- Le Pen Warns Macron "Danger Of Civil War" Looms If He Doesn't Handle Islamist Problem
Le Pen Warns Macron “Danger Of Civil War” Looms If He Doesn’t Handle Islamist Problem
The French government and much of the public has reacted with outrage after another open letter issued by military personnel has warned that France is headed for “civil war” if it doesn’t handle its Muslim extremism problem.
The controversy was further stoked when Marine Le Pen – commonly dubbed by mainstream media as France’s outspoken “leader of the far-right” – once again showed support for the letter by agreeing on the “danger of a civil war” in an apparent rallying of her base around the message ahead of next April’s election where they’ll seek to take on President Emmanuel Macron. Clearly a significant bulk of officer and enlisted military members agree with her stark assessment.
Marine Le Pen speaking to military personnel, via AFP Bloomberg noted that “While Le Pen has consistently spoken out about tightening migration and the need to be tougher on Islamism, her recent comments are perhaps the most controversial to date.”
The Macron government condemned the second letter issued Sunday as “crude” – which unlike the first letter written by 20 retired generals and which included signatories by some 1,000 currently serving soldiers – had anonymous authorship:
The letter, posted on the website of the rightwing Valeurs Actuelles magazine late Sunday, echoes the one published by the same publication last month but appears to have been written by an unknown number of younger troops still in active service.
Far-right leader Marine Le Pen said France was in danger of a civil war as it prepared to tackle President Emmanuel Macron in next April’s election.
At least 200,000 people had signed the letter by the time Le Pen commented on it. In particular Le Pen while at a campaign event on Monday had promoted the new letter as a “clear” assessment of the country’s inability to combat the growing tide of Islamism.
“There is always the danger of civil war,” she had said, which her opponents were quick to dimiss, and are calling out the statements as far-fetched and outrageous.
Among more controversial highlights of the letter include the line: “If a civil war breaks out, the military will maintain order on its soil because it will be asked to do so,” it said while addressing Macron, according to Bloomberg. It said the active duty signatories have long been “fighting Islamism, to which you are making concessions on our soil.”
Read a translation of the full letter below…
Active duty French soldiers wrote a second letter warning their leaders about civil war in France. You can find my translation and analysis here. https://t.co/5Qhg4Q7clt
— Alister Riviere (@RiviereAlister) May 10, 2021
https://platform.twitter.com/widgets.js
“If nothing is undertaken, laxity will continue to spread inexorably in society, causing, in the end, an explosion and the intervention of our comrades in action in a perilous mission of protecting our civilisational values and safeguarding our compatriots in the national territory,” the letter said.
“There is no more time for procrastination, otherwise tomorrow the civil war will put an end to this growing chaos, and the dead, for which you will bear responsibility, will number in the thousands.”
It also calls out French leaders’ “hatred” of the country’s own history (a reference to the ongoing debate over French colonialism) while at the same time making accommodating statements on Islamic extremism.
And all of this comes after the shocking street beheading of 47-year old teacher Samuel Paty, who Muslim students and parents had accused of showing derogatory cartoons of Islam’s founder Muhammad to his students. France and other European countries have since been rocked by similar Islamist shootings and attacks, including against Jewish neighborhoods.
Tyler Durden
Wed, 05/12/2021 – 02:45 - UK Plans To Require Voter ID To Ensure Election Integrity
UK Plans To Require Voter ID To Ensure Election Integrity
Authored by Alexander Zhang via The Epoch Times,
The UK government plans to introduce requirements for voters to show photographic ID when casting ballots, in order to ensure the integrity of elections.
The Electoral Integrity Bill, which requires voters to show identification before being issued with a ballot paper in a polling station, is part of the Conservative government’s legislative agenda set out in the Queen’s Speech on Tuesday.
“We think showing identification to vote is a reasonable approach to combat the inexcusable potential for voter fraud,” Prime Minister Boris Johnson’s official spokesman said.
“Everyone wants to maintain the integrity of our democracy and this would bring us in line with not only Northern Ireland but countries such as Canada, many European countries including France, the Netherlands, Sweden—all require a form of identification to vote,” the spokesman said.
The main opposition Labour party accused the government of trying to make it harder for people to vote.
Shadow Justice Secretary David Lammy said on Twitter that the government is prioritising “voter suppression” and “disenfranchising millions through Voter ID.”
Lisa Nandy, Labour’s shadow foreign secretary, told Sky News that the government should defend the UK’s democracy by taking action against Russian interference.
Asked if Labour would support plans to require voter IDs, she said: “We have got to defend our democracy robustly but I just think it’s really bizarre coming from this government that they have made it so much more difficult for people in this country to vote over recent years, but they have taken absolutely no action to defend our democracy from attacks overseas.”
The Electoral Integrity Bill has also come under attack from U.S. civil rights groups.
According to The Guardian, The American Civil Liberties Union (ACLU), Southern Poverty Law Center (SPLC), and Common Cause said the requirement for voter ID “amount to Republican-style voter suppression and are likely to erode faith in the democratic process.”
Voters casting their vote in polling stations in Great Britain currently do not need to present any form of identification before receiving a ballot paper, but identification has been a requirement in Northern Ireland, also part of the UK, for nearly 40 years.
Voter ID requirements were introduced in Northern Ireland after the 1983 General Elections following concerns about the extent of voter fraud in the British province. Since 2003 photographic ID has been required.
According to a briefing paper for the House of Commons, “There has been no evidence that the ID requirements in Northern Ireland have affected turnout.”
Since 2014 the Electoral Commission has recommended that photo ID should be required in the rest of the UK.
The Commission recommends that any system of voter ID introduced in Great Britain should mirror that in Northern Ireland, where voters without access to approved photo ID can apply for a free photographic electoral ID card from their local council.
Tyler Durden
Wed, 05/12/2021 – 02:00 - How 'Woke' May Be Leading Us To Civil War
How ‘Woke’ May Be Leading Us To Civil War
Authored by Roger Simon via The Epoch Times,
The other day, I wrote that “woke” was the new conformism.
It is, of course, but I undersold it. It’s much more than that and more dangerous.
As Tal Bachman notes at Steynonline, it’s now our state religion, a state religion in a country that – constitutionally and for good reason – isn’t supposed to have one.
But “Wokism” is yet more than that, too. It’s a mass psychosis similar to many that have arisen throughout history when the masses followed leaders who, in their zeal or self-interest, took them to disastrous ends.
A good example was when the Dominican friar Girolamo Savonarola – in a 1497 version of “cancel culture” – swept up everything secular in Florence from some of the most extraordinary paintings and sculpture of all time to the works of Boccaccio and burned them in the so-called Bonfire of the Vanities.
Being Jewish, I am also reminded of the bizarre tale of Sabbatai Zevi, the 17th-century Sephardic rabbi who proclaimed himself the long-awaited true messiah of the Jews, garnered thousands of followers, and then ended up leaving them completely in the lurch when he converted to Islam. (Interestingly, Bachman writes that “wokism” resembles Islam structurally.)
Closer to our time, the great Italian director Federico Fellini, in his film “La Dolce Vita” (1960), shows us what seems like hundreds of people rushing about, tears streaming, trampling each other, believing reports that the Madonna has been sighted. As the scene progresses, the crowd grows, with more and more people convinced of the sighting.
Of course, what Fellini documents is more or less harmless—not so “woke.” This psychosis has a political dimension and the capability of changing a society, which it has already done.
Face Excommunication
“Woke” gains adherents much in the manner of “est”—the cult-like Erhard Seminars Training—that I attended in the 1970s at the behest of a movie producer interested in making a film about it. (It never happened.)
If you’re too in, you’re out.
For est, several hundred people sat in a large conference room listening to the “training” for hours under instructions not to get up, even to go to the bathroom, until they raised their hands signaling they “got it” (i.e., effectively joined the cult). Nature’s calling being what it is, most eventually did.
Although operationally similar, “woke” is exponentially more perilous than the now-defunct est training. Our position in society, our livelihoods, and our children’s educations and futures are being held over our heads, not our mere use of a restroom.
An iron-fisted, ideologically extreme minority has our country under its thumb—play along or face ex-communication. This is stronger than anything in our history and almost identical to what we see and have seen in totalitarian countries.
It’s a psychosis approaching mass hallucination.
