- COVID-19 Shutdown: The End Of Globalization And Planned Obsolescence – Enter Multipolarity
COVID-19 Shutdown: The End Of Globalization And Planned Obsolescence – Enter Multipolarity
Authored by Joaquin Flores via The Strategic Culture Foundation,
The coronavirus pandemic has shown that the twin processes of globalization and planned obsolescence are deficient and moribund. Globalization was predicated on a number of assumptions including the perpetuity of consumerism, and the withering away of national boundaries as transnational corporations so required.
What we see instead is not a globalization process, but instead a process of rising multipolarity and a rethinking of consumerism itself.
Normally a total market crash and unemployment crisis would usher in a period of militant labor activity, strikes, walk-outs and community-labor campaigns. We’ve seen some of this already. But the ‘medical state of emergency’ we are in, has effectively worked like a ‘lock-out’. The elites have effectively flipped-the-script. Instead of workers now demanding a restoration of wages, hours, and work-place rights, they are clamoring for any chance to work at all, under any conditions handed down. Elites can ‘afford’ to do this because they’ve been given trillions of dollars to do so. See how that works?
All our lives we’ve been misinformed over what a growing economy means, what it looks like, how we identify it. All our lives we’ve been lied to about what technical improvement literally means.
A growing economy in fact means that all goods and services become less expensive. That cuts against inflation. Rather all prices should be deflating – less money ought to buy the same (or the same money ought to buy more). Technical innovation means that goods should last longer, not be planned for obsolescence with shorter lifespans.
Unemployment is good if it parallels price deflation. If both reached a zero-point, the problems we believe we have would be solved.
In a revealing April 2nd article that featured on the BBC’s website, Will coronavirus reverse globalisation? it is proposed that the pandemic exposes the weaknesses and vulnerabilities of a global supply-chain and manufacturing system, and that this in combination with the over-arching US-China trade war would see a general tendency towards ‘re-shoring’ of activities. These are fair points.
But the article misses the point of the underlying problem facing economics in general: the declining rate of profit necessitated by automation, with the increasingly irrational policies, in all spheres, being pursued to salvage the ultimately unsalvageable.
The Karmic Wheel of Production-Consumption
The shut-downs – which seem unnecessary in the numerous widely esteemed experts in virology and epidemiology – appear to be aimed at stopping the production-consumption cycle. When we look at the wanton creation of new ‘money’, to bailout the banks, we are told that this will not cause inflation/debasement so long as the velocity of money is kept to a minimum. In other words – so long as there is not a chain reaction of transactions, and the money ‘stays still’ – this won’t cause inflation. It’s a specious claim, but one which justifies the quarantine/lock-down policy which today destroys thousands of small businesses every day. In the U.S. alone, unemployment claims will pass 30 million by mid April.
Likewise, this money appears real, it sits digitally as new liquidity on the computer screens of tran-Atlantic banks – but it cannot be spent, or it tanks the system with hyper-inflation. More to the point, the BBC piece erroneously continues to assume the necessity of the production-consumption cycle, spinning wheat into gold forever.
The elites were not wrong to shut-down the cycle per se. The problem is that they cannot offer the correct hardware in its place – for it puts an end to the very way that they make money. It is this, which in turn is a major source for the maintenance of their dopamine equilibrium and narcissist supply.
This is not an economic problem faced by ‘the 1%’ (the 0.03%) . It is an existential crisis facing the meaning of their lives, where satisfaction can only be found in ever greater levels of wealth and control, real or imagined – chasing that dragon, in search of that ever-elusive high.
So naturally, their solutions are population reduction and other such quasi-genocidal neo-Malthusian plans. Destruction of humanity – the number one productive-potential force – resets the hands of time, back to a period where profit levels were higher. The algorithmically favored coronavirus Instagram campaign of seeing city centers without people and declaring these ‘beautiful’ and ‘peaceful’ is an example of this misanthropic principle at play.
That the elites have chosen to shut-down the western economy is telling of an historic point we have reached. And while we are told that production and consumption will return somewhat ‘after quarantine’, we also hear from the newly-emerged unelected tsars – Bill Gates et al – that things will never return to normal.
What we need to end is the entire theory and practice of globalization itself, including UN Agenda 21 and the dangerous role of ‘book-talking’ philanthropists like Gates and his grossly unbalanced degree of power over policy formation in the Western sphere.
In place of waning globalization, we are seeing the reality of rising multipolarity and inter-nationalism. With this, the end of the production-consumption cycle, based upon off-shore production and international assembly, and at the root of it all: planned obsolescence towards long-term profitability.
The Problem of Globalization Theory
Without a doubt, globalization theory satisfied aspects of descriptive power. But as time marched forward, its predictive power weakened. Alternate theories began to emerge – chief among these, multipolarity theory.
The promotion of globalization theory also raises ethical problems. Like a criminologist ‘describing’ a crime-wave while being invested in new prison construction, globalization theory was as much theory as it was a policy forced upon the world by the same institutions behind its popularization in academia and in policy formation. Therefore we should not be surprised with the rise of solutions like those of Gates. These involve patentable ‘vaccines’ by for-profit firms at the expense of buttressing natural human immunities, or using drugs which other countries are using with effectiveness.
The truth? Globalization is really just a rebrand of the Washington Consensus – neo-liberal think-tanks and the presumed eternal dominance of institutions like the World Bank and the International Monetary Fund, which in turn are thinly disguised conglomerates of the largest trans-Atlantic banking institutions.
So while globalization was often given a humanist veneer that promised global development, modernization, the end of ‘nation-states’ which presumably are the source of war; in reality globalization was premised on continuing and increasing concentration of capital towards the 19th century zones – New York, London, Berlin, and Paris.
‘Internationalism’ was once rooted in the existence of nations which in turn are only possible with the existence of culture and peoples, but was hi-jacked by the trans-Atlanticist project. Before long, the new-left ‘internationalists’ became champions of the very same process of imperialism that their forbearers had vehemently opposed. Call it ‘globalization’ and show how it’s destroying ‘toxic nationalism’ and creating ‘microfinance solutions for women and girls’ – trot out Malala – and it was bought; hook, line and sinker.
This was not the new era of ‘globalization’, but rather the usual suspects going back to the 19th century; a ‘feel-good’ rebranding of the very same 19th century imperialism as described in J.A Hobson’s seminal work from 1902, Imperialism. Its touted ‘inevitability’ rested not on the impossibility of alternate models, but on the authority that flows forth from gunboat diplomacy. But sea power has given way to land power.
In many ways it aligned with the era of de-colonialization and post-colonialism. New nations could wave their own flags and make their own laws, so long as the traditionally imperialist western banking institutions controlled the money supply.
But what is emerging is not Washington Consensus ‘globalization’, but a multipolar model based in civilizational sovereignty and difference, building products to last – for their usefulness and not their repeatable retail potential. This cuts against the claims that global homogenization in all spheres (moral, cultural, economic, political, etc.) was inevitable, as a consequence of mercantile specialization.
Therefore, inter-nationalism hyphenated as such, reminds us that nations – civilizations, sovereignty, and their differences – make us stronger as a human species. Like against viruses, some have stronger natural immunity than others. If people were identical, one virus could wipe-out all of humanity.
Likewise, an overly-integrated global economy leads to global melt-down and depression when one node collapses. Rather than independent pillars that could aid each other, the interdependence is its greatest weakness.
Multipolarity is Reality
This new reality – multipolarity – involves processes which aspects of globalization theory also suggest and predict for, so there are some honest reasons why experts could misdiagnose multipolarity as globalization. Overlooked was that the concentration of capital nodes in various and globally diverse regions by continent, were not exclusively trans-Atlantic regions as in the standard globalization model of Alpha ++ or Alpha+ cities. This capital concentration along continental lines was occurring alongside regional economic development and rising living standards which tended to promote the efficiency of local transportation as opposed to ocean-travel in the production process. As regional nodes by continent had increasingly diversified their own domestic production, a general tendency for transportation costs to increase as individual per capita usage increased, worked against the viability of an over-reliance on global transit lines.
But among many problems in globalization theory was that the US would always be the primary consumer of the world’s goods, and with it, the trans-Atlantic financial sector. It was also contingent on the idea that mercantilist conceptions of specialization (by nation or by region) would always trump autarkic models and ISI (income substitution industrialization). Again, if middle-class consumer bases are rising in all the world’s inhabited continents as multipolarity explains and predicts, then a global production regimen rationalized towards a trans-Atlantic consumer base as globalization theory predicts isn’t quite as apt.
Because the present system is premised on a production-consumption and financial model, the solutions to crises are presented as population reduction and what even appears, at least in the case of Europe, as population replacement. As cliché as this may seem, this also appeared to be the policy of the Third Reich when capitalism faced its last major crises culminating in WWII.
Breaking the Wheel
The shutdown reveals the karmic wheel of production-consumption is in truth already broken. We have already passed the zenith point of what the old paradigm had to offer, and it has long since entered into a period of decay, economic and moral destruction.
Like the Christ who brings forth a new covenant or the Buddha who emerges to break the wheel of karma, the new world to be built on the ruins of modernity is a world that liberates the productive forces, realizing their full potential, and with it the liberation of man from the machine of the production-consumption cycle.
Planned obsolescence and consumerism (marketing) are the twin evils that have worked towards the simultaneous time-wasting enslavement of ‘living to work’, and have built globalization based on global assembly and global mono-culture.
What is important for people and their quality of life is the time to live life, not be stuck in the grind. We hear politicians and economists talking about ‘everyone having a job’, as if what people want is to be away from their families, friends, passions, or hobbies. What’s more – people cannot invent, innovate, or address the greater questions of life and death – if their nose is to the grindstone.
Now that we are living under an overt system of control, a ‘medical state of emergency’ with a frozen economy, we can see that another world is possible. The truth is that most things which are produced are intentionally made to break at a specific time, so that a re-purchase is predictable and profits are guaranteed. This compels global supply chains and justifies artificially induced crashes aimed at upward redistribution and mass expropriations.
Instead of allowing Bill Gates to tour the world to tout a police-state cum population reduction scheme right after a global virus pandemic struck, one which many believe he owns the patent for, we can instead address the issues of multipolarity, civilizational sovereignty, and ending planned obsolescence and the global supply chain, as well as the off-shoring it necessitates – which the BBC rightly notes, is in question anyhow.
Tyler Durden
Sun, 04/12/2020 – 23:50 - JPMorgan Scrambles To Raise Mortgage Borrowing Standards Ahead Of "Biggest Wave Of Defaults In History"
JPMorgan Scrambles To Raise Mortgage Borrowing Standards Ahead Of "Biggest Wave Of Defaults In History"
Earlier this week when we reported that JPMorgan has quietly halted all non-Paycheck Protection Program based loan issuance for the foreseeable future, we said that we didn’t buy the stated reason namely – the bank was drowning in (government-backstopped) applications and would be willing to forego millions in easy, recurring net interest income and that instead the real reason why JPMorgan would “temporarily suspend” all non-government backstopped loans such as PPP, is if the bank expects a default tsunami to hit, coupled with a full-blown depression that wipes out the value of assets pledged to collateralize the loans. We went on:
Furthermore, why issue loans that will default in months if not weeks, just as bankruptcy courts fill up with millions of cases (assuming the coronavirus clears out by then, as the alternative is simply unthinkable – a default tsunami without any functioning Chapter 11 or Chapter 7 process) when JPM can simply stick to the 100% risk-free issuance of government-guaranteed small-business loans which pay a handsome 1% interest, especially if it makes JPM look patriotic by doing its duty to bail out America.
Over the weekend our skepticism was confirmed when Reuters reported that JPMorgan, the country’s largest lender by assets and which will kick off earnings season tomorrow, will raise borrowing standards this week for most new home loans as the bank “moves to mitigate lending risk stemming from the novel coronavirus disruption.”
Starting Tuesday, customers applying for a new mortgage will need a credit score of at least 700, and will be required to make a down payment equal to 20% of the home’s value (something which we thought was the norm after the last financial crisis, but apparently lending conditions had eased quite a bit in the past decade).
“Due to the economic uncertainty, we are making temporary changes that will allow us to more closely focus on serving our existing customers,” Amy Bonitatibus, chief marketing officer for JPMorgan Chase’s home lending business, told Reuters.
According to Reuters, “the change highlights how banks are quickly shifting gears to respond to the darkening U.S. economic outlook and stress in the housing market, after measures to contain the virus put 16 million people out of work and plunged the country into recession.”
What the change really highlights is that after halting its exposure to plain vanilla, non-government guaranteed loans, JPMorgan is now quietly pulling out of that other market where it makes the bulk of its revenues – mortgages – ahead of a tsunami of mortgage defaults, which last week we dubbed “The Next Crisis” as “Up To 30% Of All Mortgages Will Default In “Biggest Wave Of Delinquencies In History.”
Sure enough, JPMorgan – the fourth largest U.S. mortgage lender in 2019 – not only agrees with this dour assessment, but is taking proactive measures to mitigate its exposure to this wave of defaults but minimizing its exposure as soon as it can. And with JPM setting the stage, it is only a matter of days before all other banks follow and lock out tens of million of even credit-worthy Americans with less than prime credit scores, out of the housing market for years.
Of course, just like in the PPP case, the bank did not dwell on the true cause for this action, but instead said the change will “free up staff to handle a surge in mortgage refinance requests, which are taking longer to process due to staff working from home and non-essential businesses being closed.” While that is certainly a factor, the biggest reason behind these changes is to help JPMorgan reduce its exposure to borrowers who unexpectedly lose their job, suffer a decline in wages, or whose homes lose value.
In short, JPMorgan wants no part of the shitstorm that is about to be unleashed on middle America.
While JPMorgan would not disclose the current minimum requirements for its various mortgage products, the average down payment across the housing market is around 10%, according to the MBA. Furthermore, the new credit standards do not apply to JPMorgan’s roughly four million existing mortgage customers, or to low and moderate income borrowers who qualify for its “DreaMaker” product, which requires a minimum 3% down payment and 620 credit score.
The U.S. housing market had been on a steady footing earlier this year, but all hell broke loose as a result of the economic paralysis and deepening depression resulting from the Coronavirus pandemic. And with would-be home buyers unable to view properties or close purchases due to social distancing measures, the health crisis now threatens to derail the sector, especially as banks are going to make it next to impossible to get a new mortgage.
To be sure, as we reported last week the residential mortgage market is already freefalling after borrower requests to delay mortgage payments exploded by 1,896% in the second half of March. And unfortunately, this is just the beginning: last week, Moody’s Analytics predicted that as much as 30% of homeowners – about 15 million households – could stop paying their mortgages if the U.S. economy remains closed through the summer or beyond. Bloomberg called this the “biggest wave of delinquencies in history.”
This would result in a housing market depression and would lead to tens of billions in losses for mortgage servicers and originators such as JPMorgan.
Tyler Durden
Sun, 04/12/2020 – 23:25 - Robert F Kennedy Jr. Exposes Bill Gates' Vaccine Agenda In Scathing Report
Robert F Kennedy Jr. Exposes Bill Gates' Vaccine Agenda In Scathing Report
Authored by Robert F. Kennedy Jr., Chairman, Children’s Health Defense,
Vaccines, for Bill Gates, are a strategic philanthropy that feed his many vaccine-related businesses (including Microsoft’s ambition to control a global vaccination ID enterprise) and give him dictatorial control of global health policy.
Gates’ obsession with vaccines seems to be fueled by a conviction to save the world with technology.
