website for U.S. News, Political Cartoons and more.

Published:6/10/2021 12:41:37 PM
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[Entertainment] Washington Post hardcover bestsellers A snapshot of popular books. Published:6/9/2021 8:00:22 AM
[063b0a88-f937-56de-9fb2-1cde994c2c0a] Meghan Markle dedicates ‘The Bench’ to Prince Harry and Archie: They ‘make my heart go pump-pump’ “The Bench,” a picture story published Tuesday by Random House Children’s Books, celebrates the bond between Prince Harry and Archie, as well as fathers and sons in general. Published:6/8/2021 3:28:32 PM
[Markets] 4 Reasons Why The Market Doldrums End With Next Friday's Op-Ex 4 Reasons Why The Market Doldrums End With Next Friday's Op-Ex

While stocks remain rangebound ahead of Thursday's CPI print which according to Deutsche is "the most closely watched data release so far this year", the real action remains below the surface where the continuation of last week's big story in Equities is the acute underperformance of Longs relative to the Squeeze in Short Books led by the Retail “Meme,” SPAC and Bankruptcy plays. As Nomura's Charlie McElligott shows, this appeared in risk-premium HF Crowding Factor which dropped -1.3% on the week, along with Size Factor (Large over Small) -1.3%, Growth Factor -1.6% and 1m Reversal -2.2%

Yet while the return of the short-squeeze is a closely watched if transitory phase, the big picture "renormalization reflation" narrative remains alive and well, with the 3 month Value inflow now surging to $44.5 billion (99.9%-ile since 2003) compared to a 3-month outflow from Growth stocks of -$20.8BN (2.7%-ile).

McElligott also observes a "critically important" shift in index/ETF option positioning which is currently in a substantial Delta-accumulation phase "as funds are using upside options as cheap beta", with Delta for SPX/SPY options now at an extreme 93%-ile since 2014 and QQQs at an 85%-ile.

Which brins us to the infamous summer Doldrums, which according to McElligott are a function of 1) this "long gamma/long delta" option market stabiliziation (at least until next week's op-ex, more below), which is also boosted by 2) a "full-throttle" corporate buybacks ahead of the upcoming earnings season "blackout" period, as well as the 3) red hot overall inflows into global equities, which soared to $71BN over the past month (97%-ile), all of which pairs off with 4) a continued slow bleed in VIX ETN Net Vega where the previously discussed long vol positions which had initially hoped to monetize on last month's CPI overheat "shocker" have given up, thanks to what McElligott calls "the Fed’s “transitory” Jedi mind-tricks messaging and increasingly “goldilocks” US data—particularly the disappointment surrounding Labor prints."

And yet, the doldrums may not last too long, as the current period of peace sets-up for something “real” into the Friday of next week’s Op-Ex cycle turn, where the Nomura quant expects potential “window for a pivot” as a result of massive amounts of Gamma and Delta which expire and are de-risked, with front-month being 82% of the SPX / SPY Delta and 90% of the QQQ Delta

Add to this the expectation of Vol Control flows peaking this week into what should continue being an insulated “long Delta, long Gamma” trade (Nomura estimates that a 50bps daily change would see vol-control buy +$31.6BN SPX, while 100bps daily change would add another +$21.8BN), it is likely that shortly after Friday's Opex — into any sembalance of options de-risk around Op-Ex and greater ability to move thanks to reduced Dealer hedging flows— that we could see “Vol Control” funds turn a mechanical seller, only requiring a smaller incremental daily change as catalyst.

Finally, it is around this time when the corporate buyback blackout period also begins (heavily owned “Banks” kicking-off as always June 14th with 75% into blackout by July 1st), which sets the stage for at least a short-term reversal in supply/demand flows, i.e., some downside market action.

Nonetheless, as McElligott concludes, should this sell-off materialize, it would be par for the course with what the Vol market has been saying for weeks. Specifically, the Nomura quant references the SPX Put Skew which remains extreme on the “inflation tail” (as it acts to “pull forward” Fed tightening / QE Taper), while SPX index-level Call Skew continues to only see negligible demand (levels are well below the put skew, in the 20%-30%iles) with all the “crash up” being held via “cyclical reflation overshoot” usual suspect plays in SMH, FXI, EEM, XME, XLF, USO and XLB.

In short: expect continued melt-up for two more weeks, meme stocks turmoil notwithstanding, before next Friday's op-ex opens a trapdoor into what will likely be a shallow selloff, as most traders are already hedged for it.

 

Tyler Durden Tue, 06/08/2021 - 08:14
Published:6/8/2021 7:22:05 AM
[Markets] Unthinkable Thoughts... Unthinkable Thoughts...

Authored by Josh Mitteldorf,

This essay is inspired by Dr Mercola’s announcement last week that [May] (reading between the lines) his life and his family’s have been threatened if he doesn’t remove from his web site a peer-reviewed study demonstrating the benefits of vitamin D and zinc in prevention of the worst COVID outcomes. In the present Orwellian era, where propaganda and deception are ubiquitous, one of the signposts of truth that I have learned to respect is that the most important truths are the most heavily censored.