In Franco’s Spain, they shouted, “Viva la muerte!” (“Long live death!”) Here we are asked to proclaim just as loudly “Black Lives Matter,” to display signs saying as much on our lawns, although we never thought otherwise and always thought (naively, we are told) that all lives mattered.
All key aspects, most parts of them anyway, of our society “get it” as they did in est (i.e., now believe in ”woke”) or, yet more ominously, cynically say they do—the media, the corporations (“Better woke than broke!”), the government bureaucracy, the Democratic Party, the Department of Justice, the FBI, the military (yikes!), entertainment, the university system, the K–12 system, the medical community, the scientific community (incredibly), the religious community (sadly), and on and on.
All, to one extent or another, believe in “woke” except—the people.
Most of the people anyway.
Most of what used to be called the common men (or women) in the street roll their eyes at “woke”—including even some silent, but browbeaten, Democrats—and do their best to move on, although many realize that “woke” and its sister “social justice” are in essence euphemisms for an ideology far more totalitarian than any ever in control of this country, communism.
Rebellion Brewing
How long can this gaping dichotomy continue?
How long before they stop rolling their eyes?
A rebellion against “woke” is brewing, particularly in red states, some of which are banning or have already banned critical race theory in their schools, among other pushbacks. (Kudos to Rep. Mark Green, Republican of Tennessee and Iraq War veteran, for introducing legislation to block critical race theory training at U.S. military academies.)
But will that be enough against a federal government that lives and breathes this evil ideology and that is essentially governed by a homegrown politburo—the thought that Biden acts by himself is ludicrous—determined to impose it?
As this imposition increases, the “contradictions,” as the Marxists would say, are heightened.
What the extremist ideology of “woke” actually provokes is talk of—and not just talk—secession and even civil war.
Few of us have heard anything like that in our lifetimes. But now it’s real. We have been driven apart as never before. We have been awakened indeed.
Anything can happen and some of us, who would never have considered anything like secession and civil war, suddenly do—highly disturbing to us as those thoughts may be.
So why do we even tolerate “woke”?
Bachman gives us a quotation from Austrian philosopher Karl Popper that is remarkably apposite for our times:
“Unlimited tolerance must lead to the disappearance of tolerance. If we extend unlimited tolerance even to those who are intolerant, if we are not prepared to defend a tolerant society against the onslaught of the intolerant, then the tolerant will be destroyed, and tolerance with them.”
From Antifa to BLM (whose leader apparently identifies with the mass murderer Chairman Mao) to the willfully blind talking heads of left-wing cable TV, no one is as intolerant as the ”woke” folks. They break all domestic records in that regard.
Time to stop tolerating them.
Tyler Durden
Tue, 05/11/2021 – 23:25 - China Calls UN Planned Event On Xinjiang "Total Blasphemy"
China Calls UN Planned Event On Xinjiang “Total Blasphemy”
China is angrily boycotting and urging the banning of a planned United Nations event because it will highlight human rights and China’s treatment of Uyghur Muslims in Xinjiang.
The event will be held virtually on Wednesday, and is sponsored by the United States, Germany, and Britain. China’s foreign ministry spokeswoman Hua Chunying issued a hugely provocative statement Monday, saying “This is total blasphemy against the United Nations.”
Image via Xinhua “The US has banded up with several countries, abused the United Nations’ resources and platform, and smeared and attacked China to serve it’s own interests,” she said at a daily briefing Monday. She urged UN member nations to not attend the virtual event which she further said is an insult to the institution.
China’s UN mission issued a simultaneous rejection of the planned UN meeting, “We trust the member states will see through this political scheme… and choose to reject it,” it said. “The US and other co-sponsors are obsessed with fabricating lies and plotting to use Xinjiang-related issues to contain China and create mess in China.”
Beijing has long sought to combat an avalanche of Western media stories highlighting the network of labor and communist-run ‘reeducation’ centers for China’s minority Muslim population. Chinese officials have defended what they tend to call “vocational centers” which are “necessary” to combat Islamic extremism.
It should be remembered that China has for years boasted of its outsized monetary contributions to the United Nations, particularly with regard to its peacekeeping mission, and also being a major contributor of troops.
Detention facility in the Kunshan Industrial Park in Artux in western China’s Xinjiang region, via AP. Currently, China is the second-largest funder of the UN’s peacekeeping mission at 15% of the total budge, behind the United States (at 27%).
Like with its influential role within the World Health Organization (WHO), Beijing probably expects more quid pro quo type acknowledgement when it comes to the issues the UN highlights.
Tyler Durden
Tue, 05/11/2021 – 23:05 - Bovard: Biden's "America The Beautiful" Vision Ignores Feds' Dreadful Record
Bovard: Biden’s “America The Beautiful” Vision Ignores Feds’ Dreadful Record
Authored by James Bovard via The American Institute for Economic Research,
Will Biden’s “America the Beautiful” program save America’s environment? On January 27, President Joe Biden issued an executive order proclaiming “the goal of conserving at least 30 percent of our lands and waters by 2030.”
That target would require almost tripling the amount of land under government restrictions – an area twice the size of the state of Texas. Last week, the Biden administration released a 22-page “America the Beautiful” vision statement short on details but overflowing with bromides including the following gem: “The road to a full recovery remains steep, but President Biden is determined to lead America to new heights.”
Biden has not yet specified which provision of the Constitution entitles the president to proclaim national land use goals. Regardless, he is reaping applause for pledging to fight climate change, protect biodiversity, expand parkland, and other courageous positions. Biden is launching the initiative regardless of the feds’ own dreadful environmental record. As law professor Jonathan Turley observed, “the government remains the nation’s premiere environmental felon.”
But everything will be different under Biden, right? His plan was jointly developed by the Commerce, Interior, and Agriculture Departments. Gina McCarthy, Biden’s senior climate change advisor, proclaimed, “This is the very first national conservation goal we have ever set as a country.”
However, much of the plan resembles what the U.S. Department of Agriculture (USDA) has claimed to be achieving for almost a century.
Federal agricultural policy offers stark lessons on the folly of trusting politicians with the environment. Since Franklin Roosevelt’s New Deal, farm policymakers have routinely portrayed the private sector as inherently destructive to the environment. Secretary of Agriculture Henry Wallace declared in 1934: “Probably the most damaging indictment that can be made of the capitalistic system is the way in which its emphasis on unfettered individualism results in exploitation of natural resources.”
But federal policy has been devoted to perpetually inflating crop prices regardless of damage to the environment or the economy. In 1936, the Supreme Court struck down the Agricultural Adjustment Act (AAA), which boosted crop prices by paying farmers to idle land, as unconstitutional. A few weeks after the Supreme Court ruling, Congress enacted the Soil Conservation and Domestic Allotment Act to pay farmers for reducing their acreage of “soil-depleting” crops – which by amazing coincidence turned out to be the same crops government planners sought to restrict. Paying farmers purportedly to conserve soil was much more politically defensible than paying farmers not to work.
Politicians continued to set price supports far above market levels, causing crop surpluses that the government struggled to hide, dump, or suppress. In 1956, the Eisenhower administration launched the Soil Bank to pay for long-term acreage reduction. The program quickly flopped; Time magazine commented that it had “once more proved that, barring police-state controls, farmers will always outsmart bureaucrats.” The Soil Bank was abolished in 1965.
In the 1970s and early 1980s, the USDA earned the nickname, “Uncle Sam, Super Sodbuster.” Between 1977 and 1982, almost 4 million acres of relatively low-quality land were plowed up. Many of the newly plowed acres were born-again cropland that the USDA paid farmers to retire into grassland in the 1940s in response to the Dust Bowl. USDA Secretary John Block complained in 1984 that federal farm programs “encouraged farmers to tear up the cover crop on erodible soil ahead of schedule to provide a crop history” to collect subsidies. Deputy Assistant Secretary Richard Siegel observed that “there is a direct connection between the degradation of the fragile soil and the wheat price supports.”
Rather than fixing the problem by ending subsidies that rewarded farmers for plowing up fragile land, Congress instead created a new subsidy program to pay farmers not to plant. The Conservation Reserve Program, launched in 1985, paid farmers to idle tens of millions of acres of farmland for ten years. The CRP often paid double or triple the prevailing local rental rate to reward farmers for shutting down their farms. In Missouri, the CRP disrupted land values so badly that rocky, craggy ground became worth more than good farmland. Though farmland mortgages are routinely stretched out over 30 years, USDA’s ten annual CRP rental payments exceeded the total value of the land for over half of all CRP land. The CRP became an early retirement program for many farmers, allowing them to shut down their businesses and move to Florida. Most of the land enrolled in the CRP could have been farmed with little or no environmental harm.