Promising his share of $450 million of $1.2 billion to eradicate Polio, Gates took control of India’s National Technical Advisory Group on Immunization (NTAGI) which mandated up to 50 doses (Table 1) of polio vaccines through overlapping immunization programs to children before the age of five. Indian doctors blame the Gates campaign for a devastating non-polio acute flaccid paralysis (NPAFP) epidemic that paralyzed 490,000 children beyond expected rates between 2000 and 2017. In 2017, the Indian government dialed back Gates’ vaccine regimen and asked Gates and his vaccine policies to leave India. NPAFP rates dropped precipitously.
In 2017, the World Health Organization (WHO) reluctantly admitted that the global explosion in polio is predominantly vaccine strain. The most frightening epidemics in Congo, Afghanistan, and the Philippines, are all linked to vaccines. In fact, by 2018, 70% of global polio cases were vaccine strain.
[ZH: The CDC has a large financial interest in pushing untested vaccines on the public and WHO is even more under the control of Big Pharma. The organization is corrupt beyond the meaning of the word. “The WHO is a sock puppet for the pharmaceutical industry.” — Robert F. Kennedy Jr.]
During Gates’ 2002 MenAfriVac campaign in Sub-Saharan Africa, Gates’ operatives forcibly vaccinated thousands of African children against meningitis. Approximately 50 of the 500 children vaccinated developed paralysis.
South African newspapers complained, “We are guinea pigs for the drug makers.” Nelson Mandela’s former Senior Economist, Professor Patrick Bond, describes Gates’ philanthropic practices as “ruthless and immoral.”
In 2010, the Gates Foundation funded a phase 3 trial of GSK’s experimental malaria vaccine, killing 151 African infants and causing serious adverse effects including paralysis, seizure, and febrile convulsions to 1,048 of the 5,949 children.
In 2010, Gates committed $10 billion to the WHO saying, “We must make this the decade of vaccines.”
A month later, Gates said in a Ted Talk that new vaccines “could reduce population”.
In 2014, Kenya’s Catholic Doctors Association accused the WHO of chemically sterilizing millions of unwilling Kenyan women with a “tetanus” vaccine campaign. Independent labs found a sterility formula in every vaccine tested. After denying the charges, WHO finally admitted it had been developing the sterility vaccines for over a decade. Similar accusations came from Tanzania, Nicaragua, Mexico, and the Philippines.
In 2014, the Gates Foundation funded tests of experimental HPV vaccines, developed by Glaxo Smith Kline (GSK) and Merck, on 23,000 young girls in remote Indian provinces. Approximately 1,200 suffered severe side effects, including autoimmune and fertility disorders. Seven died. Indian government investigations charged that Gates-funded researchers committed pervasive ethical violations: pressuring vulnerable village girls into the trial, bullying parents, forging consent forms, and refusing medical care to the injured girls. The case is now in the country’s Supreme Court.
A 2017 study (Morgenson et. al. 2017) showed that WHO’s popular DTP vaccine is killing more African children than the diseases it prevents. DTP-vaccinated girls suffered 10x the death rate of children who had not yet received the vaccine. WHO has refused to recall the lethal vaccine which it forces upon tens of millions of African children annually.
Global public health advocates around the world accuse Gates of steering WHO’s agenda away from the projects that are proven to curb infectious diseases: clean water, hygiene, nutrition, and economic development.
The Gates Foundation only spends about $650 million of its $5 billion dollar budget on these areas.
They say he has diverted agency resources to serve his personal philosophy that good health only comes in a syringe.
In addition to using his philanthropy to control WHO, UNICEF, GAVI, and PATH, Gates funds a private pharmaceutical company that manufactures vaccines, and additionally is donating $50 million to 12 pharmaceutical companies to speed up development of a coronavirus vaccine.
In his recent media appearances, Gates appears confident that the Covid-19 crisis will now give him the opportunity to force his dictatorial vaccine programs on American children.
Tyler Durden
Sun, 04/12/2020 – 23:00 - Worker Visas For Hydroxychloroquine: India Demands Quid Pro Quo To Export Tump's 'Miracle' Drug
Worker Visas For Hydroxychloroquine: India Demands Quid Pro Quo To Export Tump's 'Miracle' Drug
One of India’s leading newspapers has reported that President Trump’s much-touted ‘miracle’ coronavirus drug cocktail hydroxychloroquine, which is produced in large amounts in India, is being used by Prime Minister Narendra Modi to negotiate Indian workers’ continued ability to access employment in the United States.
It seems it’s a classic and perhaps foreseeable clash of Modi’s “India First” vs. Trump’s “America First” after New Delhi previously placed an export ban on the pill, given India is trying to contain its own COVID-19 outbreak now threatening 1.3 billion people. The popular popular Hindustan Times reported late last week of the developing quid pro quo situation:
The Indian government has asked the US to extend the validity of visas, including H-1B and other types of visas, held by Indian nationals who have been hit by the Covid-19-related economic slump, people familiar with developments said on Friday.
Foreign secretary Harsh Shringla took up the matter during his telephone conversation with US deputy secretary of state Stephen Biegun on Wednesday, when the two sides also discussed ways to enhance cooperation to counter the pandemic and ensure the availability of essential medicines [hydroxychloroquine] and equipment.
The timing is extremely sensitive, given India relies heavily on wealth earned by “Non-Resident Indians” in the US – yet at a moment tens of thousands are being forced back home amid the broader coronavirus employment crush and companies furloughing employees.
Trump in an April 4th phone call with Modi made clear America’s needs in the escalating virus lockdown emergency: “They make large amounts of hydroxychloroquine — very large amounts, frankly,” Trump told reporters of the call.
“They had a hold [on exports], because, you know, they have 1.5. billion people, and they think a lot of it. And I said I’d appreciate it if they would release the amounts that we ordered,” Trump described.
Modi was swayed, apparently, as days later he approved the export of many hydroxychloroquine pills, temporarily lifting the ban.
Via Getty Images/Vox Thus naturally New Delhi expects Washington to play ball now, as India’s Economic Times voiced late last week:
Congress chief spokesperson Randeep Surjewala said after compromising the “India First” policy in the HCQ drug climb-down, the government is again failing to secure the safety and livelihood of Indians in the US.
“Time for the prime minister to ensure that our soft power of ‘Namaste Trump’ converts into fair treatment of H-1B visa holders in the US,” Surjewala said, noting that the US has put Americans on a temporary paid leave or allowed them to work for reduced hours in the wake of the pandemic.
But “the sword of H-1B visa job terminations” looms large over an estimated 75,000 Indians, with the United States giving them only a 60-day period to find a new job in case of a lay off, he said.
It’s unclear the degree to which Modi himself made the appeal directly to the administration, but it remains that “India’s Congress is demanding that India’s Narendra Modi use his control over the hydroxychloroquine supply to protect the nation’s huge population of well-paid visa workers in the United States.”
So it appears Trump’s long-term ‘America First’ principles – seen regarding India in his prior March 2016 vow to end many American Fortune 500 companies’ reliance on the H-1B visa and the cheap labor it often provides – may have to be compromised to keep the more immediately vital hydroxychloroquine supply going.
It’ll be interesting to see if Modi pivots to playing hardball. Possibly, New Delhi’s parliament demands have already been articulated forcefully as linked directly to the vital potentially life-saving medicine behind the scenes.
Tyler Durden
Sun, 04/12/2020 – 22:35 - One Bank Explains Why No V-Shaped Recovery Is Coming, And Why The Fed Will Nationalize Everything
One Bank Explains Why No V-Shaped Recovery Is Coming, And Why The Fed Will Nationalize Everything
In the past three weeks stocks have staged a substantial rebound from their March 24 lows, in big part thanks to an unprecedented barrage of Fed-driven bailouts, backstops, and asset purchases which at last count amount to over $5 trillion in committed capital in just the past month, and also due to the growing conviction that a V-shaped recovery is imminent one the coronacrisis pandemic fades away. Setting aside concerns about a second, even more powerful infection wave, the reality is that a V-shaped recovery – the underlying narrative catalyst for the powerful bear market rally – from the current quarter’s GDP plunge which according to JPM will be as big as 40% simply will not happen, and here is Bank of America with a clear and succinct explanation why:
There is a growing narrative in the markets that the end of the crisis is in sight. By some accounts, countries are bending the COVID-19 cases curve, allowing a relatively quick reversal of social distancing policies and a V-shaped recovery in the global economy. In sum, it is time to look through the dark hours ahead and focus on the approaching dawn.
We agree with part of this narrative, but disagree with the bottom line. It does appear that a number of countries and regions are starting to bend the curve. The growth in cases has slowed significantly in most of the Euro area and the biggest hotspot in the US, New York, is showing hints of slowing. Areas that shut down early, like Austria, are now debating what a reopening should look like. Of course, the number of deaths will lag and that ugly reality will be with us longer.
Unfortunately, we are also getting more information on what a reopening looks like and the dangers of premature reengagement. China, with its authoritarian controls on population movement, has opened up significantly in the past six weeks or so and now is roughly at 80% of capacity by some metrics. However, a number of other countries have found it hard to completely reopen their economy even with a much better pandemic health system than in Europe and the US.
In addition, in our view, V-shaped optimists have forgotten a basic lesson of the business cycle. Recessions can be triggered by a variety of shocks-surging oil prices, central bank inflation fighting popping bubbles and now a health crisis-but the recession continues well after the initial shock fades. This is because the drop in activity triggers a nasty feedback loop in the economy that overwhelms the policy easing.
A two- or three-month shutdown will leave lasting scars on confidence. Economies will re-open to a greatly diminished demand environment, with high saving rates and very low discretionary spending. This argues for a U-shaped recovery and a persistent, large output gap, in our view.
If this view is correct, and if the world is indeed stuck in the mire of economic contraction not for a quarter or two, but years, it means that what the Fed has done so far will be insufficient and the next step before Powell & Co., will be to expand its nationalization of capital markets by taking full control of the yield curve – to avoid the crossover point beyond which yields on the long-end of the curve soar – a in the form of Yield Curve Control, something the BOJ has been experimenting with for the past 4 years, and a version of which was used by the Fed in the 1940s, as the NY Fed was kind enough to remind its readers last week (perhaps in a hint of what is coming next). Here is BofA on this very topic:
Global central banks have rolled out an impressive array of stimulus measures. However, as the depth of the downturn becomes clear, it will be hard for them to rest on their laurels. Easing thus far was likely predicated on a nasty recession, but not the worst recession in the post-war period. What do they do next? Negative policy rates look like the very last resort for many central banks given the hot debate over whether they do more harm than good. Therefore the obvious next potential step in our view is to take a page out of the BoJ playbook and implement yield curve control.
Will it be effective and is it worth trying? Yield curve control did not succeed in getting Japan out of its low-rates-low-inflation trap. In our view, this is not because the policy is a waste of time, but because the BoJ only implemented it after deflation psychology was deeply embedded in the economy. It did not help matters that the Japanese government has repeatedly shocked the economy with tax hikes, over the objections of many economists.
Yield curve control has many advantages, in our view. First and foremost, it makes it much easier to control the long end of the curve. Japan was able to keep bond yields low even as it slowed its bond purchases. Second, and related, it makes a replay of the 2013 taper tantrum much less likely. Third, it enhances fiscal stimulus as it prevents the normal rise in interest rates and the “crowding out” of private spending. Fourth, it ensures that as the economy crawls out of the deep hole it has fallen into, rising bond yields do not slow the rebound. Fifth, it would be particularly useful in Europe if the ECB can overcome political hurdles and direct the policy at specific bond markets.
What BofA did not mention, on purpose, is that any form of Yield Curve Control would terminally crush any forward-looking function the bond market, which is the earliest warning indicator of inflationary (or deflationary) forces across the economy, has. That means that with the yield curve frozen, inflationary imbalances will build up beneath the surface and there will be no way to either observe them or respond to them… besides asset price hyperinflation and soaring gold prices of course.
Effectively, yield curve control in a depressionary world would eliminate one of the two core market-moving drivers of risk prices – market-driven inflation/interest rates – and only leave corporate profits as an indicator of how the economy is doing. However, since the Fed has with its alphabet soup of measures disconnected risk asset prices from corporate fundamentals, i.e., profits and cash flow, by directly purchasing corporate bonds and soon stocks, it is only a matter of time before US capital markets get to a point where no economic or fundemental signals are reflected in risk assets, resulting in a “market” that is if not nationalized, then centrally-planned by the whims of a small group of Fed career economists, most of whom have never held a private sector job and have zero real world experience.
How does such ubiquItious central planning end? Look no further than the USSR for the answer.
Tyler Durden
Sun, 04/12/2020 – 22:14 - Observations Of An Anonymous UPS Driver: "Customers I've Seen Since The 'Rona'…"
Observations Of An Anonymous UPS Driver: "Customers I've Seen Since The 'Rona'…"
Authored by Daisy Luther via The Organic Prepper blog,
The other day, I shared something funny on social media. A little bit of humor is good for us, even (and especially) in times like this. If anyone knows who originally wrote this, please let me know so I can give proper credit.
If you think about it, a UPS driver with a regular route gets to know a little bit about nearly everyone who frequently places orders. I hope this brings you a giggle. (Remember, fun is not the F-Word.) I also hope it reminds you to pay strict attention to OPSEC.
Here are some observations.
From an anonymous UPS delivery driver…
5 types of customers since the “rona”:
1) Steve: He has been waiting for this moment his whole life. He has been drinking boilermakers since 10:00 am in his recliner and his AR is within arms reach. He has 6 months provisions in the basement and a bug out bag due west buried in the woods. Steve demands a handshake as I give him his package. He’s sizing me up as I deliver his ammo. Steve will survive this, and he will kill you if he needs to.
2) Brad: He is standing at his window wearing skinny jeans and a Patagonia t-shirt. He is mad because there were no organic tomatoes at Whole Foods today. He points at the ground where he has taped a 6 ft no go zone line from his porch. I leave his case of Fuji water, organic granola bites, and his new “Bernie Bro” hat at the tape. Brad will not survive. Steve will probably eat him.
3) Nancy: She has sprayed everything with Thieves oil. Bought all the Clorox wipes, hand sanitizer, toilet paper, meat, and bread from the local grocery chain. She has quarantined her kids and sprays them with a mixture of thieves, lavender, & mint essential oils daily. She has posted every link known to man about “The Rona” on her social media. She will spray you if you break the 6 ft rule. I will leave her yet another case of toilet paper. She will last longer than Brad, but not Steve.
4) Karen: She has called everybody and read them the latest news on “The Rona”. She asked for the manager at Food Lion, Walmart, Publix, McDonald’s, Chi-Fil-A, and Vons all before noon demanding more toilet paper. Karen’s kids are currently faking “The Rona” to avoid her. I’m delivering “Hello Kitchen” to her. Karen will not survive longer than Brad.
5) Mary: Is sitting in the swing watching her kids have a water balloon fight in the front yard as she is on her fourth glass of wine. She went to the store and bought 2 cases of pop tarts, 6 boxes of cereal, 8 bags of pizza rolls, And a 6 roll pack of toilet paper. There is a playlist of Bob Marley, Pink Floyd, and Post Malone playing in the background. I’m bringing her second shipment of 15 bottles of wine in 3 days. Mary will survive and marry Steve. Together they will repopulate the earth.
Got any other types to add to this?
And boy did people have other types to add to this. The responses were pretty apt and I think we all know someone who fits the bill of these characters. I also sent it to my friend, 1stMarineJarHead, who had a few characters of his own to add.
The observations of our imaginary UPS driver are continued below.
6) Aelfie: It takes me four trips to deliver all her seeds and gardening supplies. Two trips for all her sewing supplies. Her grocery order is smaller than you’d expect being mostly bulk items and alcohol.
She hands me a handmade mask after showing how to fit in the N95 filter paper. It has the UPS logo neatly embroidered on the side. She hands over 5 boxes, prepaid and with printed labels all addressed to different hospitals. They’re full of masks, she tells me cheerfully. Just doing my small bit to help.
The mail carrier walks up with a package for her from a pharmacy, seed catalogs, and a handful of assorted magazines. They’re wearing a mask with the USPS logo embroidered on it and they nod in passing. She limps back inside to get her hand truck, whistling “Good Ship Venus” as she starts to haul things to the back yard.
Aelfie will survive and Steve and Mary will barter with her for groceries. She’ll accept bribes of wine to NOT teach their offspring the lyrics to all the songs she knows.
7) Todd: He pretends to be a partner at a prestigious hedge fund firm in the city, when in reality he is a mid-level analyst. He answers the door to his East Hampton seaside 3,000sqft “cottage,” in his casual attire of slacks, Italian shoes (Corinthian leather, of course), polo shirt and a designer sweater tied around his neck. All of which costs more than I make in three months. As Todd signs for the delivery of a case of Russian caviar, his wife, Buffy, is complaining in the background of how the “help” has not shown up and how dreadful it will be to have to look at all those “townies” for the next few weeks. Faced with a possible mandatory quarantine with Todd and Buffy, the “help” all ran back to their third world Central, South American countries, and New Jersey.
The “townies” know that Todd and Buffy came from the city and storm the “cottage” with pitchforks and torches. Todd and Buffy meet a terrible fate, all the while the “townies” enjoy the well-stocked wine cellar and use the caviar as fishing bait.
8) Brenda: She follows social distancing to her own tailored interpretation. She doesn’t leave but has all walks of life come over every day for bbq’s, extended family games, birthday parties, and jigsaw puzzle nights. Brenda starts a major cluster of illness among her visitors and dies of COVID-19.
9) Shooter: He hunts people like Steve for fun, avoids everyone anyway especially people like Brad and wasn’t aware there was a social distancing issue until they started putting tape on the ground. He wasn’t specifically trained for this but he’s happy to wipe out anyone near him in his pursuit of taking care of his family or just because he’s tired of looking at them. Shooter and his family eventually relocate someplace so remote that no one ever sees them again, but rumor has it there’s a very nice, handbuilt homestead out in the boondocks somewhere that is surrounded by tripwires and homemade claymore mines.
10) Scott: He is a former Special Ops guy, currently contracted as chief of security for a CEO of a major global corporation, his wife and kids, and their grandkids in a former missile silo converted into a bunker at an undisclosed location. After only three weeks, Scott and his team are already growing tired of being referred to as the “help,” and as one teammate commented, “She orders me to make her a chocolate martini one more time and I am going to ghost her! The paycheck is not worth it!”
Within a week, the CEO and his entire family meet a most unfortunate end, and are converted into compost. Scott and his team take up with the locals, integrate, and after a few years, become a nomadic tribe, traveling throughout the wasteland of what was once the greatest nation of the 21st century.
11) Susan: Susan is Karen’s sister. She’s the one who keeps tabs on her neighbors who are out for a walk or anyone she thinks is not social distancing properly. She posts every incident on social media and can sometimes be found at Wal-Mart screaming at people who don’t have masks on. She secretly wants to call the police several times a day.
When there’s no apocalypse going on, Susan heads the locals HOA and makes some HOA kickbacks from threatening to report dead lawns.
Susan will be the first one Steve or Shooter takes out…from 100 yards
12) Kyle: Kyle is like Steve but makes his kids in camo do boot camp in the back yard, and then play Pokémon with him at night, pounds Monster in the morning and whiskey at night, cringes when his former medic wife kicks his butt for using too much TP after eating MRE’s for 2 weeks straight. Kyle likes to hide in the bushes in his ghillie suit to freak out the UPS guy. I just sigh and throw the package into the bushes.
Kyle will survive although his wife strongly considers killing him for being aggravating.
13) Dan: As I pull up the long dirt drive, Dan and his dog, Jake, step off the front porch to greet me. Dan was a high power lobbyist on K Street in Washington DC but retired early after his heart attack at the age of 42. He sold everything and moved to this remote woodland off-grid cabin, where he gardens, fishes, hunts and grows pot. When I hand over his new wheeled hand row tiller, I ask him what is he doing about the pandemic. “Pandemic? What pandemic?” I cannot help but envy him.
Dan will survive and have no idea that the death toll is as high as it is.
14) John: John lives in a small mobile home, off a county road. Half a dozen different antennas of various shapes and sizes fill his small back yard. Just beyond the back yard is the state park, all 5,000 acres of it. After I knock, the door opens a crack, and Bob looks me over and then opens the door a bit more. He looks around nervously. He is tight-lipped as he signs for the insured package of radio equipment. He mutters his thanks and closes the door. Not only was he wearing a N95 mask, as nearly everyone is nowadays, but a tinfoil hat. Once the pandemic broke out, John never appeared in public again.
John will be found years later, dead of starvation in his mobile home, with just one Twinkie left and surrounded by at least 100 empty boxes Twinkies and empty Spam cans.
13) Rachel: She is a nurse at a local hospital ER, but sells homemade candles not as a second source of income, but as something she enjoys on the side. I deliver the wicks in large spools about once an] month. She gets the wax from a local apiary. The additional income would be a bonus, but her husband insists on spending the money on firearms, ammo, and MREs. He has stockpiled enough MREs to feed him, her, and their teen daughter for a year. He has 20k rounds of ammo for each firearm. After the pandemic and the collapse of the food distribution system, I see her at the town square market place. She looks almost bewildered, even nervous as she and her daughter walk among the people who are bustling about, trading things and food. As I approach, she recognizes me, despite my beard and smiles, even giving me a half hug, as she is carrying a case of MREs. I ask her what is it she is looking to trade for, and she seems to be at a loss. I ask her what has happened to her.
She says in the name of OPSEC, her husband demanded they make their home look like it was looted, breaking some of the windows, and putting the body of a dead animal just in front to deter would-be looters/scavengers. He also ordered they dig a pit in the back of their fenced in yard and do their “business” there. After three months of nothing but MREs, OPSEC, and pooping in a hole they had to squat over, Rachel’s hubby has succumbed to an “unfortunate accident” and was disposed of in one of the poop holes.
I tell her the community has set up a daily farmers market like square where people trade for things, socialize as the pandemic has subsided for now. I help her trade MREs for two dozen fresh eggs, cabbage, carrots, apples, and two freshly slaughtered chickens. That night, they eat the best they have in three months.
Being a nurse, I help Rachel find employment as an assistant to the house call doctor that has sprung up in the community. They are paid in various things, from food to home knit wool hats. Rachel still trades her candles for other things. A few years go by, and Rachel’s daughter marries one of the doctors. Rachel later becomes a member of the community council leaders and eventually chairperson. At the age of fifty, Rachel marries a blacksmith. She allowed me the honor of giving her away. She has never been happier.
14) Me, the anonymous UPS delivery driver: Having delivered ammo, Fiji water, toilet paper, pre-made foodstuff, wine, Russian caviar, and a package of unknown origin to an undisclosed former missile silo, I had to call the ball. The food supply distribution system was collapsing. I sat in my brown truck, leaned over the steering wheel, looking at the road in front of me. Do my job or save myself and my family?
I chose the latter and took the truck back home. Had the wife and kids follow me with the dogs to family farm out in the sticks. I figured a UPS truckload of ammo, wine, water, toilet paper, and whatever else was back there would be additions at the farm. I would learn to like Russian caviar. With a good chianti, it cannot be that bad, right?
Tyler Durden
Sun, 04/12/2020 – 22:10 - Timing The "Crossover Point": The Fed Will Soon Monetize The Entire Fiscal Stimulus Package… What Happens Then
Timing The "Crossover Point": The Fed Will Soon Monetize The Entire Fiscal Stimulus Package… What Happens Then
As we noted late last week, the Fed’s money printer has been going brrrr in overtime, and in the past month alone, Powell & Co. has purchased nearly $2 trillion in Treasury and MBS securities, far more than during any of the previous QE episodes (either in the first month or their entirety)…
… which together with the Fed’s POMO schedule which sees the Fed purchasing another $225BN in securities this week…
… will push the Fed’s balance sheet (currently at $6.1 trillion) to $6.4 trillion by next Friday, up more than 50% in the span of just weeks.
That’s just the beginning, because as we showed two weeks ago, BofA strategist and former Fed guru, Mark Cabana expects the Fed’s balance sheet to double to $9 trillion by the end of the year.
What does this mean for Treasury issuance? Well, for one thing it means that the Fed will monetize not only all the debt issuance for 2020 that was scheduled before the coronavirus pandemic broke out, but also the entire fiscal stimulus package (currently $2.2 trillion, soon $3+ trillion). Which is hardly a surprise: last week the Bank of England became the first bank to officially announce it would openly monetize the UK’s deficit. In other words, the central bank and the Treasury are now one and the same, which also means that helicopter money has arrived, first in the UK and soon everywhere else.
It also means that, as DB’s Stuart Sparks puts it “these are administered markets” (or perhaps “administerrrrrred” markets).
Yet while the Fed has unleashed an unprecedented buying spree across the curve, traders are starting to ask when and how will markets price in a “crossover point” when there is more supply than demand (if such a thing is possible), potentially resulting in a violent bear steepening in the yield curve and a spike in long-term yields as the Fed loses control over long-term inflation expectations.
Commenting on this, DB’s rates strategists write that the narrative for bearish curve steepening is rooted in the idea of a crossover point at which the duration impact of additional Treasury supply exceeds that of demand stemming from Fed QE purchases. This is particularly true in the long end, where the Treasury is still expected to begin 20y issuance in the May refunding. The “crossover” argument is illustrated on the chart below: coupon supply net of Fed purchases is likely to turn positive during Q3, even if the Fed monetizes the entire fiscal stimulus package as it currently stands.
That said, the crossover argument is inherently a flow argument, rather than a stock argument. To mitigate fears that the deluge of Treasurys – now that helicopter money has been unleashed – will lead to a chaotic spike in long-rates, Deutsche Bank writes that an immediate issue with the flow argument that increasing Treasury supply will push yields higher and the term premium steeper “is that it ignores the flows between the present and the time at which this crossover occurs.” That is, large purchase volumes at higher than market WAM should flatten the term premium and push yields lower until the crossover point. Yields might rise and the term premium steepen, but from lower and flatter levels.
At the same time, the Fed’s thought process around QE is inherently more stock-based (an argument that the Fed lost long ago when it was demonstrated conclusively by the like of Goldman and others that only the flow matters): QE “permanently” reduces the stock of risk free government debt, which should cause that government debt to richen. In order to enhance returns, private investors are then obliged to extend duration, flattening the term premium. When the term premium is flat, investors must move out the risk spectrum to enhance returns. This is the Fed’s portfolio balance channel.
Deutsche take a middle ground, and notes that pragmatically, one would expect the effects of large asset purchases to be cumulative, and to occur at a lag. For this reason QE is something of a hybrid between stock and flow. Intuitively, Fed purchases of, say, $100 billion/month should have a different impact on the market if they were preceded by a period in which the Fed bought $2 trillion in total than they would had the Fed bought nothing previously. Here DB is quick to note that, at its projection of QE demand, the Fed will have fully monetized the first three phases of fiscal stimulus totaling
around $2.2 trillion. Likewise the bank expects Fed purchases to increase to absorb any “phase 4” stimulus as is currently being debated in the US Congress.In short, without the Fed actively monetizing US debt, the long end would have disconnected long ago.
A second issue is that there is still a reasonable amount of uncertainty about the magnitude of flows on both the supply and demand sides. Let’s start with the supply side.
While a fourth installment of fiscal stimulus of $1 trillion or more would clearly add to potential supply, it is somewhat less clear where on the curve it might come. Specifically, there is a possibility that the Treasury might elect to delay its inaugural 20y issue due to poor liquidity and stretched dealer balance sheets. According to DB, the entire 2040 maturity sector is trading extremely cheap to the fitted curve (chart below).
The bank’s view is that the Treasury will proceed, but the “long end supply thesis” is subject to both the risk that the issue will be delayed for better market conditions, and to the risk that if the issue comes, a smaller issue size could reduce long end supply pressures.
Perhaps the key issue in the “crossover thesis” is what is the true goal of the Fed’s QE program. One argument is that the immense initial size of Fed Treasury purchases was intended as a powerful short term market stabilizer, but a “V”-shaped recovery could obviate the need for an extended program to stimulate the economy (not that one is coming as we will discuss in a subsequent post). This argument is perhaps the most consistent with Treasury cheapening as it could be consistent with a rapid taper of QE purchases in the relatively near term. That said, the probability of this scenario is low as the Fed will not do anything to send rate volatility (MOVE) soaring again.
As a result, DB’s central expectation is that while QE purchase volumes are indeed likely to be tapered further, they will remain sufficiently large to exert further downward pressure on the level of real yields and the term premium. In short: once helicopter money start, it can never again stop.
The fundamental reason the Fed will target these variables is that rising real yields and real term premium run contrary to their policy goals. First, the level of r* has likely fallen due to the acute demand shock caused by virus mitigation. As DB strategists argue, the equity/bond correlation suggests that r* could be as low as -1% (chart below).
And with short rates already at the effective lower bound (at least until we get NIRP), the Fed must ease further by growing its balance sheet (i.e., targeting longer maturities). Suppressing the term premium crowds return-seeking investors first out the curve, and ultimately out of Treasuries into riskier assets, which means the Fed is now back to blowing the biggest asset bubble ever. The chart below illustrates that the ACM term premium has been reasonably well correlated with a proxy for the equity risk premium. When the term premium is low, all else equal, equities look cheaper, and price appreciation tightens the equity risk premium.
Second, high real yields keep the dollar strong, which keeps downward pressure on commodity prices and hence headline inflation. Note that the spike in real yields as BEI declined coincided with the sharp dollar appreciation during March. Moreover, we think it is important that the broad dollar is stronger than before the Fed began to ease, and remains higher than end-2019 levels in spite of the fact that 10y real yields have fallen 50 bp. The implication is that real yields likely need to fall further to stabilize the dollar and improve the prospects for persistent increases in headline and core inflation, the Fed’s true stated mission.
Which brings us to the key question: what happens once we reach the Treasury supply/demand crossover point, and the answer is most that either the Fed doubles down voluntarily, or the Fed loses control and doubles down because it is forced to keep on monetizing all US debt issuance, which is now in its exponential phase (a lot of exponential curves in recent weeks)…
… as the alternative is that everything that the Fed has been working on for the past decade (and really, 107 years) can be thrown out, and the US – and global – economy implodes.
How long can this can-kicking last? Simple: as long as the world has faith in the dollar as a reserve currency (as discussed earlier) – while that particular fiction persists, the now co-joined Fed and Treasury will be able to pick the US economy up by its bootstarps while giving everyone the impression that printing money somehow makes people richer, when in reality it just devalues purchasing power, cripples labor and makes the “top 0.1%” holders of assets wealthier beyond their wildest dreams.
Tyler Durden
Sun, 04/12/2020 – 21:45 - Westward No! A Bitter Land-Office Business In Taming Federal Bureaucrats
Westward No! A Bitter Land-Office Business In Taming Federal Bureaucrats
Submitted by Vince Bielski, of RealClearInvestigations
The Trump administration’s big strike against the federal bureaucracy is quietly unfolding at the Bureau of Land Management, where its senior managers and scientific staff have been told to pack up their desks in Washington, D.C., and move to its new headquarters in Grand Junction, Colo. and other western offices. Most employees aren’t climbing aboard the wagon train.
Environmental protesters in Vail, Colo., 2019, greet Interior Secretary David L. Bernhardt at a Western Governors Association meeting.