The CRP ravaged the economies in much of rural America. Sen. Kent Conrad (D-ND) complained that the CRP has “absolutely wiped out small town after small town as we took land out of production.” A 1995 University of Minnesota study concluded that USDA acreage-idling programs such as the CRP had directly reduced rural population by one-third since 1950. The CRP hurt aspiring young farmers in many areas by creating a comparative shortage of farmland and artificially inflating rent.
The Clinton administration believed the solution to CRP’s problems was to vastly expand the program. In 1997, the USDA announced that most of the cropland in the United States was in such bad shape that the government would consider paying to shut it down. Secretary of Agriculture Dan Glickman bragged, “This is the most profound conservation program in the history of the United States of America.” The Associated Press inadvertently captured the new policy’s irony: “Up to 240 million acres, two-thirds of the nation’s farmland, will be eligible for the Conservation Reserve Program under the new rules, which are intended to target the most environmentally sensitive land.” How much targeting occurred if most of the cropland in the country was eligible? But that was typical of how farm programs were designed to maximize the number of handout recipients. Kendell Keith, president of the National Grain and Feed Association, said that the USDA “grossly exaggerated” the number of highly erodible acres it enrolled in the CRP and blamed the program for “the 15 percent decline in U.S. wheat export market share.”
Any marginal environmental benefit the CRP conveyed was swamped by the perverse incentives of other federal policies. A 2007 Government Accountability Office report found that tens of millions of acres of fragile grasslands had been converted to cropland in the prior decades thanks to lavish crop subsidies. GAO concluded, “Farm program payments provide significant incentive to convert grassland to cropland because they increased the expected profitability of farming while lowering the associated risks.” Many farmers sodbusted poor-quality grasslands solely to qualify for federal disaster or crop insurance payments when their crops failed. Some farmers plowed worthless land, seeded from an airplane, and collected government payments when the crop inevitably failed.
Politicians’ pious prattle about conserving fragile grasslands was irrelevant compared to the impact of federal ethanol mandates, which sent corn prices through the roof. Farmers planted 14 million more acres of corn in 2007 than in 2006. By 2016, almost half the corn crop was devoted to ethanol – which remained politically popular even though it boosts smog, damages gasoline engines, and sows starvation in poor nations by driving up food prices.
As part of the “America the Beautiful” campaign, the Biden administration is expanding the Conservation Reserve Program. USDA Secretary Tom Vilsack declared, “With CRP, the United States has one of the world’s most successful voluntary conservation programs.” But Vilsack, a former Iowa governor, is one of the biggest ethanol zealots in the land, who portrays it as aggie holy water. The Biden administration is expected to mandate greater use of ethanol in fuel, thereby likely spurring more grassland conversion to cropland regardless of the administration’s rhetorical emissions.
Property and Environment Research Center president Brian Yablonski labeled Biden’s “30 by 30” plan as “the president’s eco moonshot.” Many farmers and other rural Americans fear being in the moonshot’s crosshairs. Sen. Roger Marshall (R-KS) said, “this is the No. 1 emotional issue out there… You talk about upsetting people, start messing with their property rights.” Rep. Pete Stauber, (R-MN), warned that “Biden’s 30 by 30 agenda means further extending federal control into our way of life.”
Biden’s “30 by 30” program may be another in a long series of command-and-control interventions that presumes the feds must forcibly intervene to prevent landowners from committing economic suicide. But private owners have a much better record of caretaking land than does the U.S. Forest Service, the Bureau of Land Management, or other bureaucratic monoliths.
Biden’s “30 by 30” will likely become simply another pork barrel environmental program which deluges their friends and donors with subsidies. But there is no reason to expect “America the Beautiful” to be less of a debacle than FDR’s farm programs, Eisenhower’s Soil Bank, or the Conservation Reserve Program. If political hot air was all that was required to achieve “America the Beautiful,” the United States would have become paradise long ago.
Tyler Durden
Tue, 05/11/2021 – 22:45 - (Do Not) Let The Games Begin!
(Do Not) Let The Games Begin!
Could Japan still cancel the Tokyo Olympics over COVID?
As Statista’s Felix Richter notes, recent comments from Prime Minister Yoshihide Suga have driven speculation that the Summer Games could be called off. As COVID-19 infections rise in Japan, public support for the Games continues to drop.
Just around 70 days ahead of the Games’ opening date, a poll conducted by TBS News found that 65 percent of Japanese wanted the Games cancelled or postponed again, with 37 percent voting to scrap the event altogether and 28 percent calling for another delay.
Japan has extended the state of emergency in Tokyo and three other areas until the end of May and is struggling to contain a surge of COVID-19 cases, raising questions about whether the Games should go ahead. Japan’s vaccination rate is also the lowest among wealthy nations.
The Olympic Games, which were already delayed by a year due to the pandemic, are set to open on July 23, with the International Olympic Committee (IOC) and organisers insisting that measures will be put in place to ensure the safety of athletes and visitors.
As the following chart shows, the Summer Olympics have only been cancelled three times in the modern era dating back to 1896.
You will find more infographics at Statista
The 1916 games in Berlin fell victim to World War I and the 1940 and 1944 games, scheduled to be held in Helsinki and London, respectively, were cancelled due to World War II. Interestingly, the 2016 Rio games were also clouded by a health crisis, as many athletes refused to participate due to the ongoing outbreak of the Zika virus.
Tyler Durden
Tue, 05/11/2021 – 22:25 - Penn State Administrator Who Failed To Report Sandusky Sex Crimes With Minors Received $330,699 Public Pension
Penn State Administrator Who Failed To Report Sandusky Sex Crimes With Minors Received $330,699 Public Pension
By Adam Andzejewski of OpenTheBooks.com, submitted by RealClearPolicy.com,
In 2001, Gary Schultz was Penn State’s senior vice president for finance and business when he was told that assistant football coach Jerry Sandusky had sexually assaulted a boy in the school’s locker room shower.
But neither he nor any other Penn State administrators who were told about the incident reported it to law enforcement, childcare, or youth services.
Schultz was charged with perjury and failing to report to authorities allegations of sexual contact with a minor. However, he retired from Penn State and collected a $330,699 annual pension.
He plead guilty to endangering the welfare of children in March 2017, was sent to jail and released in September 2017.
Schultz was given a six-to-23-month sentence, with only the first two months in jail and the remainder on house arrest, followed by probation.
While Pennsylvania has a pension forfeiture law that strips pensions from public employees convicted of job-related crimes, Schultz’s crime fell between the cracks, allowing him to continue collecting his $330,669 yearly pension.
Sandusky is serving a 30-60-year prison sentence after his conviction on 45 counts of sexually abusing young boys from 1994 to 2009 through the charity he founded, The Second Mile, to serve Pennsylvania’s underprivileged and at-risk youth.
Sandusky “retired” and received a $58,600 public pension – that continues to this day.
Tyler Durden
Tue, 05/11/2021 – 22:05 - Goldman Scrambles To Comfort Its Clients Who Are Freaking Out About China's Soaring Prices
Goldman Scrambles To Comfort Its Clients Who Are Freaking Out About China’s Soaring Prices
It’s hardly a secret that commodity and raw material prices in China have been soaring: this was confirmed by last night’s April PPI inflation print which surprised the market to the upside and reached 6.8% Y/Y, the highest since 2017.
The frenzy culminated with Monday’s 10% one-day jump in iron ore prices which, as Goldman’s China strategist Hui Shan wrote this morning, “brought many questions from clients regarding the impact of upstream price increases on the Chinese economy and monetary policy” especially when it comes to the threat risk of tighter monetary policy/rate hike by the PBOC.
So to address these growing concerns that China may be in the early stages of commodity hyperinflation, Goldman addresses these questions below in collaboration with its commodities strategists.
Q: Is China demand as strong as the commodity prices suggest?
Based on our reading of both macro data (e.g., PMI and exports) as well as micro data (e.g., steel consumption and air pollution), we think on-the-ground demand remains solid. Our equity analysts’ channel checks confirm stable infrastructure and property activity and resilient auto and appliance production in April. However, it is important to emphasize that China’s role in the commodity market has changed somewhat from previous years in three ways.