Dean Krakel/The Colorado Sun via AP, FileThe shake-up, meant to make the bureaucracy more accountable to the drillers, cattle ranchers, hunters and hikers who use America’s public lands, is part of the sweeping deregulation that has fueled a boom in U.S. energy production through last year. In its earliest days, the administration declared energy independence a top priority and two years later oil production on federal and tribal lands and offshore hit record highs — a surge that will likely slow as the coronavirus pandemic cuts demand and rocks the industry.
“It’s more efficient now,” says Kathleen Sgamma, president of Western Energy Alliance, a trade group representing 300 oil and gas companies that pushed for the BLM move. “You can be productive without fighting for years to get a permit. They are processed more efficiently in less time.”
The gusher that has been feeding the coffers of states like Wyoming and New Mexico, however, is also raising concerns about the impact on some of the country’s spectacular landscapes and wildlife. Noting that only 80 of 174 employees have agreed to move west, environmental groups and some former BLM managers warn that relocating the agency’s headquarters reflects a broader shift of authority to political appointees, from career bureaucrats with years of expertise.
“The relocation will have a substantial impact on the management of our public lands,’’ says Ray Brady, a retired senior manager and minerals specialist who worked in the Washington headquarters for 23 years. “We view it as a dismantling of the organization and turning major decisions on public lands over to political people who have agendas.” The department and bureau didn’t respond to requests for comment.
The move began in November 2019 with a target completion date of July 1, and the pandemic, which may provide an unexpected rationale for getting out of a major population center, is not expected to significantly slow it down. But nonessential BLM travel is on hold for now.
William Perry Pendley: “Sagebrush Rebel” and Bureau of Land Management acting director. It represents tests both of the power of the administrative state and of striking a balance between the competing forces of development and conservation on public lands. It also promises to be a key regional issue in the 2020 election. At a campaign rally in Colorado in February, a state Donald Trump lost in 2016, the president touted the BLM relocation as part of his effort to end “the tyranny of Washington bureaucrats.” Joe Biden, the likely Democratic nominee, would have the bureau flex its regulatory muscles like never before. He would ban new oil and gas permitting on public lands and waters to reduce the threat of climate change. Carbon emissions from energy produced on federal lands amount to one quarter of the U.S. total.
Americans have a lot riding on the outcome. BLM manages 245 million acres of public lands – 10% of the U.S. land mass — primarily in 12 Western states. The iconic sagebrush deserts, grasslands and rugged mountains hold rich oil and gas deposits, robust elk and antelope herds, desert monuments and tribal cultural sites. Federal and tribal property produce about 10% of U.S. oil and gas sales. BLM also cares for 28 national monuments and other conservation areas encompassing red-rock deserts, jagged coastline and remote tundra.
The bureau was founded in 1946, and in its first three decades quietly served cattle ranchers and coal miners who needed permits to use public lands. The rise of environmentalism and increased pressure on the lands changed the game by the 1970s: The National Environmental Policy Act forced federal agencies to examine ecological and health impacts — and take public input — before making decisions. A few years later the Federal Land Policy and Management Act gave BLM new and broader marching orders to manage public lands under a multiple-use principle. It now had to balance the interests of many competing groups – conservationists, drillers, hunters, miners and ranchers – in carving up lands for grazing, historical preservation, recreation, resource extraction and wildlife protection.
Herding wild horses in Idaho: BLM manages 245 million acres – 10% of the U.S. land mass — primarily in 12 Western states.
Darin Oswald/Idaho Statesman via APThe “Sagebrush Rebellion” sprung up in the West in the 1970s to challenge the government’s tightening grip on public lands and the movement still reverberates today. William Perry Pendley, who was appointed BLM’s acting chief by Interior Secretary David L. Bernhardt, calls himself a “Sagebrush Rebel.” The firebrand property-rights attorney rose to prominence by suing BLM and other federal agencies on behalf of ranchers and drillers who depend on public lands.
BLM has wiggle room in striking that balance between development and conservation, making its job tricky. Its offices spread throughout the West in cities like Boise, Billings and Carson City solicit input from groups with opposing land-use agendas. Staffers then apply scientific expertise to assess the best use of the resources and impact on the environment, and try to reach a consensus. But the hardest part of the balancing act can be navigating Washington politics, as Democratic and Republican administrations zealously push their priorities onto BLM decision-making. The radical swing from Barack Obama to Donald Trump is the latest example
“The Obama administration was laser focused on conservation and I wasn’t a fan of that. It was too far left and not enough in the middle,” says Mary Jo Rugwell, who retired as BLM Wyoming state director in August after 46 years of federal service. “The Trump administration is all about removing barriers and restrictions to development.”Soon after Trump took office, then-Interior Secretary Ryan Zinke announced a shift in the balance. While Zinke’s strategic plan includes fishing, hunting and recreation, it stresses drilling above all else: “An American-First energy policy is one that maximizes the use of American resources in freeing us from dependence on foreign oil,” wrote Zinke, who resigned in late 2018 amid investigations into his conduct and was succeeded by Bernhardt, his like-minded deputy.
David L. Bernhardt, right, Trump Interior Secretary: Put political appointees in charge of major land-use decisions. Photo: doi.gov To speed up energy production, the department significantly streamlined BLM regulations. In January 2018 officials ended the requirement for public input during environmental review of potential leases and cut the days for protests of lease offerings by more than half to 10. The number of new acres leased shot up by 117% in fiscal 2018 compared with two years earlier. And the time it takes to get a drilling permit on leased land was slashed by almost three months in that period. In 2019, oil production on federal and tribal lands and offshore hit a record of more than 1 billion barrels, almost a 30% jump.
The BLM move shifts more than 200 filled and unfilled career positions in Washington to Grand Junction and other Western outposts — primarily the bureau’s top leaders and staffers with training in biology, geology, forestry, rangelands and archeology. As the experts leave Washington, major decisions will be made by political appointees who lack scientific training, say current and former BLM managers.
Retiree Brady said the agency’s renewable-energy program, which he helped create and oversaw, requires scientific expertise and collaboration that may be lost in the relocation. The large wind and solar energy developments on public lands can disturb the ecology and cultural sites, threaten endangered species like the desert tortoise and bald eagle and impinge on military installations and parklands. Brady said a technical staff is needed in Washington to collaborate with the National Park Service, Fish & Wildlife Service and the Defense and Energy departments to reduce possible harm from the renewable-energy projects.
Bernhardt has already put political appointees in charge of major BLM land-use decisions. In 2018, he said a team of six political appointees and one career professional must review all actions that involve an environmental impact statement. This includes pivotal resource management plans created by field and state offices that divide up public lands for conservation, drilling, recreation and other uses for 20-year periods. The appointees on the team are lawyers and former Capitol Hill and department staffers with little or no scientific training. Before the order, BLM experts in Washington had played the leading role in reviewing plans, with occasional input from political appointees on major decisions, says Steve Ellis, who retired in 2016 as BLM deputy director, the top career post.
The Bureau of Land Management is moving a long way from D.C.;blm.gov “The review has been taken over by political people who are not scientists and have never worked in the field,” says Ellis, a forester by training.
State offices that have submitted plans to headquarters for review have been told to open more land to oil and gas leasing. In Wyoming, the biggest energy exporting-state in the country, the Rock Springs field office developed a draft plan that fenced off a limited number of acres from leasing in its region while allowing drilling in other areas. The restrictions, which were requested by local officials and groups, were meant to protect the city’s aquifer and some sensitive big-game habitat. When the plan was presented to headquarters in 2018, the then-BLM director shot it down. He told Wyoming staffers to go back to the drawing board and make a plan that was less restrictive to drilling, says Rugwell, who was in the meeting.
“He said, ‘Are you trying to turn BLM into the National Park Service?’” Rugwell said. “That insulted me. I take pride in trying to be balanced. When I tried to explain that we had listened to the people of Wyoming, that didn’t make a difference.” The field office is now revising its plan.
In Montana, the Lewistown field office’s draft plan called for setting aside about 100,000 acres because of its wilderness characteristics. The land is next to the Charles M. Russell National Wildlife Refuge, some of Montana’s wildest habitat with robust herds of bugling elk and mule deer. While this land surface would be off-limits to development, the plan sought to strike a balance by permitting oil and gas drilling on more than 1 million acres in the district.
The political team in Washington asked for changes in the plan that eliminated the wilderness characteristics’ protections. The final 2020 plan allows for drilling and road building under controlled conditions in the wilderness area.
The tradeoff between energy production and wildlife conservation is evident in New Mexico, an epicenter of the U.S. surge in energy production. The state’s San Juan Basin is one of the country’s most prolific oil and gas regions. But the drilling infrastructure in the area has disrupted mule deer migration from Colorado to winter feeding grounds in New Mexico. That prompted Sen. Tom Udall, Democrat of New Mexico, to introduce a bill last year with bipartisan backing giving federal agencies authority to create national wildlife corridors to protect the state’s big game and other animals around the country hurt by the loss of habitat.
Chaco Culture National Historical Park is another flashpoint in New Mexico. Navajo Nation leaders oppose drilling close to Chaco Canyon where ancient ruins have been preserved. After Bernhardt visited the park last year, he said, he “walked away with a greater sense of appreciation of the magnificent site” and announced a one-year moratorium on leasing within a 10-mile radius of Chaco while BLM revised its resource management plan for the area.
Greater sage grouse: The thing with feathers, and lawyers.
Pacific Southwest Region U.S. Fish and Wildlife Service /WikimediaThe stakes are also high for the greater sage grouse. A 2015 plan from the Obama administration covering 10 states established restrictions on development to keep the bird from being listed as an endangered species. Last year, BLM revised the plan to permit more drilling and other development by reducing restrictions on millions of acres of sensitive habitat. But a federal judge in Idaho blocked the revisions from going into effect, citing a wildlife biologist who found that the bureau ignored analyzing how its changes would impact sage grouse habitat in a way that’s “inconsistent with standard practices and the best available science.” The bureau responded in February with supplemental environmental analysis to justify its revisions.
Amid a string of legal challenges, BLM’s Pendley points to the benefits of the U.S. becoming the world’s largest producer of crude oil.
People in states that depend heavily on energy production — such as Wyoming, New Mexico and North Dakota — are the winners. An astonishing 50% of Wyoming’s revenue comes from energy industry taxes and royalties. Job growth in oil and gas extraction has been robust until a recent slowdown, made worse by the pandemic that has caused oil prices to plunge.
“Barack Obama says you cannot drill your way out of energy dependence. And the president came in and said, ‘We are going to do it,’ and we have done it,” Pendley said in mid-February on a Colorado radio show. “It’s an unprecedented accomplishment.”
BLM employees in Washington appear to be the losers. Brady, the retired minerals expert, says far fewer employees, only about 20%, will end up making the move, based on a survey he has done will most of the leadership and staff. Many of them are disillusioned over their diminished role at BLM and are either retiring or finding positions at other agencies.
“A lot of good people are fleeing the agency,” a BLM senior manager with extensive experience in Washington wrote in an email before retiring in February. “This administration does not respect career employees.”
Colorado Sen. Cory Gardner, who spearheaded the effort to move the agency to his state, isn’t concerned about the experts the bureau is losing. The Republican lawmaker said BLM is hiring to fill those spots and that it is more important to have career employees living in the West where they’ll learn about the local issues and take a more common-sense approach to regulation.
“If people don’t want to live and work in the West, on the land that they’re regulating, that’s probably a good decision” to leave the BLM, he says. “I find it offensive and elitist that somebody would refuse to live on the land they regulate.”
Tyler Durden
Sun, 04/12/2020 – 21:20 - Global 'Jubilee' Looms As G20 Finalizes Debt Relief Program For World's Poorest Countries
Global 'Jubilee' Looms As G20 Finalizes Debt Relief Program For World's Poorest Countries
Hours after Pope Francis on Easter Sunday morning said the debt burden on the most impoverished countries should be forgiven (aka debt jubilee), the Financial Times is now reporting that the G20 group is nearing a critical “action plan” to freeze debt servicing payments for poor countries to stave off an emerging-market meltdown.
The new relief program could be finalized on April 15 on a videoconference of finance ministers and central bank governors. The plan would “freeze on sovereign debt repayments for six or nine months, or possibly through to 2021,” the official told the Times.
The official said developed countries and multilateral institutions would use this period to write up “very clear criteria, country-by-country of what exactly is going to happen. Is it debt relief totally? Is it just a deferment, a rescheduling?”
“For debt relief to happen, it would take time for it to be co-ordinated,” the official said.
“But what is immediately needed is to give these people space so they don’t need to worry about the cash flow and debt servicing going to other countries, and they can use that money for their immediate needs,” the official said, who did not want to be named due to the sensitivity of the discussions.
Last week, the British-based Jubilee Debt Campaign called for a worldwide debt jubilee to avoid some of the world’s poorest countries from collapsing into chaos amid the COVID-19 crisis.
Sarah-Jayne Clifton, director of the Jubilee Debt Campaign, said: “The suspension on debt payments called for by the IMF and World Bank saves money now, but kicks the can down the road and avoids actually dealing with the problem of spiraling debts.”
Clifton is urging for the immediate cancellation of 69 of the world’s poorest countries’ debt payments this year, which would free up at least $25 billion for the countries in 2020, and up to $50 billion if the jubilee was extended to the end of 2021.
“This is the fastest way to keep money in countries to use in responding to Covid-19, and to ensure public money is not wasted bailing out the profits of rich private speculators,” added Clifton.
Much of the debt crisis concern is situated around the poorest countries that line China’s Belt and Road Initiative.
The official said there is “very clear recognition that a global co-ordinated approach is a must” to avoid an emerging market debt crisis.
Odile Renaud Basso, chair of the Paris Club, a group of the 22 largest creditor nations, told the Times that all creditor nations and China should work closely with G20 negotiations to resolve emerging market woes.
“There must be a level playing field so that all creditors agree to the same key parameters,” she said. “But with that in place there is always a need for bilateral discussions between each creditor and debtor nation, and China could work within that framework. They are very much involved and I think they will be part of an agreement.”
The IIF has also been vocal in calls “to forbear payment default for the poorest and most vulnerable countries significantly affected by Covid-19 and related economic turbulence for a specified time period, without waiving the payment obligation”.
The official also said that governments would not make it mandatory for private creditors to offer relief programs for the poorest countries.
“You cannot force individual investors to waive their rights. That could distort the markets, and could have the negative consequences of liquidity problems. They would not lend if they see any sign that they can be forced to let go of their assets.”
And it appears the world is at the end of a decade’s long monetary experiment, where ushering in more quantitative easing to fix below-trend growth or instabilities in the financial casino will not work this time.
Daniel Lacalle, CIO at fund manager Tressis Gestión, recently said: “QE will not fix this. Swap lines will not fix this. A debt jubilee would fix this or multiple trillions of dollars in write-downs and defaults.”
Internet search term for “debt jubilee” has surged to the highest level not seen since late 2012.
Increasing calls for a debt jubilee suggests the 100-year debt-super cycle’s “kick the can down the road” plan may have finally hit a wall .
Tyler Durden
Sun, 04/12/2020 – 20:55 - "Down The Rabbit Hole" – The Eurodollar Market Is The Matrix Behind It All
"Down The Rabbit Hole" – The Eurodollar Market Is The Matrix Behind It All
Submitted by Michael Every of Rabobank
Summary
- The Eurodollar system is a critical but often misunderstood driver of global financial markets: its importance cannot be understated.
- Its origins are shrouded in mystery and intrigue; its operations are invisible to most; and yet it controls us in many ways. We will attempt to enlighten readers on what it is and what it means.
- However, it is also a system under huge structural pressures – and as such we may be about to experience a profound paradigm shift with key implications for markets, economies, and geopolitics.
- Recent Fed actions on swap lines and repo facilities only underline this fact rather than reducing its likelihood
What is The Matrix?
A new world-class golf course in an Asian country financed with a USD bank loan. A Mexican property developer buying a hotel in USD. A European pension company wanting to hold USD assets and swapping borrowed EUR to do so. An African retailer importing Chinese-made toys for sale, paying its invoice in USD.
All of these are small examples of the multi-faceted global Eurodollar market. Like The Matrix, it is all around us, and connects us. Also just like The Matrix, most are unaware of its existence even as it defines the parameters we operate within. As we shall explore in this special report, it is additionally a Matrix that encompasses an implicit power struggle that only those who grasp its true nature are cognizant of.
Moreover, at present this Matrix and its Architect face a huge, perhaps existential, challenge.
Yes, it has overcome similar crises before…but it might be that the Novel (or should we say ‘Neo’?) Coronavirus is The One.
So, here is the key question to start with: What is the Eurodollar system?
For Neo-phytes
The Eurodollar system is a critical but often misunderstood driver of global financial markets: its importance cannot be understated. While most market participants are aware of its presence to some degree, not many grasp the extent to which it impacts on markets, economies,…and geopolitics – indeed, the latter is particularly underestimated.
Yet before we go down that particular rabbit hole, let’s start with the basics. In its simplest form, a Eurodollar is an unsecured USD deposit held outside of the US. They are not under the US’ legal jurisdiction, nor are they subject to US rules and regulations.
To avoid any potential confusion, the term Eurodollar came into being long before the Euro currency, and the “euro” has nothing to do with Europe. In this context it is used in the same vein as Eurobonds, which are also not EUR denominated bonds, but rather debt issued in a different currency to the company of that issuing. For example, a Samurai bond–that is to say a bond issued in JPY by a nonJapanese issuer–is also a type of Eurobond.
As with Eurobonds, eurocurrencies can reflect many different underlying real currencies. In fact, one could talk about a Euroyen, for JPY, or even a Euroeuro, for EUR. Yet the Eurodollar dwarfs them: we shall show the scale shortly.
More(pheous) background
So how did the Eurodollar system come to be, and how has it grown into the behemoth it is today? Like all global systems, there are many conspiracy theories and fantastical claims that surround the birth of the Eurodollar market. While some of these stories may have a grain of truth, we will try and stick to the known facts.
A number of parallel events occurred in the late 1950s that led to the Eurodollar’s creation – and the likely suspects sound like the cast of a spy novel. The Eurodollar market began to emerge after WW2, when US Dollars held outside of the US began to increase as the US consumed more and more goods from overseas. Some also cite the role of the Marshall Plan, where the US transferred over USD12bn (USD132bn equivalent now) to Western Europe to help them rebuild and fight the appeal of Soviet communism.
Of course, these were just USD outside of the US and not Eurodollars. Where the plot thickens is that, increasingly, the foreign recipients of USD became concerned that the US might use its own currency as a power play. As the Cold War bit, Communist countries became particularly concerned about the safety of their USD held with US banks. After all, the US had used its financial power for geopolitical gains when in 1956, in response to the British invading Egypt during the Suez Crisis, it had threatened to intensify the pressure on GBP’s peg to USD under Bretton Woods: this had forced the British into a humiliating withdrawal and an acceptance that their status of Great Power was not compatible with their reduced economic and financial circumstances.
With rising fears that the US might freeze the Soviet Union’s USD holdings, action was taken: in 1957, the USSR moved their USD holdings to a bank in London, creating the first Eurodollar deposit and seeding our current UScentric global financial system – by a country opposed to the US in particular and capitalism in general.
There are also alternative origin stories. Some claim the first Eurodollar deposit was made during the Korean War with China moving USD to a Parisian bank.
Meanwhile, the Eurodollar market spawned a widely-known financial instrument, the London Inter Bank Offer Rate, or LIBOR. Indeed, LIBOR is an offshore USD interest rate which emerged in the 1960s as those that borrowed Eurodollars needed a reference rate for larger loans that might need to be syndicated. Unlike today, however, LIBOR was an average of offered lending rates, hence the name, and was not based on actual transactions as the first tier of the LIBOR submission waterfall is today.
Dozer and Tank
So how large is the Eurodollar market today? Like the Matrix – vast. As with the origins of the Eurodollar system, itself nothing is transparent. However, we have tried to estimate an indicative total using Bank for International Settlements (BIS) data for:
- On-balance sheet USD liabilities held by non-US banks;
- USD Credit commitments, guarantees extended, and derivatives contracts of non-US banks (C, G, D);
- USD debt liabilities of non-US non-financial corporations;
- Over-the-Counter (OTC) USD derivative claims of non-US non-financial corporations; and
- Global goods imports in USD excluding those of the US and intra-Eurozone trade.
The results are as shown below as of end-2018: USD57 trillion, nearly three times the size of the US economy before it was hit by the COVID-19 virus. Even if this measure is not complete, it underlines the scale of the market.
It also shows its vast power in that this is an equally large structural global demand for USD. Every import, bond, loan, credit guarantee, or derivate needs to be settled in USD.
Indeed, fractional reserve banking means that an initial Eurodollar can be multiplied up (e.g., Eurodollar 100m can be used as the base for a larger Eurodollar loan, and leverage increased further). Yet non-US entities are NOT able to conjure up USD on demand when needed because they don’t have a central bank behind them which can produce USD by fiat, which only the Federal Reserve can.
This power to create the USD that everyone else transacts and trades in is an essential point to grasp on the Eurodollar – which is ironically also why it was created in the first place!
Tri-ffi-nity
Given the colourful history, ubiquitous nature, and critical importance of the Eurodollar market, a second question then arises: Why don’t people know about The Matrix?
The answer is easy: because once one is aware of it, one immediately wishes to have taken the Blue Pill instead.
Consider what the logic of the Eurodollar system implies. Global financial markets and the global economy rely on the common standard of the USD for pricing, accounting, trading, and deal making. Imagine a world with a hundred different currencies – or even a dozen: it would be hugely problematic to manage, and would not allow anywhere near the level of integration we currently enjoy.
However, at root the Eurodollar system is based on using the national currency of just one country, the US, as the global reserve currency. This means the world is beholden to a currency that it cannot create as needed.
When a crisis hits, as at present, everyone in the Eurodollar system suddenly realizes they have no ability to create fiat USD and must rely on national USD FX reserves and/or Fed swap lines that allow them to swap local currency for USD for a period. This obviously grants the US enormous power and privilege.
The world is also beholden to US monetary policy cycles rather than local ones: higher US rates and/or a stronger USD are ruinous for countries that have few direct economic or financial links with the US. Yet the US Federal Reserve generally shows very little interest in global economic conditions – though that is starting to change, as we will show shortly.
A second problem is that the flow of USD from the US to the rest of the world needs to be sufficient to meet the inbuilt demand for trade and other transactions. Yet the US is a relatively smaller slice of the global economy with each passing year. Even so, it must keep USD flowing out or else a global Eurodollar liquidity crisis will inevitably occur.
That means that either the US must run large capital account deficits, lending to the rest of the world; or large current account deficits, spending instead.
Obviously, the US has been running the latter for many decades, and in many ways benefits from it. It pays for goods and services from the rest of the world in USD debt that it can just create. As such it can also run huge publicor private-sector deficits – arguably even with the multitrillion USD fiscal deficits we are about to see.
However, there is a cost involved for the US. Running a persistent current-account deficit implies a net outflow of industry, manufacturing and related jobs. The US has obviously experienced this for a generation, and it has led to both structural inequality and, more recently, a backlash of political populism wanting to Make America Great Again.
Indeed, if one understands the structure of the Eurodollar system one can see that it faces the Triffin Paradox. This was an argument first made by Robert Triffin in 1959 when he correctly predicted that any country forced to adopt the role of global reserve currency would also be forced to run ever-larger currency outflows to fuel foreign appetite – eventually leading to the breakdown of the system as the cost became too much to bear.
Moreover, there is another systemic weakness at play: realpolitik. Atrophying of industry undermines the supply chains needed for the defence sector, with critical national security implications. The US is already close to losing the ability to manufacture the wide range of products its powerful armed forces require on scale and at speed: yet without military supremacy the US cannot long maintain its multi-dimensional global power, which also stands behind the USD and the Eurodollar system.
This implies the US needs to adopt (military-) industrial policy and a more protectionist stance to maintain its physical power – but that could limit the flow of USD into the global economy via trade. Again, the Eurodollar system, like the early utopian version of the Matrix, seems to contain the seeds of its own destruction.
Indeed, look at the Eurodollar logically over the long term and there are only three ways such a system can ultimately resolve itself:
- The US walks away from the USD reserve currency burden, as Triffin said, or others lose faith in it to stand behind the deficits it needs to run to keep USD flowing appropriately;
- The US Federal Reserve takes over the global financial system little by little and/or in bursts; or
- The global financial system fragments as the US asserts primacy over parts of it, leaving the rest to make their own arrangements.
See the Eurodollar system like this, and it was always when and not if a systemic crisis occurs – which is why people prefer not focus on it all even when it matters so much. Yet arguably this underlying geopolitical dynamic is playing out during our present virus-prompted global financial instability.
Down the rabbit hole
But back to the rabbit hole that is our present situation. While the Eurodollar market is enormous one also needs to look at how many USD are circulating around the world outside the US that can service it if needed. In this regard we will look specifically at global USD FX reserves.
It’s true we could also include US cash holdings in the offshore private sector. Given that US banknotes cannot be tracked no firm data are available, but estimates range from 40% – 72% of total USD cash actually circulates outside the country. This potentially totals hundreds of billions of USD that de facto operate as Eurodollars. However, given it is an unknown total, and also largely sequestered in questionable cash-based activities, and hence are hopefully outside the banking system, we prefer to stick with centralbank FX reserves.
Looking at the ratio of Eurodollar liabilities to global USD FX reserve assets, the picture today is actually healthier than it was a few years ago.
Indeed, while the Eurodollar market size has remained relatively constant in recent years, largely as banks have been slow to expand their balance sheets, the level of global USD FX reserves has risen from USD1.9 trillion to over USD6.5 trillion. As such, the ratio of structural global USD demand to that of USD supply has actually declined from near 22 during the global financial crisis to around 9.
Yet the current market is clearly seeing major Eurodollar stresses – verging on panic.
Fundamentally, the Eurodollar system is always short USD, and any loss of confidence sees everyone scramble to access them at once – in effect causing an invisible international bank run. Indeed, the Eurodollar market only works when it is a constant case of “You-Roll-Over Dollar”.
Unfortunately, COVID-19 and its huge economic damage and uncertainty mean that global confidence has been smashed, and our Eurodollar Matrix risks buckling as a result.
The wild gyrations recently experienced in even major global FX crosses speak to that point, to say nothing of the swings seen in more volatile currencies such as AUD, and in EM bellwethers such as MXN and ZAR. FX basis swaps and LIBOR vs. Fed Funds (so offshore vs. onshore USD borrowing rates) say the same thing. Unsurprisingly, the IMF are seeing a wide range of countries turning to them for emergency USD loans.
The Fed has, of course, stepped up. It has reduced the cost of accessing existing USD swap lines–where USD are exchanged for other currencies for a period of time–for the Bank of Canada, Bank of England, European Central Bank, and Swiss National Bank; and another nine countries were given access to Fed swap lines with Australia, Brazil, South Korea, Mexico, Singapore, and Sweden all able to tap up to USD60bn, and USD30bn available to Denmark, Norway, and New Zealand. This alleviates some pressure for some markets – but is a drop in the ocean compared to the level of Eurodollar liabilities.
The Fed has also introduced a new FIMA repo facility. Essentially this allows any central bank, including emerging markets, to swap their US Treasury holdings for USD, which can then be made available to local financial institutions. To put it bluntly, this repo facility is like a swap line but with a country whose currency you don’t trust.
Allowing a country to swap its Treasuries for USD can alleviate some of the immediate stress on Eurodollars, but when the swap needs to be reversed the drain on reserves will still be there. Moreover, Eurodollar market participants will now not be able to see if FX reserves are declining in a potential crisis country. Ironically, that is likely to see less, not more, willingness to extend Eurodollar credit as a result.
You have two choices, Neo
Yet despite all the Fed’s actions so far, USD keeps going up vs. EM FX. Again, this is as clear an example as one could ask for of structural underlying Eurodollar demand.
Indeed, we arguably need to see even more steps taken by the Fed – and soon. To underline the scale of the crisis we currently face in the Eurodollar system, the BIS concluded at the end of a recent publication on the matter:
“…today’s crisis differs from the 2008 GFC, and requires policies that reach beyond the banking sector to final users. These businesses, particularly those enmeshed in global supply chains, are in constant need of working capital, much of it in dollars. Preserving the flow of payments along these chains is essential if we are to avoid further economic meltdown.
Channeling dollars to non-banks is not straightforward. Allowing non-banks to transact with the central bank is one option, but there are attendant difficulties, both in principle and in practice. Other options include policies that encourage banks to fill the void left by market based finance, for example funding for lending schemes that extend dollars to non-banks indirectly via banks.”
In other words, the BIS is making clear that somebody (i.e., the Fed) must ensure that Eurodollars are made available on massive scale, not just to foreign central banks, but right down global USD supply chains. As they note, there are many practical issues associated with doing that – and huge downsides if we do not do so. Yet they overlook that there are huge geopolitical problems linked to this step too.
Notably, if the Fed does so then we move rapidly towards logical end-game #2 of the three possible Eurodollar outcomes we have listed previously, where the Fed de facto takes over the global financial system. Yet if the Fed does not do so then we move towards end-game #3, a partial Eurodollar collapse.
Of course, the easy thing to assume is that the Fed will step up as it has always shown a belated willingness before, and a more proactive stance of late. Indeed, as the BIS shows in other research, the Fed stepped up not just during the Global Financial Crisis, but all the way back to the Eurodollar market of the 1960s, where swap lines were readily made available on large scale in order to try to reduce periodic volatility.
However, the scale of what we are talking about here is an entirely new dimension: potentially tens of trillions of USD, and not just to other central banks, or to banks, but to a panoply of real economy firms all around the Eurodollar universe.
As importantly, this assumes that the Fed, which is based in the US, wants to save all these foreign firms. Yet does the Fed want to help Chinese firms, for example? It may traditionally be focused narrowly on smoothly-functioning financial markets, but is that true of a White House that openly sees China as a “strategic rival”, which wishes to onshore industry from it, and which has more interest in having a politically-compliant, not independent Fed? Please think back to the origins of Eurodollars – or look at how the US squeezed its WW2 ally UK during the 1956 Suez Crisis, or how it is using the USD financial system vs. Iran today.
Equally, this assumes that all foreign governments and central banks will want to see the US and USD/Eurodollar cement their global financial primacy further. Yes, Fed support will help alleviate this current economic and brewing financial crisis – but the shift of real power afterwards would be a Rubicon that we have crossed.
Specifically, would China really be happy to see its hopes of CNY gaining a larger global role washed away in a flood of fresh, addictive Eurodollar liquidity, meaning that it is more deeply beholden to the US central bank? Again, please think back to the origins of Eurodollars, to Suez, and to how Iran is being treated – because Beijing will. China would be fully aware that a Fed bailout could easily come with political strings attached, if not immediately and directly, then eventually and indirectly. But they would be there all the same.
One cannot ignore or underplay this power struggle that lies within the heart of the Eurodollar Matrix.