First, we have seen manufacturing outperforming infrastructure and property investment in China, which is also consistent with the fact that prices of flat steel (mostly used in manufacturing) outperform those of long steel (mostly used in construction). And the key source of manufacturing strength is strong external demand, which in turn was driven by economic re-opening after mass vaccination and significant monetary and fiscal support overseas. Therefore, as our commodity strategists have argued, the incremental demand for commodities currently comes from ex-China.
Second, changes in China supply outlook play an important role. Tightened steel capacity swap rules and the anti-corruption campaign in the coal industry of Inner Mongolia have added supply pressure during a time when demand is strong. China’s commitment to “Carbon Neutral 2060”, which our equity analysts expect to generate profound impacts on upstream industries, further signals to the market that China’s supply of high-emission products such as steel, aluminum and cement is unlikely to respond to higher prices.
Third, geopolitical tensions introduce risk premium and complicate the picture. The most recent example is the announcement by the National Development and Reform Commission (NDRC) to suspend indefinitely all activities under the China-Australia Strategic Economic Dialogue. Although little details were provided and our ANZ economics team believes tariffs or restrictions on iron ore are very unlikely given China’s heavy reliance on Australian supply, the news may have contributed to the latest market moves given the inbound questions that we received on the headline.
Bottom line: China demand appears robust in level terms, but we do not think the latest commodity price increases indicate China’s commodity demand is accelerating.
Q: What near-term responses can we expect from Chinese policymakers?
Chinese policymakers have taken notice of the sharply rising upstream price inflation. For example, at the Financial Stability and Development Committee meeting chaired by Vice Premier Liu He on April 8, policymakers stated the need to “keep prices stable” and to “closely monitor commodity prices”. On April 9, Premier Li Keqiang hosted a meeting with economists and entrepreneurs where Premier Li called for “strengthening the management of raw materials markets” and “alleviating the cost pressure on businesses”.
The challenge from a policy perspective is that at the same point Beijing desires lower commodity prices, they are also focused on achieving their de-carbonization targets by restraining metals supply in sectors with significant spare capacity, relative low value, and high carbon footprint (e.g., aluminum and steel in particular). Policy induced constraints on both current and forward supply act as tightening effects on underlying balances and support price. Moreover, in an environment of both strong domestic and external demand as is currently the case, such supply cuts provide even greater price effect. Until there is a material deceleration in demand conditions to moderate current tightness across the majority of industrial commodities, the ability to sustainably restrain price dynamics is limited.
In regard to actual policy tools to alleviate the pain on downstream manufacturers, so far there have been a few channels of attempted influence by Chinese policymakers. The first is to reduce other types of costs faced by businesses. We think recent announcements on cutting taxes and fees fall into this category. Second, policymakers can encourage imports and discourage exports to help meet domestic demand. For example, the Ministry of Finance has removed the export tax rebate on 146 steel products effective May 1. Third, the government can deploy strategic reserves of commodities. And lastly, regulators have urged commodities futures exchanges to curb speculative activities.
Bottom line: Although some measures are available to policymakers to temporarily alleviate pressures, the fundamental supply and demand tightness is more difficult to address.
Q: What is the impact of higher upstream prices on China growth and inflation?
Rising prices are the mechanism through which the market finds a new equilibrium by destroying demand and/or incentivizing supply. The degree to which each of the two margins of adjustment happens depends on supply and demand elasticities. So far there has been little evidence of end-demand destruction at current price levels in the available China macro and micro data. However, one trend which has emerged from late Q1 onward is a phase of downstream metal destocking. This has been best demonstrated by the negative metals apparent demand growth rates in April after strong year-over-year growth in Q1. We believe this reflects essentially a temporary buyer strike, where downstream consumers destock inventory until they have to return to market given end-demand requirements. This trend could temporarily soften metal physical markets, although raw material stock levels suggest this should abate into Q3.
The potential for supply-side responses are limited by Beijing’s de-carbonization policy emphasis. In the short run, whilst there exists some spare capacity flex in the system, a combination of weak processing margins (e.g., copper, zinc) or policy constraints at a provincial level (e.g., aluminum smelting in Inner Mongolia and steel mills in Tangshan) offer headwinds to any output acceleration. At the margin we do expect some improvement in secondary based metals production from scrap, though the volumes will be limited in aggregate. The risk of net supply capacity additions from here is low particularly in the aluminum and steel (blast furnace) sectors. A hard cap on aluminum capacity will be hit this year after which only swaps will be allowed. For steel, a recent tightening in blast furnace capacity swap rules (1.5:1 old for new swap ratio) limits any expansion potential beyond shifts to electric arc furnace (EAF).
While higher inputs costs are impacting gross margins in some industries including auto, historical experience suggests that downstream profits at the aggregate level do not suffer greatly when upstream prices increase, likely due to the relatively small raw material share of total costs and producers’ ability to improve efficiency and/or pass some of the higher costs onto end-consumers. That said, the COVID shock is like no other, and we may see significant demand destruction if prices move higher for longer, particularly when supply has become much less responsive to price signals than before because of longer-term trends such as de-carbonization.
In previous research, we have found that PPI inflation only affects non-food goods in CPI and the pass-through is far from complete. Given the softening food price inflation on pork cycle and the muted service inflation on both economic slack and government policies aimed at reducing housing and medical costs faced by consumers, we think CPI inflation is likely to remain subdued even as PPI inflation reaches a multi-year-high.
Bottom line: The impact of higher commodity prices and upstream producer prices on Chinese growth and CPI inflation looks limited thus far.
Q: Will the upstream price inflation cause the PBOC to tighten monetary policy?
In the Q4 PBOC Monetary Policy Report, the central bank characterized the high PPI inflation and low CPI inflation as driven by “temporary factors”. The Q1 PBOC survey of urban depositors showed inflation expectations remained subdued among consumers. In April, Monetary Policy Committee (MPC) member Wang Yiming discussed the rebound in oil and metals prices and highlighted the need to “avoid strengthening inflation expectations.” Overall, the central bank appears to be paying closer attention to upstream price pressures and inflation expectations over the past few months.
On the other hand, interbank liquidity has been kept ample and 7-day repo rate has stayed below the policy rate of 2.2%, suggesting little signs of policy tightening on the back of sharply rising upstream prices. The lack of response from the central bank makes economic sense because the root cause of the latest commodity price rally is not China demand. As discussed earlier, stronger ex-China demand and supply concerns have played a bigger role in driving the market higher. If this diagnosis is indeed correct, then tightening monetary policy in China would not be an effective solution. If anything, the demand destruction impact of higher input costs may argue for accommodative monetary policy to offset the overall burdens on businesses as long as inflation expectations remain anchored.
Bottom line: We do not expect the PBOC to tighten monetary policy on higher upstream prices.
Tyler Durden
Tue, 05/11/2021 – 21:45 - The American Cyber Stasi Will Suppress All Digital Dissent In Biden's Dystopia
The American Cyber Stasi Will Suppress All Digital Dissent In Biden’s Dystopia
Authored by Andrew Korybko via OneWorld.press,
CNN’s recent report that the US’ security services are considering contracting the services of so-called “researchers” as a legal workaround for spying on average Americans confirms that Biden’s dystopian hellhole is rapidly moving in the direction of establishing a “Cyber Stasi” for suppressing all digital dissent against the Democrats as they continuing consolidating their de facto one-party rule of the country.
The dystopian hellhole that I predicted would become a fait accompli following Biden’s confirmation as President by the Electoral College is quickly becoming a reality after CNN’s recent report that the US’ security services are considering contracting the services of so-called “researchers” as a legal workaround for spying on average Americans. According to the outlet, these ostensibly independent contractors would be charged with infiltrating the social media circles of white supremacists and other supposedly terrorist-inclined domestic forces within the country. The report claims that the intent is to “help provide a broad picture of who was perpetuating the ‘narratives’ of concern”, after which “the FBI could theoretically use that pool of information to focus on specific individuals if there is enough evidence of a potential crime to legally do so”.
In other words, the US’ security services essentially want to establish a “Cyber Stasi” of “fellow” citizens who spy on one another and produce purported “evidence” of “potential crimes” for “justifying” the FBI’s “legal” investigations. CNN quoted an unnamed senior intelligence official who asked, “What do you do about ideology that’s leading to violence? Do you have to wait until it leads to violence?”, thereby hinting that this initiative might likely be exploited to stop so-called “pre-crime”, or crimes before they occur. Put another way, even those average Americans who practice their constitutionally enshrined right to the freedom of speech to peacefully dissent against the Democrats’ consolidation of their de facto one-party rule of the country might find themselves targeted by the security services depending on how the contracted “researchers” spin their words.