I know you’re out there
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So, considering those systemic pressures, let’s look at where Eurodollar pressures are building most now. We will use World Bank projections for short-term USD financing plus concomitant USD current-account deficit requirements vs. specifically USD FX reserves, not general FX reserves accounted in USD, as calculated by looking at national USD reserves and adjusting for the USD’s share of the total global FX reserves basket (57% in 2018, for example). In some cases this will bias national results up or down, but these are in any case only indicative.How to read these data about where the Eurodollar stresses lie in Table 1? Firstly, in terms of scale, Eurodollar problems lie with China, the UK, Japan, Hong Kong, the Cayman Islands, Singapore, Canada, and South Korea, Germany and France. Total short-term USD demand in the economies listed is USD28 trillion – around 130% of USD GDP. The size of liabilities the Fed would potentially have to cover in China is enormous at over USD3.4 trillion – should that prove politically acceptable to either side.
Outside of China, and most so in the Cayman Islands and the UK, Eurodollar claims are largely in the financial sector and fall on banks and shadow banks such as insurance companies and pension funds. This is obviously a clearer line of attack/defence for the Fed. Yet it still makes these economies vulnerable to swings in Eurodollar confidence – and reliant on the Fed.
Second, most developed countries apart from Switzerland have opted to hold almost no USD reserves at all. Their approach is that they are also reserve currencies, long-standing US allies, and so assume the Fed will always be willing to treat them as such with swap lines when needed. That assumption may be correct – but it comes with a geopolitical power-hierarchy price tag. (Think yet again of how Eurodollars started and the 1956 Suez Crisis ended.)
Third, most developing countries still do not hold enough USD for periods of Eurodollar liquidity stress, despite the painful lessons learned in 1997-98 and 2008-09. The only exception is Saudi Arabia, whose currency is pegged to the USD, although Taiwan, and Russia hold USD close to what would be required in an emergency. Despite years of FX reserve accumulation, at the cost of domestic consumption and a huge US trade deficit, Indonesia, Mexico, Malaysia, and Turkey are all still vulnerable to Eurodollar funding pressures. In short, there is an argument to save yet more USD – which will increase Eurodollar demand further.
We all become Agent Smith?
In short, the extent of demand for USD outside of the US is clear – and so far the Fed is responding. It has continued to expand its balance sheet to provide liquidity to the markets, and it has never done so at this pace before (Figure 5). In fact, in just a month the Fed has expanded its balance sheet by nearly 50% of the previous expansion observed during all three rounds of QE implemented after the Global Financial Crisis. Essentially we have seen nearly five years of QE1-3 in five weeks! And yet it isn’t enough.
Moreover, things are getting worse, not better. The global economic impact of COVID-19 is only beginning but one thing is abundantly clear – global trade in goods and services is going to be hit very, very hard, and that US imports are going to tumble. This threatens one of the main USD liquidity channels into the Eurodollar system.
Table 2 above also underlines looming EM Eurodollar stress-points in terms of import cover, which will fall sharply as USD earnings collapse, and external debt service. The further to the left we see the latest point for import cover, and the further to the right we see it for external debt, the greater the potential problems ahead.
As such, the Fed is likely to find it needs to cover trillions more in Eurodollar liabilities (of what underlying quality?) coming due in the real global, not financial economy – which is exactly what the BIS are warning about. Yes, we are seeing such radical steps being taken by central banks in some Western countries, including in the US – but internationally too? Are we all to become ‘Agent Smith’?
If the Fed is to step up to this challenge and expand its balance sheet even further/faster, then the US economy will massively expand its external deficit to mirror it.
That is already happening. What was a USD1 trillion fiscal deficit before COVID-19, to the dismay of some, has expanded to USD3.2 trillion via a virus-fighting package: and when tax revenues collapse, it will be far larger. Add a further USD600bn phase three stimulus, and talk of a USD2 trillion phase four infrastructure program to try to jumpstart growth rather than just fight virus fires, and potentially we are talking about a fiscal deficit in the range of 20-25% of GDP. As we argued recently, that is a peak-WW2 level as this is also a world war of sorts.
On one hand, the Eurodollar market will happily snap up those trillions US Treasuries/USD – at least those they can access, because the Fed will be buying them too via QE. Indeed, for now bond yields are not rising and USD still is.
However, such fiscal action will prompt questions on how much the USD can be ‘debased’ before, like Agent Smith, it over-reaches and then implodes or explodes – the first of the logical endpoints for the Eurodollar system, if you recall. (Of course, other currencies are doing it too.)
Is Neo The One?
In conclusion, the origins of the Eurodollar Matrix are shrouded in mystery and intrigue – and yet are worth knowing. Its operations are invisible to most but control us in many ways – so are worth understanding. Moreover, it is a system under huge structural pressure – which we must now recognise.
It’s easy to ignore all these issues and just hope the Eurodollar Matrix remains the “You-Roll-Dollar” market – but can that be true indefinitely based just on one’s belief?
Is the Neo Coronavirus ‘The One’ that breaks it?
_______________________________________________________________
ORACLE: “Well now, ain’t this a surprise?”
ARCHITECT: “You’ve played a very dangerous game.”
ORACLE: “Change always is.”
ARCHITECT: “And how long do you think this peace is going to last?”
ORACLE: “As long as it can….What about the others?”
ARCHITECT: “What others?”
ORACLE: “The ones that want out.”
ARCHITECT: “Obviously they will be freed.”
Tyler Durden
Sun, 04/12/2020 – 20:45 - Confirmed COVID-19 Cases In NYC Pass 100k, Deaths Pass 6k; UK Reports Most Deaths Outside US For 2nd Day: Live Updates
Confirmed COVID-19 Cases In NYC Pass 100k, Deaths Pass 6k; UK Reports Most Deaths Outside US For 2nd Day: Live Updates
Summary:
- UK death toll passes 10,000
- Boris Johnson released from hospital, says “I owe my life to the NHS”
- Pope delivers Easter blessing at an empty St. Peter’s Basilica
- US deaths cross 21k
- France, Italy report drop in cases
- France reports
- Pope says debts of poor nations should be ‘forgiven’
- Japanese report record single-day jump in cases for 5th day running
- Jordan extends lockdown until end of April
- China says new imported cases linked to flight from Russia
- NY deaths, hospitalizations continue to fall.
- FDA’s Hahn, Dr. Fauci say US will begin reopening on May 1
- Germany reported the smallest increase in cases in more than a month
- Spain deaths accelerate, snapping 3-day streak of declines
- Canada deaths rose by 74
- China announced 99 new cases, most in a month
- Asian nations worry about Indonesia being “weak link”
- Bill Gates warns we’re in “uncharted territory”
- Spain leads rebound in European deaths, cases, snapping streak of declines
* * *
Update (2000ET): While the Christian world was focused on celebrating a confusing and isolated Easter holiday, and with much of Continental Europe ‘off’ on Monday, most of the coronavirus-related headlines to hit in the past couple of hours have been mostly negative.
As we noted in our latest curve update, lockdown’s imposed worldwide might finally have brought the outbreak in Europe and the US to – or at least close to – a plateau. They’ve certainly come a long way in 2 weeks.
But updates are still uneven, with large daily spikes in deaths in cases still occasionally being reported. On one hand, Germany reported 2,715 new cases and 200 deaths, the smallest daily increase in cases since March. It brought Germany’s total to 127,631 cases and 3,015 deaths. Earlier, Italy’s Civil Protection Agency reported the lowest number of coronavirus deaths in the country since March 19
Spanish fatalities rose by 619 on Sunday, up from a nearly three-week low of 510 on Saturday. That snapped a three-day streak of daily declines in deaths, and brought Spain’s death toll to 16,972.
Jordan extended its lockdown until the end of April, as schools, some government agencies and nonessential businesses remain closed. And, in the latest sign that the outbreak is probably being distressingly undercounted in Africa, the justice minister of Somalia’s autonomous Hirshabelle state, Khalif Mumin Tohow, has reportedly died after contracting the novel coronavirus. He’s only the second recorded death from the virus in the country.
In Canada, the number of deaths rose by 74 to 674 in a day, official data posted by the public health agency showed on Sunday.
As we mentioned earlier, in mainland China, health officials reported 99 new coronavirus infections, more than doubling from the previous day to reach a one-month high. Though, to be sure, all but once case was ‘imported’.
For the second day in a row on Sunday, the UK has reported the most virus-linked deaths outside the US.
The number of confirmed cases in NYC passed 100k on Sunday, while the number of confirmed deaths passed 6k. New cases slowed, bringing the total to 104,410, and deaths climbed to 6,182.
* * *
Update (1300ET): Italy reported 4,092 new cases of coronavirus and 431 new deaths, as the pace of both slowed, even as the number of new cases remained above 4k. That brought the total to 156,363 cases, and 19,899 deaths, across Italy. The number recovered climbed to 34,211, while active cases hit 102,253. Of the currently infected, only ~3% were in serious condition. The mortality rate hit 12.7%.
In Singapore, the number of new cases confirmed Sunday hit 233, a surprising jump in a city-state that recently imposed a strict lockdown to prevent a resurgence of cases.
Meanwhile in France, the number of new cases climbed by the lowest level in a week. Total deaths jumped 561 to 14,393.
Despite the drop, French health authorities said the country must continue to abide by the lockdown, which appears to be working, the government said.
“This data confirms that the epidemic keeps going on in our country in a dynamic way and it continues to hit us hard,” the health authority said in a statement.
“Confinement measures, the application of barrier gestures, physical distancing for a minimum of 1 meter, social distance and a drastic reduction in contacts produce their first effects,” it added.
In the US, coronavirus deaths passed 21k, while the worldwide total of confirmed COVID-19 cases topped 1.8 million as the virus marches on.
In recent days, we’ve reported on the disturbing acceleration in new cases in Russia, where President Vladimir Putin extended a lockdown until the end of April. Moscow remains the epicenter, with 2/3rds of all cases.
Now, Chinese health officials in Shanghai reported that 51 of 52 imported cases confirmed on Sunday were linked to a recent flight from Russia. The travelers accounts for more than half of the 97 ‘imported’ cases confirmed by national health authorities.
Per BBG:
More than half of the coronavirus infections reported by China on Sunday stemmed from a Russian flight to Shanghai on April 10, underscoring the possible severity of the outbreak in Russia. Shanghai’s Municipal Health Commission said 51 of 52 imported cases on Saturday were of Chinese nationals who were diagnosed to have Covid-19 after they landed in the city. The travelers accounted for more than half of 97 imported infections China disclosed on Sunday morning. No other information was provided about the flight. Ninety-two people linked to the Russian flight have been tracked and quarantined, Shanghai authorities said. It’s not clear why the Chinese nationals were in Russia.
That certainly doesn’t look good.
* * *
Update (1140ET): Andrew Cuomo kicked off a special Easter Sunday edition of his daily press briefing with some more good news: both deaths and hospitalizations have continued to fall across New York State. According to health officials, deaths over the last 24 hours declined to 758, bringing the statewide death toll to 9,385.
Cuomo said he would sign an executive order mandating that essential businesses supply employees with gloves and masks. He also complained that NY was only getting $12k per patient from the trio of federal coronavirus bills passed since the outbreak began. He complained that less densely populated states are getting up to $300k per patient, amount received by Republican-controlled Montana.
Watch Cuomo live below:
Holding a briefing with updates on #Coronavirus. WATCH LIVE: https://t.co/dl4jsgL7or
— Andrew Cuomo (@NYGovCuomo) April 12, 2020
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Meanwhile, the UK Department of Health released figures for the rest of the UK, confirming that the rate is accelerating across the country. The UK reported 5,288 new cases and 737 new deaths, for a total of 84,279 cases and 10,612 deaths.
But before we go, a little Easter-themed coronavirus humor:
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As millions of Christians wake up to an Easter Sunday largely devoid of cherished holiday traditions (Easter Egg hunts, baskets filled with candy, gathering to celebrate with family), the UK Health Department reported some more grim news: As expected, the COVID-19 death toll in the country passed 10k over the last 24 hours, according to numbers released Sunday morning.
The UK Department of Health and Social Care revealed that the death toll rose in England by 657 to 9,594 on Sunday, bringing the total across the UK to more than 10,500. Unfortunately, the daily deaths have become part of the world’s grim routine in the coronavirus era. But at least the British people received some good news: PM Boris Johnson has left the hospital in London where he was briefly moved to the ICU about a week ago.
After Italy reported a sudden jump in deaths yesterday, ending a promising streak of declines, Spain on Sunday reported a daily death toll of 16,972, up 619 on Sunday, compared with a jump of 510 yesterday. The Saturday number was a nearly three-week low, and marked the third day in a streak of declines.
So much for that trend of leveling off that experts hailed as signs of a possible peak. On Saturday, both the Spanish and Italian governments celebrated what looked like progress in combating the virus, and assured the population that the transition back to “normalcy” would begin soon.
In the Vatican, Pope Francis spoke before an empty St. Peter’s Basilica for the annual Easter Vigil. This year, he urged Catholics celebrating the holiday weekend in lockdown to “not yield to fear”. More controversially, the pope called on the debts of poor nations to be ‘forgiven’ to help them deal with the virus.
For the fifth day in a row, health authorities in Japan confirmed yet another daily record of new cases. Japan is roughly one week into a state of emergency that can’t be enforced by law, but appears to be setting in nonetheless, as non-essential businesses close and Japan’s students reckon they won’t return to a classroom until the fall, at the earliest. Like Trump, Japanese PM Shinzo Abe has been criticized for not ramping up testing, and for getting complacent after the “Diamond Princess” fiasco.
In the US, FDA Commissioner Stephen Hahn said the White House had targeted May 1 as the date to start relaxing stay-at-home restrictions. “We see light at the end of the tunnel,” he told ABC’s “This Week.”
Hahn, however, warned that there were many factors to take into account in finally determining when it would be safe to lift restrictions, he said
President Trump is considering May 1 as a new target for opening the country, sources tell ABC News.
Asked if May 1 is a “good target,” FDA Commissioner Stephen Hahn tells @MarthaRaddatz it’s “a target” but “it’s too early to be able to tell that.” https://t.co/37q29hM48A pic.twitter.com/g7jFLHO2cM
— This Week (@ThisWeekABC) April 12, 2020
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Dr. Fauci said something similar during an appearance on CNN’s “State of the Union”.
Dr. Anthony Fauci expresses “hopeful… cautious optimism” as signs emerge that the coronavirus curve may have begun to flatten. https://t.co/Q8n2OjgFVX pic.twitter.com/e3aTTehfes
— CNN (@CNN) April 12, 2020
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Meanwhile, more attention is being paid to several other European countries, including the Netherlands, where the number of confirmed coronavirus cases has topped 25,000, health authorities said on Sunday, with the number of deaths rising by 94 to 2,737. Belgium reported 1,629 new cases and 268 new deaths on Sunday, for a total of 29,647 cases and 3,600 deaths. Portugal reported 598 new cases of coronavirus and 34 new deaths, for a total of 16,585 cases and 504 deaths.
Yesterday, Sweden reported 77 new deaths and 544 new cases, bringing the country’s case total north of 10k to 10,151. Its death toll, meanwhile, is about to cross 1k. As time goes on, how things play out in Sweden offers an interesting contrast to the US and the rest of Europe.
While Japan deals with its resurgence, across Asia, media reports and governments are looking at Indonesia, which engaged in some short-lived denialism before finally acknowledging that the virus had arrived, as the weak link in the neighborhood. A riot in a prison in Indonesia’s North Sulawesi province where at least one guard is reportedly exhibiting COVID-19-like symptoms has highlighted the risk as prisoners in overcrowded jails take matters into their own hands to avoid being infected – a phenomenon that has also played out in Italy and China.
Finally, in an interview with the BBC, Microsoft founder Bill Gates said “we find ourselves in uncharted territories” after the international community failed to properly prepare for a pandemic. Gates has emerged as a major critic of government responses, saying very few countries warrant “an A” grade for their coronavirus responses.