It should be remembered that even Americans’ constitutionally enshrined right to the freedom of assembly is nowadays under scrutiny depending on the stated reason behind their planned peaceful protests if they dare to propose gathering in opposition to last year’s alleged voter fraud for example. The events of 6 January were exploited as a game-changer by the security services in order to restrict Americans’ freedoms. It’s neither here nor there whether one sincerely believes that the election was stolen since the purpose in pointing these double standards out is to prove that average Americans are being politically discriminated against with the implied threat of legal intimidation when it comes to exercising their constitutional rights about “politically incorrect” issues of concern to them.
Although the reported purpose of the “Cyber Stasi” is to preemptively thwart emerging domestic terrorist plots, it can’t be discounted that the combination of political Russophobia and “mission creep” will combine to create additional objectives such as stopping the spread of so-called “Russian disinformation” throughout society. That phrase is actually just a euphemism for “politically incorrect” facts and interpretations thereof that contradict the Democrats’ official narrative of events, being intentionally vague enough to function as an umbrella under which to cover practically every alternative understanding possible. With this in mind, those average Americans who dare to share something “politically incorrect” – even in private chats amidst the presence of “deep state” infiltrators (“researchers” employed as “Cyber Stasi”) – might be targeted by the FBI.
The end effect is that the US’ security services might succeed in suppressing most expressions of digital dissent in the coming future. They’re inspired to do so by the ruling administration which wants to impose a syncretic system of economic leftism and social fascism onto the country. It’s not “communist” in the sense that the economic vision is more akin to state capitalism than traditional Marxism, but the social impact will certainly mirror that of East Germany during its darkest days of Stasi rule, though that’s precisely why many critics casually describe it as “communist” despite that not being economically correct (at least not yet). The US’ “researcher”-contracted “Cyber Stasi” will have a chilling effect how Americans interact with one another from here on out, all in order for Biden’s dystopian hellhole to avoid the fate of its predecessor, East Germany.
Tyler Durden
Tue, 05/11/2021 – 21:25 - China Sees Slowest Population Growth In Decades Raising Concerns About Aging Labor Force
China Sees Slowest Population Growth In Decades Raising Concerns About Aging Labor Force
A few weeks ago, we reported that China, the world’s largest country, reported a shrinking population for the first time in 70+ years, a sign that the global economy might struggle with long-term structural deflation as the population across the developed world shrinks.
But according to the latest census data released Tuesday by China’s National Bureau of Statistics, China reported only 12 million births last year, the lowest annual reading since 1961, and down 18% from 2019.
Looking back at the last 10 years, China’s population increased by just 72 million people (between 2010 and 2020) bringing the country’s total population to 1.41 billion. That breaks down to an average annual growth rate of just 0.53%, slower than the 0.57% seen in 2010, according to the FT.
You will find more infographics at Statista
As analysts studied the data, Nikkei reported that the declining population growth reflects China’s “failure of policies designed to reverse China’s falling birth rate. The rate of increase is the lowest since China first conducted a census in 1953. The fastest growth was the 2.09% recorded in the 1982 census.”
You will find more infographics at Statista
Unsurprisingly, the declining birth rate shows that China’s average age has increased substantially, posing a demographic crisis similar to what’s being experienced in Japan. People over the age of 65 now make up 13.5% of the population, compared with 8.9% back in 2010, when the previous census data was published. Meanwhile, the working-age population of people aged between 15 and 59 declined to 63.35% from 70.14%.
Ning Jizhe, the director of the NBS, told the FT that China’s democratic crisis actually doesn’t seem so bad when compared with the US, which has an average age of 38.8 years, compared with China’s 38 years. Still, “the further ageing of the population imposed continued pressure on the long-term balanced development of the population in the coming period.”
Source: Nikkei
But Ning noted that an aging population will likely be a salient feature of China’s demographic trends for years
“The proportion of the elderly population is rising fast, and aging will become the basic characteristic of our country in the future,” said Ning.
Even after Beijing scrapped its controversial one-child policy in favor of a “two child policy” a few years back, China’s fertility rate – which measures how many children the average female will have in her lifetime – is still a paltry 1.3, below the ~2+ level needed for population replacement.
But falling birth rates weren’t the only problem plaguing China’s cities. Another issue seen in more than a dozen cities, especially in China’s north-eastern provinces, is that an exodus of younger workers seeking opportunities in more “economically vibrant” regions (or perhaps even abroad) is adding further pressure in local labor markets.
Looking back, China’s population added 5.8% in the decade to 2010 and grew by double-digit percentage amounts between each of the previous censuses, which were held in 1953, 1964, 1982, 1990 and 2000.
Source: Nikkei
Such a shift will have a major impact on what economists call “the dependency ratio”, which refers to the burden shouldered by workers for caring for children and the elderly.
Goldman analysts broke it down in a chart.
Source: Goldman Sachs
To be sure, while China’s population growth is slowing, it’s still in a better position than other developed Asian economies like Japan and South Korea.
Tyler Durden
Tue, 05/11/2021 – 21:05 - Japanese Investors Panic After Stocks Tumble And BOJ Does Not Buy ETFs
Japanese Investors Panic After Stocks Tumble And BOJ Does Not Buy ETFs
Something took place on Tuesday that has happened just once since 2016: Japan’s Topix index (which is widely viewed as more representative of Japanese equities than the Nikkei) tumbled by 2% in the morning session…. and the BOJ did not intervene.
Why is this notable? Because – in a world where everyone is now completely used to Plunge Protection Teams and central bank bailouts as if it is a perfectly expected event – this was only the second time since at least 2016 that the Bank of Japan did not make an ETF purchase after the Topix fell more than 1% in the morning session. The only other time? April 21, when the Topix also tumbled 2% in the morning session and the BOJ was nowhere to be seen.
To be sure, the BOJ’s lack of intervention was to be expected: as a reminder, the central bank tweaked its ETF purchase program at the March meeting, with changes that came into effect in April. As part of its policy review, the BOJ on March 19 said it would buy ETFs as needed, scrapping the previously 6T yen annual target, but keeping its 12T yen upper limit on purchases
Until last month, the largest drop the BOJ would tolerate without buying ETFs was the 0.89% full-day decline on Feb. 24; In other words, any time the Topix would drop by 1% or more, the BOJ would step in or else there would be a market crash. Furthermore, before this year, the BOJ typically bought if the Topix fell more than 0.5% in the morning session.
This changed on April 20, when the Topix tumbled more than 2% in the morning session and contrary to trader expectations that they would get bailed out, the BOJ did not intervene, and led to a panicked stock dump in the morning of April 21, at which point the BOJ had no choice – it had to buy ot else it would suffer a far worse crash. And buy it did, purchasing 70.1b yen on April 21, the day after it so miserly withheld its bailout of Mrs Watanabe.
As Bloomberg notes, “today’s lack of action by the central bank may further fuel speculation that the bank will only step in if the drop in the AM session exceeds 2%; previously the bank had bought after a 0.5% decline.”
So keep a close eye on Japanese stocks, where frentic investors will likely test the BOJ’s resolve again by dumping stocks if only to test the new level of the “Kuroda Put.” And woe to Japan if there is a second 2% – or bigger – drop in a row in the Topix and still no BOJ bailout.
Tyler Durden
Tue, 05/11/2021 – 20:45 - World's Most Vaccinated Nation Sees Active COVID Cases Double In Under A Week
World’s Most Vaccinated Nation Sees Active COVID Cases Double In Under A Week
The situation in the Seychelles, an island nation that has suffered from a recent surge in COVID-19 cases despite boasting the world’s highest vaccination rate, is going from bad to worse.
Since we last reported on the Seychelles one week ago, the island nation has faced a fresh surge in COVID cases.
The vaccine failure cannot be determined without a detailed assessment, said the WHO. The hike in coronavirus cases has stoked concerns that the jabs might not be helping to suppress the island nation’s COVID-19 outbreak. A vaccine failure can’t be determined without a detailed study by the WHO, however.
Presently, the health body is in direct communication with Seychelles and working on evaluating the situation, said Kate O’Brien, director of the WHO’s department of immunization, vaccines and biologicals at a briefing on May 10.
The Indian Ocean archipelago nation started vaccinations in January when it introduced the Chinese-developed Sinopharm vaccine. It administered Chinese vaccine shots to 57% of those who were fully inoculated and the rest received vaccines that were made in India.
Since last week, the number of active coronavirus cases has more than doubled to 2,486 people. Of these, 37 percent of the population have received both the vaccine doses, as per the report.
Due to the surge in COVID-19 cases, Seychelles re-imposed curbs last week, including closing schools, canceling sports events and banning mingling of households.
Seychelles’ first two positive cases of COVID-19 were confirmed on March 14, 2020. The two individuals were a couple from Seychelles who had returned from a trip to Italy. Aftre this, the country imposed a nationwide lockdown in which most shops, businesses and schools were closed for 21 days in April. The airport was also closed and ships were prevented from bringing tourists.
Finally, with the outbreak threatening to scuttle the island nation’s critical upcoming summer tourism season, Seychelles President Wavel Ramkalawan insisted that the island is safe for visiting tourists.
Still, the fact that so many residents are being reinfected with COVID despite being fully vaxxed is raising questions about the efficacy of the Chinese and Indian-made jabs.
Tyler Durden
Tue, 05/11/2021 – 20:25 - Is 'GosFed' Looming At The Eccles Building?
Is ‘GosFed’ Looming At The Eccles Building?
Via The American Institute for Economic Research,
Economist Judy Shelton had a crackerjack column in last week’s Wall Street Journal on the lack of intellectual and policy diversity at the Federal Reserve. She points out that during the entire term of Chairman Jerome Powell and his predecessor, Janet Yellen, not a single dissenting vote was recorded among the governors. It reminds us of the central bank of the Soviet Union.
Is that what we want – GosFed? That’s our jibe, not Ms. Shelton’s. It’s a play on Gosbank, for Gosudarstvenny Bank, the name of the Soviet central bank. It’s not our intention to suggest that our Fed or anyone associated with it is a communist. All the more mystifying, though, is the absence of dissent among GosFed governors, particularly when a new administration is readying vast new spending.
It “may surprise people to learn,” Ms. Shelton writes, “that not a single dissenting vote was cast by any member of the Fed’s Board of Governors throughout the eight monetary-policy meetings in 2020 and the three meetings held so far this year. The same is true for 2019, 2018, 2017, 2016, 2015 and 2014, covering Mr. Powell’s years as Fed chairman and the entire term of his predecessor, Janet Yellen.”
“No Fed governor,” Ms. Shelton adds, “cast a dissenting vote from the Fed chair at any monetary policy meeting held throughout that time.” Presidents of regional Fed banks have during this period done some dissenting in the open market committee, but no break by a Fed governor with the chairman has fetched up on our scope in recent years.
It’s all the more powerful a point if one considers the unprecedented growth of the Fed balance sheet, which is now something like $7.8 trillion. Most of the securities that make up that debt, even if acquired on the open market, are obligations of the government of which the Fed is a part. That, incidentally, is how GosBank worked. Ms. Shelton wrote a warning about that, too, and also in the Wall Street Journal.
That piece, issued in July 2012, was called “The Soviet Banking System — and Ours.” Ms. Shelton wrote that “[u]nder Soviet accounting practices, the true gap between concurrent revenues generated by the economy and the expenditures needed to sustain the nation was obscured by a phantom ‘plug’ figure that ostensibly reflected the working capital furnished by the Soviet central bank, Gosbank.”
That is, as she puts it at one point, “The Soviet central bank was making up for the difference between government revenues and government expenditures by creating empty credits to be disbursed by central-planning bureaucrats.”
When Mikhail Gorbachev acceded to party boss in 1985, Ms. Shelton writes, the budget deficit the central bank was covering was more than 30% of total government expenditures.
Neither Ms. Shelton, as we read her pieces, nor we are suggesting the American economy is at quite that point or is false in the sense that the Soviet Union’s was. The system of having the Gosbank create money to fund the state, though, didn’t turn out so well. It’s getting harder by the year to see, as well, how the GosFed is going to come out whole in the end as well.
It’s maddening to see the Fed governors plunge down this road without recorded dissent. We made this point when the Democrats on the Senate Banking Committee were maneuvering to block Ms. Shelton’s nomination to a Fed governorship because she isn’t a “mainstream” economist. So did the Wall Street Journal. As did James Grant, who in 2016 wrote about a call by Democrats for more diversity at the Fed.
Mr. Grant, in his Interest Rate Observer, noted that what the solons — including, among others, Senators Bernie Sanders and Elizabeth Warren — wanted was diversity in race and gender on the mostly male and white Fed boards. Mr. Grant focused on “the kind of diversity that would leave the monetary establishment constructively rattled” — governors and economists who would question 21st century monetary dogma.
That question looms today at not only the Fed. We now have, in Janet Yellen, a former chairwoman of the Fed as Treasury Secretary. Dissent is also scant between the Fed and Treasury, as we launch these multi-trillion-dollar commitments. It’s easy to see why the comrades of Gosbank showed so little dissent. Say, or think, the wrong thing in the Soviet Union, and you risked a one-way ticket to Siberia. What in the world is GosFed’s excuse?
Tyler Durden
Tue, 05/11/2021 – 20:05 - Wild Tiger On The Loose In Houston Area Belongs To Murder Suspect Out On Bond Since 2017
Wild Tiger On The Loose In Houston Area Belongs To Murder Suspect Out On Bond Since 2017
A tiger that was seen roaming loose in a Houston area neighborhood over the weekend has yet to be located – but its owner has been identified and arrested.
The exotic animal reportedly belongs to a man named Victor Cuevas, who was out of jail on bond on an “unrelated murder charge”, according to local ABC affiliates. “Cuevas is accused of shooting and killing a man in July 2017 and is out on a $125,000 bond,” the report reads.
Go figure.
Cuevas “is known to possess several exotic animals”, the report reads. Authorities took Cuevas into custody at his mother’s house on Monday, the same day he was supposed to turn himself in to the Harris County jail. Cuevas evaded police on Sunday and was also charged with felony evading arrest, as a result.
Cuevas’ lawyer, Michael Elliot, wasn’t thrilled about his client being apprehended on the same day he was supposedly planning to turn himself in. Elliot said: “Fifteen minutes before he leaves to surrender, (HPD) go and arrest him, and the result is they get to keep him there for 10 days now.”
Paying adage to the famous “I was just holding it for a friend” defense, Elliot also maintains that the tiger doesn’t belong to Cuevas, but rather that he simply “knows the owner”.
“There’s a lot of misunderstandings and miscommunications and a lot of things put out there falsely that’s very troubling. First off, The Houston Police Department here. I know they’re trying to do their job. Everyone wants to know about the tiger and their safety. Make no mistake, there’s no crime of having a tiger in the state of Texas,” he said.
However, ABC reviewed Cuevas’ Instagram and found he was “no stranger” to exotic animals:
The videos show him playing with a baby bear, feeding it with a bottle, and giving the bear kisses in his home. There are also videos of at least two monkeys. Cuevas is seen taking one monkey with him while he was having dental work done, and taking another monkey to a convenience store, where the clerk was not pleased. In addition, several videos show Cuevas cuddling with a young tiger.
Police had responded to a call about the tiger on Sunday. HPD Commander Ron Borza said: “The owner put the tiger in a white SUV and drove off from the scene, there was a brief pursuit, and the man got away with the tiger. My main concern right now is focused on finding him, and finding the tiger, because what I don’t want him to do is harm the tiger. We have plenty of places where we can take the tiger and he can spend the rest of his life.”
Our Animal Cruelty Unit, along with @BARC_Houston are currently investigating the incident in which a tiger was seen at 1103 Ivy Wall Drive about 8 p.m. on Sunday (May 9). The male owner was seen escorting the tiger to the residence then putting it into his vehicle. 1/3
— Houston Police (@houstonpolice) May 10, 2021
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Cuevas’ neighbor, Jose Ramos, said: “I did notice one time, and this is something interesting, that I was walking by my driveway. There was a capuchin monkey that showed up in the window. I figured, ‘OK, this is a small animal. It could be domesticated.’ But I never thought they would hold a tiger in their house.”