Gates has also advocated a mandatory 10-week strict lockdown to eradicate the virus that would likely cause immense suffering among the poorest and most vulnerable among us.
Tyler Durden
Sun, 04/12/2020 – 20:44 - Lessons From the 1980 "Inflation" Virus: Transmission Chain Has To Be Broken For Successive Outcome
Lessons From the 1980 "Inflation" Virus: Transmission Chain Has To Be Broken For Successive Outcome
Submitted by Joseph Carson, former Chief Economist at Alliance Bernstein
As difficult it was to decide to shut down large segments of the economy in order to contain coronavirus it will be even trickier to decide when to end the lockdown. News that the coronavirus curve (i.e., the number of cases) may be flattening will only intensify the pressure on government leaders to relax restrictions on work-life and travel, as well as social and recreational gatherings.
There is a risk in removing government restrictions too early in a war against a virus. History shows it is essential that the “the chain of transmission” of the virus is severed as a second wave could prove to be even more damaging.
In 1980, government-imposed credit restrictions to kill the “inflation” virus. At that time, “inflation” was labeled as public enemy number one much like coronavirus is viewed today.
The decision to impose credit controls to attack the “inflation” virus literally “scared people away from the stores” (The Wall Street Journal, May 5, 1980) triggering the sharpest one-quarter decline in consumer spending in the post-war period.
The National Bureau of Economic Research (NBER), the official arbiter of dating economic cycles peaks and trough, viewed the sudden drop in business activity to be so severe it announced that the economy was in recession even before the official GDP data showed an actual contraction. That surprising announcement by NBER compelled the federal government and the Federal Reserve to abruptly end the credit-control program, only 90 days after it was first implemented.
Investors will be pleased to learn the removal of government restrictions on credit sparked a quick and powerful rebound in the economy. Real GDP posted back-to-back quarterly gains of nearly 8% annualized in Q4 1980 and Q1 1981. The entire decline in consumer spending and output loss of the short 6-month recession was recaptured.
However, investors should be alarmed to learn the chain of transmission of the “inflation” virus was not severed. Instead it was alive and well, ready to resurface once the economy rebounded.
The second wave of the “inflation” virus proved to be more damaging as it forced the Federal Reserve to implement broader and more stringent monetary constraints. A deeper and more protracted recession followed, lasting 18 months from the middle of 1981 to the end of 1982.
Looking back on the 1980 experience economic and policy experts voiced concern that not enough was done early on to break the chain of transmission for the “inflation” virus.
Federal Reserve Board Vice Chairman Frederick Schultz in testimony before Congress in late 1980 stated, “Now, with the benefit of 20/20 hindsight… I think there is a considerable risk that the underlying problems of the economy will be found to be even more intense once the period of credit controls has been ended…the quick-fix or the band-aid policy always looks attractive, but that is a cruel deception”. Mr. Schultz was right.
2020 recession like that of the 1980 recession is similar in that both are government-made, linked to a “contagious” virus, and involve a sudden stop in the economy. The difference is that the 1980 recession involved an economic virus versus today’s medical one.
As such, investors must realize the timing, scale and sustainability of any business rebound are not forecastable. Recovery depends on the coronavirus curve that has no economic properties and the success of medical science.
At this point, it would be best for the government officials to follow science and let the data determine the timing of the “on” switch for the economy. The last thing anyone wants if to have a medical expert testify before Congress in 6 months (like that of Mr. Schultz in 1980) and say “wish we’d done something more in the spring” to break the transmission chain.
Tyler Durden
Sun, 04/12/2020 – 20:30 - NYT Deletes Tweet, Stealth-Edits Article After Excusing Biden Sexual Misconduct
NYT Deletes Tweet, Stealth-Edits Article After Excusing Biden Sexual Misconduct
The New York Times, which tried to sabotage Supreme Court Justice Brett Kavanaugh’s career with months of baseless #MeToo allegations – not only downplayed Joe Biden’s well-documented history of unwanted physical contact with women on Sunday, they cast extreme doubt on a detailed sexual assault allegation by former Biden staffer Tara Reade.
The original article, which can be seen in the Wayback Machine reads: “No other allegation about sexual assault surfaced in the course of reporting, nor did any former Biden staff members corroborate any details of Ms. Reade’s allegation. The Times found no pattern of sexual misconduct by Mr. Biden, beyond the hugs, kisses and touching that women previously said made them uncomfortable.“
Which they also tweeted, and have since deleted:
The @nytimes has deleted this Tweet: pic.twitter.com/pdXclM6UwQ
— Benny (@bennyjohnson) April 12, 2020
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The current, stealth-edited version now reads: “No other allegation about sexual assault surfaced in the course of reporting, nor did any former Biden staff members corroborate any details of Ms. Reade’s allegation. The Times found no pattern of sexual misconduct by Mr. Biden.“
Reade filed a police report against Biden with the Washington D.C. police alleging that the former Vice President (and then Senator) forcibly penetrated her without consent in 1993. She does not reference Biden by name in the complaint, which the Biden campaign has strongly denied.
The Times, meanwhile, had the audacity to write: “Filing a false police report may be punishable by a fine and imprisonment.“
Remember the press spent a month essentially arguing that underage drinking was evidence that Kavanaugh committed sexual assault, but a long pattern of “hugs, kisses, and touching that women previously said made them uncomfortable” proves Biden’s innocence. pic.twitter.com/CPGr48o8nK
— (((AG))) (@AGHamilton29) April 12, 2020
Look at how the Times framed Kavanaugh and his accuser, Christine Blasey Ford – whose allegations that Kavanaugh sexually assaulted her at a gathering in the mid 1980s were refuted by every single person at the party.
I think what is frustrating about kavanaugh is not only assumption of guilt is they were trying to paint him as this frat boy that did whatever he wanted pic.twitter.com/PSqqIglahu
— UncleDickindeerstand (@Cincyfella) April 12, 2020
In short, “believe all women” unless they’re accusing a Democratic presidential candidate of sexual assault.
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Tyler Durden
Sun, 04/12/2020 – 20:05 - For First Time Ever, All 50 US States Now Under Major Disaster Declaration At Same Time
For First Time Ever, All 50 US States Now Under Major Disaster Declaration At Same Time
Authored by Jack Phillips via The Epoch Times,
President Donald Trump on Saturday approved a disaster declaration for Wyoming, meaning that all 50 states are under a major disaster declaration amid the CCP virus pandemic.
The declaration for the state comes about three weeks after the first disaster order in New York, the epicenter of the virus.
Non-state territories including the U.S. Virgin Islands, the Northern Mariana Islands, Washington, Guam, and Puerto Rico are all under disaster declarations. The only one that isn’t under such a declaration is American Samoa.
“Public Assistance Federal funding is available to the state, tribal and eligible local governments and certain private nonprofit organizations on a cost-sharing basis for emergency protective measures, including direct federal assistance under Public Assistance, for all areas in the state of Wyoming affected by COVID-19 at a federal cost share of 75 percent,” Trump’s declaration on Wyoming read.
It’s the first time a president has ever declared a major disaster in all 50 states at the same time, said deputy press secretary Judd Deere.
🚨With @realDonaldTrump’s declaration for WY, the President has now declared for the 1st time in history that a major disaster exist within all 50 states at once. The President continues to respond to the needs of every Governor to protect the health of all Americans. 🇺🇸 #COVID19
— Judd Deere (@JuddPDeere45) April 11, 2020
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“The President continues to respond to the needs of every Governor to protect the health of all Americans,” Deere wrote on Twitter on Saturday.
Wyoming Gov. Mark Gordon sought the declaration last week in a letter to Trump.
“Though Wyoming has not reached the dire situations of some states, this declaration will help us to prepare and mobilize resources when we need them,” Gordon said, according to news reports.
The United States, meanwhile, has surpassed Italy on Saturday as the country with the most deaths related to the CCP (Chinese Communist Party) virus pandemic, according to a running tally from Johns Hopkins University.
Despite the data, there have been indicators that the social distancing guidelines are working, said Trump on Friday.
“Nationwide, the number of new cases per day is flattening substantially, suggesting that we are near the peak and our comprehensive strategy is working,” he said during a White House briefing.
Trump added that he is now looking to create a taskforce that is comprised of doctors and business leaders aimed at reopening the U.S. economy.
Health authorities have urged Americans to avoid close contact with one another, use good hand-washing hygiene, and not leave their homes as much as possible. Symptoms of the potentially fatal disease include fever, cough, and shortness of breath, according to the Centers for Disease Control and Prevention.
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Support The Epoch Times’ independent journalism and donate a ‘Coffee’ now.
Tyler Durden
Sun, 04/12/2020 – 19:40 - Turkey's Interior Minister Resigns Over Coronavirus Curfew Chaos, Erdogan Rejects Resignation
Turkey's Interior Minister Resigns Over Coronavirus Curfew Chaos, Erdogan Rejects Resignation
After cynically urging Syrian refugees toward coronavirus-hit Europe, Turkey’s Interior Minister Suleyman Soylu announced on Twitter on Sunday that he was resigning from his post over the chaotic implementation of a two-day curfew in major Turkish cities to tackle the coronavirus outbreak.
The resignation followed Turkey’s announcement, late on Friday, of a weekend lockdown but in the brief time before it went into effect many people rushed out to buy food and drink in the country’s commercial hub Istanbul, a city of 16 million people, and other cities.
“Although in a limited period of time, the incidents that occurred ahead of the implementation of the curfew was not befitting with the perfect management of the outbreak process,” Soylu said in his statement.
— Süleyman Soylu (@suleymansoylu) April 12, 2020
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Soylu, who has held the post since August 2016, shortly after the failed staged coup against Erdogan, said the scenes that took place just following the declaration of the curfew on Friday night did not reflect a smooth implementation of policy. Soylu added that he had been proud to serve as interior minister and would remain loyal to Erdogan.
The lockdown decision was taken with good intention and aimed at slowing the spread of coronavirus, he said. The lockdown ended at 2100 GMT on Sunday, prompting questions why it was started in the first place, as a 48 hour lock down achieves absolutely nothing.
However, Soylu’s resignation was even shorter than Turkey’s curfew as just hours after the interior minister’s resignation announcement, President Erdogan rejected the resignation, sparking celebration among Turkey’s nationalists.
#Turkey’s Interior Min resigns, taking blame for botched curfew. Social media erupts with shock that a Turkish politician has actually taken responsibility. AKP rumour mill starts. Erdogan rejects resignation. Nationalists celebrate. As you were, Turkey. pic.twitter.com/PpRNB1EWju
— Mark Lowen (@marklowen) April 12, 2020
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If his resignation had been accepted by President Erdogan, Soylu would have been the second Turkish minister to leave his post since the coronavirus pandemic was declared. Transport Minister Mehmet Cahit Turhan was removed two weeks ago after the ministry drew criticism for holding a tender amid the outbreak to prepare to build a huge canal on the edge of Istanbul.
On Sunday, Turkey reported 97 more deaths related to the novel coronavirus, bringing the death toll to 1,198. The country also has nearly 57,000 confirmed cases since the first patient was diagnosed a little more than a month ago.
Tyler Durden
Sun, 04/12/2020 – 19:30 - When The World Stopped – Stunning Scenes From A Global Lockdown
When The World Stopped – Stunning Scenes From A Global Lockdown
Deaths breached the 100,000 mark on Friday, another grim milestone for the world engulfed in a pandemic.
More than a billion people across the world remain in quarantine as the global economy crashes into a depression in the second quarter. The OECD and WTO on Wednesday published two separate reports that both outline global economic activity has collapsed.
The OECD Leading Indicators show the global economy experienced a sharp decline in the last month.
The WTO shows world trade has plunged well below 2008 levels. One word: unprecedented.
As a result of quarantines, unemployment claims have rocketed higher in nearly every major developed and emerging market economy. Tens of millions of people have been laid off as streets, highways, shopping districts, and manufacturing hubs have become lifeless.
While words can only describe so much of a world in lockdown, Bloomberg has published a handful of pictures illustrating what the world looks like after a month of pandemic:
New York City
A lone pedestrian walks inside the Oculus, a transportation and shopping hub in Manhattan’s financial district on March 30. H/T Photographer Gabby Jones/Bloomberg Los Angeles
The usually busy 110 freeway on April 1. H/T Photographer Patrick T. Fallon/Bloomberg Paris
The Arc de Triomphe looms over an empty Champs Elysees and its shuttered luxury retailers on April 4. H/T Photographer Cyril Marcilhacy/Bloomberg Milan
Umbrellas outside closed cafes line a street leading to the Navigli canal system on April 8. Photographer H/T Francesca Volpi/Bloomberg Sao Paulo
The Municipal Market on April 8. H/T Photographer: Rodrigo Capote/Bloomberg Moscow
Police patrol a deserted Red Square on April 2. H/T Photographer: Andrey Rudakov/Bloomberg Jerusalem
The Old City on March 29. H/T Photographer: Kobi Wolf/Bloomberg Istanbul
An empty walkway inside the Grand Bazaar on March 25. H/T Photographer: Kerem Uzel/Bloomberg London
Banners fly outside closed luxury boutiques on New Bond Street on April 9. H/T Photographer: Simon Dawson/Bloomberg Toronto
Security guards are among the few people inside the Toronto Eaton Centre on March 25. H/T Photographer: Cole Burston/Bloomberg Madrid
Shuttered bars and tapas restaurants line a deserted street on March 16. H/T Photographer: Angel Navarrete/Bloomberg Mumbai
Men sit inside the closed Crawford Market on March 25. H/T Photographer: Dhiraj Singh/Bloomberg Lisbon
A pedestrian crosses a deserted street of usually crowded shops and cafes on March 22. H/T Photographer: Jose Sarmento Matos/Bloomberg It becomes evident that the world has ground to a halt in one of the fastest economic crashes ever. It remains to be seen if the recovery phase is V-shaped, U-shaped, or L-shaped.
More or less, we’re leaning towards an L-shaped recovery…
Tyler Durden
Sun, 04/12/2020 – 19:15 - Weimar America, Here We Come! Virus Hysteria Adds $10 Trillion To The National Debt
Weimar America, Here We Come! Virus Hysteria Adds $10 Trillion To The National Debt
Authored by Mike Whitney via The Unz Review,
There’s no doubt that the Coronavirus is a serious infection that can lead to severe illness or death. There’s also no doubt that ‘virus hysteria’ has been used for other purposes. Wall Street, for example, has used virus-panic to advance its own agenda and get another round of trillion dollar bailouts. In fact, it took less than a week to get the pushover congress to ram through a massive $2.2 trillion boondoggle without even one lousy congressman offering a peep of protest. That’s got to be some kind of record.
In 2008, at the peak of the financial crisis, Congress voted “No” to the $700 billion TARP bill. Some readers might recall how a number of GOP congressmen bravely banded together and flipped Wall Street “the bird”. That didn’t happen this time around. Even though the bill is three times bigger than the TARP ( $2.2 trillion), no one lifted a finger to stop it. Why?
Fear, that’s why. Everyone in congress was scared to death that if they didn’t rush this debt-turd through the House pronto, the economy would collapse while tens of thousands of corpses would be stacking up in cities across the country. Of course the reason they believed this nonsense was because the goofy infectious disease experts confidently assured everyone that the body-count would be “in the hundreds of thousands if not millions.” Remember that fiction? The most recent estimate is somewhere in the neighborhood of 60,000 total. I don’t need to tell you that the difference between 60,000 and “millions” is a little more than a rounding-error.