Tyler Durden
Tue, 05/11/2021 – 19:45 - Professor Explains Flaw In Many Models Used For COVID-19 Lockdown Policies
Professor Explains Flaw In Many Models Used For COVID-19 Lockdown Policies
Authored by Andrew Chen via The Epoch Times (emphasis ours),
Economics professor Doug Allen wanted to know why so many early models used to create COVID-19 lockdown policies turned out to be highly incorrect. What he found was that a great majority were based on false assumptions and “tended to over-estimate the benefits and under-estimate the costs.” He found it troubling that policies such as total lockdowns were based on those models.
“They were built on a set of assumptions. Those assumptions turned out to be really important, and the models are very sensitive to them, and they turn out to be false,” said Allen, the Burnaby Mountain Professor of Economics at Simon Fraser University, in an interview.
People walk past empty patios in Jacques Cartier Square in Montreal on May 7, 2021. (The Canadian Press/Ryan Remiorz) Allen says most of the early cost-benefit studies that he reviewed didn’t try to distinguish between mandated and voluntary changes in people’s behaviour in the face of a pandemic. Rather, they just assumed an exponential growth of cases of infection day after day until herd immunity is reached.
In a paper he published in April, in which he compiled his findings based on a review of over 80 papers on the effects of lockdowns around the world, Allen concluded that lockdowns may be one of “the greatest peacetime policy failures in Canada’s history.”
He says many of the studies early in the pandemic assumed that human behaviour changes only as a result of state-mandated intervention, such as the closing of schools and non-essential businesses, mask and social distancing orders, and restrictions on private social gatherings.
However, they didn’t take into consideration people’s voluntary behavioural changes in response to the virus threat, which have a major impact on evaluating the merits of a lockdown policy.
“Human beings make choices, and we respond to the environment that we’re in, [but] these early models did not take this into account,” Allen said. “If there’s a virus around, I don’t go to stores often. If I go to a store, I go to a store that doesn’t have me meeting so many people. If I do meet people, I tend to still stand my distance from them. You don’t need lockdowns to induce people to behave that way.”
Allen’s own cost-benefit analysis is based on the calculation of “life-years saved,” which determines “how many years of lost life will have been caused by the various harms of lockdowns versus how many years of lost life were saved by lockdowns.”
Based on his lost-life calculation, lockdown measures have caused 282 times more harm than benefit to Canadian society over the long term, or 282 times more life years lost than saved.
Furthermore, “The limited effectiveness of lockdowns explains why, after one year, the unconditional cumulative deaths per million, and the pattern of daily deaths per million, is not negatively correlated with the stringency of lockdown across countries,” writes Allen. In other words, in his assessment, heavy lockdowns do not meaningfully reduce the number of deaths in the areas where they are implemented, when compared to areas where lockdowns were not implemented or as stringent.
Today, some 14 months into the pandemic, many jurisdictions across Canada are still following the same policy trajectory outlined at the beginning of the pandemic. Allen attributes this to politics.
He says that politicians often take credit for having achieved a reduction in case numbers through their lockdown measures.
“I think it makes perfect sense why they do exactly what they did last year,” Allen said.
“If you were a politician, would you say, ‘We’re not going to lock down because it doesn’t make a difference, and we actually did the equivalent of killing 600,000 people this last year.’”
You wouldn’t, he said, because “the alternative is they [politicians] have to admit that they made a mistake, and they caused … multiple more loss of life years than they saved.”
Allen laments that media for the most part have carried only one side of the debate on COVID-19 restrictions and haven’t examined the other side. Adding to the concern, he says, is that views contrary to the official government response are often pulled from social media platforms.
He says he has heard that even his own published study has been censored by some social media sites.
“In some sense these are private platforms. They can do what they want. But on the other hand, I feel kind of sad that we live in the kind of a world where posing opposing opinions is either dismissed, ignored, or … name-called, [and] in some ways cancelled,” Allen said.
Tyler Durden
Tue, 05/11/2021 – 19:25 - NRA In Peril After Judge Rejects Bankruptcy Filing
NRA In Peril After Judge Rejects Bankruptcy Filing
The NRA was dealt a serious blow on Tuesday after a Texas judge tossed the gun rights organization’s bid to declare bankruptcy, saying it was filed in “bad faith” in an effort to dodge litigation in New York.
Judge Harlin Hale tossed the case after New York Attorney General Letitia James and others questioned how legitimate the January 15th bankruptcy filing was, according to a report by Law 360.
#BREAKING: A judge has ruled in our favor and rejected the @NRA‘s attempt to claim bankruptcy and reorganize in Texas.
The @NRA does not get to dictate if and where it will answer for its actions, and our case will continue in New York court.
No one is above the law.
— NY AG James (@NewYorkStateAG) May 11, 2021
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The group filed for Chapter 11 bankruptcy after James filed a lawsuit to dissolve the NRA – alleging that the organization has abused its status as a nonprofit, along with corruption, and a “culture of self-dealing, mismanagement, and negligent oversight” fostered by longtime CEO Wayne LaPierre.
The decision means that Hale will be able to more easily seize the NRA’s assets if she prevails in her New York lawsuit, where she argued that the group should be dissolved.
According to bankruptcy filings, the organization has $50 million more assets than their debt load, making the financially solvent. In their bid to restructure and move to Texas, the NRA claimed that New York’s regulatory environment is corrupt. NRA attorneys accused James, a Democrat, of waging a political campaign against the organization – and argued that Texas would offer a ‘regulatory haven’ for the gun-rights group.
Meanwhile, LaPierre faces additional litigation from James’ office, after the Wall Street Journal reported that the IRS is investigating him for potential criminal tax fraud.
Tyler Durden
Tue, 05/11/2021 – 19:05 - Three Places Where "Permanently" Higher Inflation Could Come From
Three Places Where “Permanently” Higher Inflation Could Come From
Tomorrow we get a CPI number which according to consensus at least, will be historic: it will be the first 0.3% sequential increase in core (not the much higher headline) prices this century…
… a talking point which will merely underscore the recent surge in inflation fears across both companies (who can pass these rising costs on to consumers)…
… and consumers (who can’t).
Yet while households are growing more convinced with each passing day that higher prices will stick, with the NY Fed’s latest survey of consumer expectations revealing that over the next year consumers anticipate gasoline prices jumping 9.18%, food prices gaining 5.79%, medical costs surging 9.13%, the price of a college education climbing 5.93%, and rent prices increasing 9.49%…
… neither the Fed, nor sellside analysts are willing to concede as much yet. Take BofA’s chief economist Michelle Meyer, who expects core PCE inflation, the Fed’s preferred measure, to peak at 2.3% this quarter, before settling back down to 1.9% by the end of 2021. Meyer then expects prices to trend slightly higher over the medium term, eventually surpassing the Fed’s target consistently enough (and in an environment of full employment) that interest rate hikes will be warranted, possibly not until the second half 2023.
Needless to say, the market disagrees, and especially the bond market, where traders are pricing in far more inflation and faster Fed hikes than that. But, as BofA’s Jared Woodard notes, they often do, and are usually very early: as shown in the chart below, since 2007, rates implied by Fed funds futures have been, on average, 54bp higher than actual interest rates one year later.
But maybe this time will be different? As Woodard counters, the challenge for those who expect permanently higher or harmful inflation is to explain where it will come from. In response, the BofA strategist says he can see three possible sources of “permanent” inflation, if no no plausible ones.
1. Scarce goods
In 2020, many firms cut capacity and reduced inventories, expecting a long recession. The faster rebound has meant shortages in lumber, corn, copper, etc. Some bottlenecks may lack quick fixes (e.g. semiconductors), but many others can be resolved.
More importantly, whether necessitated by Covid or by the reorientation of supply chains toward reliable democracies, a period of higher capex should be tolerable. Many companies have proven pricing power, and in Q1, US corporate profit margins are at record highs.
Scarce workers
Woodard then predicts that there are also good reasons to think that any sharp surge in wages will end by Q4 for the following reasons:
- Labor supply is set to rise sharply.
- Generous unemployment insurance benefits expire in September,
- children will return to public schools,
- health concerns will be alleviated,
- firms will be able to hire from a broader pool of remote workers.
Indeed, we have 9.8 million unemployed workers and BofA economists expect an additional 2mm+ returning to the labor force by the fall, by which point the Biden unemployment checks will have expired.
Meanwhile, those widespread reports of employers offering hiring bonuses…
… are a sign of a temporary mismatch, not an incipient spiral. “A bonus is not a raise”, according to BofA… although it’s a key part of one’s compensation – we wonder how many BofA bankers would work without one.