So we’ve had the wool pulled over our eyes, right? Not as bad as congress, but, all the same, we’ve been hoodwinked and we’ve been fleeced. And the people who have axes to grind have been very successful in taking advantage of the hysteria and promoting their own agendas. Maybe you’ve noticed the reemergence of creepy Bill Gates and the Vaccine Gestapo or NWO Henry Kissinger warning us that, “the world will never be the same after the coronavirus”.
What do these people know that we don’t know? Doesn’t it all make you a bit suspicious? And when you see nonstop commercials on TV telling you to “wash your hands”or “keep your distance” or “stay inside” and, oh yeah, “We’re all in this together”, doesn’t it leave you scratching your head and wondering who the hell is orchestrating this virus-charade and what do they really have in mind for us unwashed masses??
At least in the case of Wall Street, we know what they want. They want money and lots of it.
Have you looked over the $2.2 trillion CARES bill that Trump just signed into law a couple weeks ago? It’s pretty grim reading, so I’ll save you the effort. Here’s a rough breakdown:
$250 billion will go for the $1,200 checks that most of us will receive in a couple weeks.
And $250 billion will be provided for extended unemployment insurance benefits.
That’s $500 billion.
Working people will get $500 billion while Wall Street and Corporate America will get 3 times that amount. ($1.7 trillion)
And even that’s a mere fraction of the total sum because– hidden in the small print– is a section that allows the Fed to lever-up the base-capital by 10-to-1 ($450 billion to $4.5 trillion) which means the Fed can buy as many “toxic” bonds and garbage assets as it chooses.
The Fed is turning itself into a hedge fund in order to buy the sludge that has accumulated on the balance sheets of corporations and financial institutions for the last decade.
It’s another gigantic ripoff that’s being cleverly concealed behind the ridiculous coronavirus hype. It’s infuriating.
So here’s the question:
Do you think Congress knew that working people would only get a pittance while the bulk of the dough would go to Wall Street?
It’s hard to say, but they certainly knew that the economy was cratering and that $500 billion wasn’t going to put much of a dent in a $20 trillion economy. In other words, even if everyone goes out and blows their measly $1,200 checks on Day 1, we’re still going to experience the sharpest economic contraction on record, a second Great Depression.
Maybe they should have talked about that in congress before they voted for this trillion-dollar turkey? Maybe they should have thought a little more about how the money should be distributed: Should it go to the people who actually buy things, generate activity and produce growth, or to the parasite class that blows up the system every decade and drags the economy down a black hole? That seems like something you might want to know before you pass a multi-trillion dollar bill that’s supposed to fix the economy.
It’s also worth noting that the $5.8 trillion is not nearly the total amount that Wall Street will eventually get. The Fed has already spent $2 trillion via its QE program (to shore up the dysfunctional repo market) and Fed chair Jay Powell announced on Thursday that another $2.3 trillion in loans and purchases would be used to buy municipal bonds, corporate bonds and loans to small businesses. The allocation for small businesses, which falls under the, Main Street Lending Program, has been widely touted as a sign of how much the Fed really cares about struggling Mom and Pop businesses that employ the majority of working Americans. But, once again, it’s a sham and a boondoggle. The program is on-track to get $600 billion funding of which the US Treasury will provide the base-capital of $75 billion. The rest will be levered-up by 9-to-1 by the Fed, which means it’s just more smoke and mirrors.
What readers need to realize is that the Treasury has accepted the credit risk for all of the loans that default. In other words, the American people are now on the hook for 100% of all of the loans that go south, and there’s going to be alot of them because the banks have no reason to find creditworthy borrowers. They get a 5% cut off-the-top whether the loans blow up or not. And, that, my friend, is how you incentivize fraud which, as Bernie Sanders noted, “is Wall Street’s business model.”
It also helps to explain why Trump has repeatedly rejected congressional oversight of the various bailout programs. He’s smart enough to know a good swindle when he sees one, and this one is a corker. The government is essentially waving trillions of dollars right under the noses of the world’s most ravenous hyenas expecting them not to act in character. But of course they will act in character and hundreds of billions of dollars will be siphoned off by scheming sharpies who figure out how game the system and turn the whole fiasco into another Wall Street looting operation. You can bet on it.
So, what is the final tally?
Well, according to Trump’s chief economic advisor, Larry Kudlow, the first bailout installment is $6.2 trillion (after the Fed ramps up the Treasury’s contribution of $450 billion.). Then there’s the $2.3 trillion in additional programs the Fed announced on Thursday. Finally, the Fed’s QE program adds another $2 trillion in bond purchases since September 17, when the repo market went haywire.
Altogether, the total sum amounts to $10.5 trillion.
You know what they say, “A trillion here, a trillion there, pretty soon you’re talking real money.”
Of course, no one on Capitol Hill worries about trivialities like money because, “We’re the United States of America, and our dollar will always be King.” But there’s a fundamental flaw to this type of thinking. Yes, the dollar is the world’s reserve currency, but that’s a privilege that the US has greatly abused over the years, and it’s certainly not going to survive this latest wacky helicopter drop. No, I am not suggesting the US would ever default on its debt, that’s not going to happen. But, yes, I am suggesting that the US will have to repay its debts in a currency that has lost a significant amount of its value. You don’t have to be Einstein to figure out that you can’t willy-nilly print-up $10 or $20 trillion dollars without eroding the value of the currency. That’s a no-brainer. Central bankers around the world are now looking at their piles of USDs thinking, “Hmmm, maybe it’s time I traded some of these greenbacks in for a few yen, euros or even Swiss francs?”
So how does this end? Can the Fed continue to write trillion dollar checks on an account that is already $23 trillion overdrawn? Will Central banks around the world continue to stockpile dollars when the Fed is printing them up faster than anyone can count? And what about China? How long before China realizes that US Treasuries are grossly overvalued, that US equities markets are unreformable, that the dollar is backed by nothing but red ink, and that Wall Street is the biggest and most corrupt cesspit on earth?
Not long, I’d wager. So, how does this end? It ends in a flash of monetary debasement preceded by a violent and destabilizing currency crisis. It’s plain as the nose on your face. The Fed knows that when a nation’s sovereign debt exceeds 100% of GDP, “there’s almost no mathematical way to service that debt in real terms.” Well, the US passed that milestone way-back in 2019 before this latest drunken spending-spree even began. It’s safe to say, we’ve now entered the financial Twilight Zone, the Land of No Return. If we add the Fed’s bulging balance sheet to the final estimate, (after all, it’s just another shady Enron-type Special Purpose Vehicle) the national debt will be somewhere north of $33 trillion by year-end, which means that Uncle Sam will be the greatest credit risk on Planet Earth. Imagine how jaws will drop on the day that Moodys and Fitch slash the ratings on US Treasuries to Triple B “junk” status. That should turn a few heads.
So what can we expect in the months to come?
First, the economy is going to slip into a deflationary period as people get back to work and slowly resume their spending.
But once demand picks up and the Fed’s liquidity starts to kick in, the economy will rebound sharply followed by steadily rising prices.
That’s the red flag that will signal a weakening dollar.
Similar to 1933, when Roosevelt took the U.S. off the gold standard and printed money like crazy, economic activity picked up but the value of the dollar dropped by 40%.
A similar scenario seems likely here as well.
Economist Lyn Alden Schwartzer summed it up like this in an article at Seeking Alpha:
“One of the common debates is whether all of this debt, counteracted by a tremendous monetary expansion by the Federal Reserve in response, will cause a deflationary bust or an inflationary problem…..Fundamentally, evidence points to a period of deflation due to this global shutdown and demand destruction shock, likely followed in the coming years by rising inflation….
In the coming years, the United States will be effectively printing money to fund large fiscal deficits, while also having a large current account deficit and negative net international investment position. This is one of the main variables for my view that the dollar will likely decrease in value relative to a basket of foreign currencies in the coming years….” (“Why This Is Unlike The Great Depression”, Seeking Alpha)
So, after decades of lethal low interest rates, relentless meddling and gross regulatory malpractice, the Fed has led us to this final, fatal crossroads: Inflate or default.
From the looks of things, the choice has already been made. Wiemar America, here we come!
Tyler Durden
Sun, 04/12/2020 – 18:50 - "The Cut Is Just 4.3MMbpd"- Goldman Throws Up Over OPEC+ Deal, Sees Oil Dropping Back To $20
"The Cut Is Just 4.3MMbpd"- Goldman Throws Up Over OPEC+ Deal, Sees Oil Dropping Back To $20
Earlier today, when summarizing the terms of the “historic” OPEC+ cut, which was presented theatrically as a
10MMb/d9.7MMb/d by OPEC+ and all the oil bulls (including Citi’s Ed Morse who may have been acting in his capacity as OPEC advisor instead of Citi commodity analyst, when he immediately raised his oil price target) we said “OPEC Reaches “Historic” Deal To Cut Oil Production As Mexico Wins “Mexican Standoff” With Saudis… But It’s Not Enough” because “in a world where there is now up to 36MMb/d less oil demand, the world’s oil producers have agreed to cut production by… 9.7MMb/d” and added that “the real cuts when ignoring accounting gimmicks, amount to just over 7mmb/d, still a record amount, but hardly enough to put an even modest dent in today’s massively oversupplied market.”As a reminder, this is what OPEC+ agreed on, with Mexico an outlier after winning the “Mexican standoff” with Saudi Arabia which would grant the country an exemption from the deal, in cutting just 6% of production, or 100Kb/d, instead of the 23% agreed by everyone else (whether they actually do cut production by 23% is an entirely different matter, now that everyone will feel slighted by the Mexican special treatment and look to cheat by maximizing their output, especially if the price of oil does not rebound).
With that in mind, moments ago Goldman’s commodity analyst Damien Couravalin published his latest OPEC+ deal post-mortem, in which he agreed with our take (and even title) and in a report titled “A historic yet insufficient cut”, he writes that “taking into account updated core-OPEC production guidance from April, this 9.7 mb/d “headline” deal represents a 12.4 mb/d cut from claimed April OPEC+ production (given the Saudi, UAE, Kuwait ongoing surge) but an only 7.2 mb/d cut from 1Q20 average production levels.“
Precisely as we said 4 hours earlier.
Doing the math, the Goldman analyst calculates that “the OPEC+ voluntary cut would only lead to an actual 4.3 mb/d reduction in production from 1Q20 levels” adding that “based on our updated oil balances, such OPEC+ voluntary cuts would still require an additional 4.1 mb/d cut in May production at the binding storage capacity constraint” which means that “at the 35% compliance level outside of core-OPEC, the necessary production cuts need would need to be 0.5 mb/d larger.”
Then, having been skeptical about the deal all along, Couravlin adds that “today’s agreement leaves the voluntary cuts as still too little and too late to avoid breaching storage capacity, ensuring that low oil prices force all producers to contribute to the market rebalancing” which prompts the Goldman analyst to reiterate his view that “inland crude prices will decline further in coming weeks as storage capacity becomes saturated and expect further weakness in WTI timespreads and crude prices in coming weeks, as already presaged on Friday, with downside risks to our short-term $20/bbl forecast.“
Judging by the swift and violent drop in oil once the market reopened at 600pm ET, following a very brief kneejerk move higher the market agrees.
His full note is below:
A historic yet insufficient cut
OPEC+ members have agreed to cut production by a record large 9.7 mb/d from May 1. The agreement came after settling over a smaller contribution from Mexico of only 0.1 mb/d instead of the 0.4 mb/d initially planned. Taking into account updated core-OPEC production guidance from April, this 9.7 mb/d “headline” deal represents a 12.4 mb/d cut from claimed April OPEC+ production (given the Saudi, UAE, Kuwait ongoing surge) but an only 7.2 mb/d cut from 1Q20 average production levels.
G20 ministers appear to have also committed to output reductions, with headlines today of potentially 3.7 mb/d output cuts by the US, Brazil and Canada or even 5 mb/d mentioned on Friday. These are very unlikely to be voluntary cuts but instead set to occur over time and due to market forces (ie. low prices) given the significant geological and regulatory hurdles in reducing production (well illustrated by Mexico’s refusal to cut by a reported 0.4 mb/d following its 50% increase in upstream capex since 2018), with the Iranian minister adding that they could take a year. We therefore do not count these as voluntary cuts in our oil balance.
Optimistically, assuming full compliance from core-OPEC and 50% compliance by all other participants already in May (vs. 35% achieved in Jan/Feb-19 despite the new cut being 8x larger), the OPEC+ voluntary cut would only lead to an actual 4.3 mb/d reduction in production from 1Q20 levels. Based on our updated oil balances, such OPEC+ voluntary cuts would still require an additional 4.1 mb/d cut in May production at the binding storage capacity constraint. At the 35% compliance level outside of core-OPEC, the necessary production cuts need would need to be 0.5 mb/d larger.
Given the difficulty for most producers outside of core-OPEC to implement large cuts, today’s agreement leaves the voluntary cuts as still too little and too late to avoid breaching storage capacity, ensuring that low oil prices force all producers to contribute to the market rebalancing. Ultimately, this simply reflects that no voluntary cuts could be large enough to offset the 19 mb/d average April-May demand loss due to the coronavirus. We therefore reiterate our view that inland crude prices will decline further in coming weeks as storage capacity becomes saturated and expect further weakness in WTI timespreads and crude prices in coming weeks, as already presaged on Friday, with downside risks to our short-term $20/bbl forecast.
The reduction in seaborne exports from OPEC+ producers will however likely lead Brent prices to outperform as the cut in seaborne exports (especially from the record April Saudi/UAE export program) will ease the pull on the global VLCC fleet, freeing vessels to be used for floating storage and capping freight rates. We therefore expect Brent prices to outperform WTI prices in coming weeks. The announcement of today’s cuts may also provide some support to long-dated prices as the expected price support later this year creates a disincentive for producers to add new hedges and instead likely incentivize them to monetize existing ones (a buying flow of forwards)
Finally, Reuters reported that the IEA is set to announce this week oil purchases into SPR that would contribute towards effective oil output cuts. For example, a 2.5 mb/d SPR purchase announcement would help square the “20 mb/d cut” stated in the OPEC+ draft statement (pegging OPEC+ at 12.5 mb/d cut and G20 at 5 mb/d). Importantly, we do not view such SPR purchases as changing our supply-demand balance since we estimate that combined commercial and government storage capacity would be reached by late April, with 4 mb/d of production shut-ins required even before the OPEC+ deal starts. Such a high SPR purchase pace would further likely be logistically difficult as strategic reserves are designed for fast drawdowns not fills, and typically operate at high utilization levels with low spare capacity.
For once, Goldman was right:
Tyler Durden
Sun, 04/12/2020 – 18:46 - Drone View Of Manhattan Under Lockdown, Now A Ghost Town
Drone View Of Manhattan Under Lockdown, Now A Ghost Town
The latest aerial view of Manhattan in lockdown is riveting. YouTube account Mingomatic flew a drone over the island on Sunday morning (April 12) and found a city straight out of I Am Legend.
The video starts with a broad view of Manhattan from the sky, then cuts to ground level scenes. The drone flies around some of the highest-trafficked areas, such as the Financial District, Grand Central Terminal, Rockefeller Center, Times Square, Radio City, and Chinatown, to only find just a couple of cars and less than a dozen people in the entire 5-minute video. The video ends with an impressive tilt shot of the New York Stock Exchange with no one on the street.
Lifeless Manhattan illustrated in ten images:
Charging Bull:
NYSE Exchange:
West 50th Street:
West 48th Street:
Grand Central Terminal:
Chinatown:
Globe Sculpture at Columbus Circle:
Rockefeller Center:
Rainbow Room NBC Studios:
Empire State Building:
Here are Mingomatic’s other impressive drone shots detailing how NYC and Jersey have transformed into ghost towns:
Tyler Durden
Sun, 04/12/2020 – 18:25
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