In any case, BofA believes that a higher long-term trend in wage growth would be positive for GDP and productivity: of the firms that said they will not raise capex in the latest Duke CFO survey, 2/3 said it is because they “have no need to expand capacity.” Persistent higher demand is necessary for sustained corporate investment. It’s, therefore, hard even to imagine a wage-spiral tail risk according to Woodard who argues that it would take steady wage gains of 10-12% to push inflation to the levels of the 1970s & 80s…
… and the US economy is structured very differently today. Non-elite unions are politically toothless. Technology penetrates every industry. The offshoring of more services is coming.
Excess demand
The last argument against persistent inflation is that there are also no signs of excess demand. The latest BofA consumer appears to affirm a “fiscal liquidity trap” thesis.
- High-income households have excess savings, but history shows they don’t spend; and a chill in high-income spending is more likely in 2021 from the threat of higher taxes (Ricardian equivalence);
- Low-income households received excess stimulus but their spending has already peaked (Exhibit 7) and <10% of new rounds of stimulus are being spent (Exhibit 8).
While we are confident that many readers will disagree, Woodard concludes that “in sum, we expect high inflation levels to be transitory because structural deflationary forces are very strong, most supply shortages can be resolved, wage increases are modest (and helpful long-term in any case), and there is no evidence of excess demand.”
* * *
Bullshit, you say. Between the trillions in stimulus and the monetary pump, this time is different.
Perhaps, but there is another problem: anyone wishing to hedge against soaring inflation faces a daunting high cost (one could almost say “inflationary” cost).
As shown in the chart below, historical data show that a permanent portfolio allocation to inflation assets only hurts returns (unlike a deflationary bias). Allocating $1 in 1974 equally to a basket of commodities, gold, global value, and European equities – i.e. inflationary assets – was worth $38 today; at the same time, an allocation to IG corporate bonds, Treasuries, US growth stocks, and the S&P 500 was worth $104.
Curiously, even a tactical allocation imposes a significant cost unless timed perfectly. BofA economists expect 3.6% average inflation for Q2. Over the last 30 years, there were five occasions when CPI surged above that level (May’01, Sept’05, June’06, Oct’07, June’11).
On average, investors who bought inflation assets on those triggers suffered losses over the next year: commodities -10%, value vs growth -2%, EU vs US equities -3% and cyclical vs defensives -1%. Only TIPS and small vs large saw positive average returns. And today, 10-year TIPS yield -0.93%, just 19bps from record lows.
In conclusion, Woodard writes that “the best time to buy inflation protection would be after the next “natural” recession, not when inflation expectations are already at 13-year highs.”
While that may true, one thing Woodard refuses to admit – or perhaps forgot to acknowledge – is that in a world where even the BIS admits it is in the business of manipulating gold lower, crypto has emerged as the best inflation hedge in the world. In that case, his entire argument about “expensive” inflation hedges can be thrown out, because one look at the return of bitcoin, ethereum, or the various DeFi tokens in the past year, and the conclusion is that the market is convinced that what is coming will make the Weimar and Zimbabwe hyperinflations seem like a walk in the park…
Tyler Durden
Tue, 05/11/2021 – 18:45 - Hedge Funds Descend On Puerto Rico As Biden Tax Threat Looms
Hedge Funds Descend On Puerto Rico As Biden Tax Threat Looms
With President Biden and the Democrats on the warpath to separate the richest Americans from their income, hedge funds managers are starting to expand into Puerto Rico – leaving open the possibility of relocating to the island to obtain huge tax breaks, according to Bloomberg.
Both ExodusPoint Capital Management and Millennium Management have opened local subsidiaries on the island, according to local records. ExodusPoint, headed by Michael Gelband, created a money-management in Puerto Rico on behalf of co-founder Hyung Soon Yee, who moved there last year.
Millennium, run by Izzy Englander, set up shop on the island just weeks after Biden won the 2020 US election.
And with Biden’s proposed tax increases on the wealthy and corporations looming, those who venture to Puerto Rico may be able to avoid both state and federal taxes according to the report.
The lure for would-be tax-savers is a pair of laws Puerto Rico enacted in 2012 to attract wealthy mainlanders: the Export Services Act and the Individual Investors Act. The latter is of particular interest to hedge fund managers because it exempts capital-gains taxes, including those levied on the performance fees that comprise the bulk of their compensation. In New York, such income currently would be subject to aggregate federal, state and local taxes approaching 50%.
Puerto Rico received almost 3,500 applications for the tax incentives during fiscal 2019 and 2020, exceeding the combined total for the previous seven years, according to the commonwealth’s Department of Economic Development and Commerce. -Bloomberg
In the first six months leading up to March, over 1,000 applications for tax incentives were filed according to an agency spokeswoman. Applications for the tax breaks, which are generally available to new residents and services businesses which generate revenue outside Puerto Rico, are typically kept confidential until approval. The government office which vets them reports a seven-month backlog, which has been exacerbated by the pandemic and surging demand thanks to Biden’s tax plans.
“You have a lot of people looking to relocate because they no longer have to be in close proximity to where they work,” said Euro Pacific Capital head Peter Schiff, who moved his firm’s asset management arm to San Juan in 2013. “The higher taxes are, the greater the appeal of coming here,” he added.
Menlo Park-based Pantera Advisors, headed by Dan Morehead, established a money-management unit last month in the Puerto Rican town of Guaynabo, according to a filing.
According to SEC records, ExodusPoint and Millennium were the only large money managers with Puerto Rico affiliates as of the end of March. At present, neither firms’ subsidiaries have been granted incentives under the Export Services Act, according to the government spokeswoman.
Real estate prices going ham
Around 20 miles west of the capital of San Juan lies Dorado, an area considered family-friendly which boasts high-end housing and the infrastructure required by finance professionals to access necessary computer networks on the mainland.
“There has been exceptional interest, in part because Dorado has access to fiber broadband,” said Jared Dubin – who recently set up Troluce Capital Advisers to manage money for ExodusPoint. “The Dorado real estate market has been pretty wild,” he added.
And of course, the flood of new money managers snapping up high-end real estate is squeezing prices even higher in the region.
Millennium incorporated a San Juan-based company, MPG PRManagement, on Nov. 23, according to records maintained by Puerto Rico’s Department of State. The subsidiary had four money managers working there at year-end, SEC records show. In June, ExodusPoint incorporated its subsidiary in Dorado, where Lee, 52, now lives. He owns 50% of that entity, ExodusPoint Capital Management Puerto Rico, and shares ownership of the rest with Gelband through another affiliate, according to a regulatory filing.
Lee, whose Facebook page shows him seated at the controls of a private plane, has a commercial pilot rating and is certified to fly small jets, Federal Aviation Administration records show. In September, ExodusPoint revised its SEC filings to say that Lee’s business trips on a plane he had recently purchased would be partially covered by the firm’s expense policy. It allows Lee and Gelband to seek reimbursement from ExodusPoint hedge funds for private flights, with repayment limited to the equivalent cost of first-class commercial airfare.
“If people are interested in drastic life changes in order to pay less tax, then I have one item on my list,” according to Stewart Patton – a Belize-based attorney who helps US expats optimize their tax situations.
“Move to Puerto Rico…”
Tyler Durden
Tue, 05/11/2021 – 18:25 - Marked-to-Marxist: Weighting Chinese Stocks
Marked-to-Marxist: Weighting Chinese Stocks
Authored by Nick Schmitz via Verdad Capital
The three largest economies by GDP are the US, China, and Japan. These are also the largest country stock markets by aggregate market cap. By our count, US-headquartered stocks add up to $44T in equity value, Chinese (and Hong Kong) stocks add up to $17.3T, and Japanese stocks add up to $6.5T. Meanwhile, Vanguard’s Total World Stock ETF allocates 57% to US stocks, 5% to Chinese stocks, and 7% to Japanese stocks.
Figure 1: GDP, Aggregate Market Size, and Vanguard (VT) Fund Weighing
Source: IMF for 2021 nominal GDP estimates. Capital IQ for aggregate market cap of all country-headquartered public listings on country exchanges, excluding REITS and capital markets; China includes Hong Kong. Vanguard (VT) for country exposure weights.
Relative to GDP or total market capitalization, global equity indices, and by proxy most investors, are massively underweight Chinese stocks. The case for upping exposure to China looks even stronger when we look at the selection opportunity, liquidity and growth, especially relative to China’s Asian competitor, Japan. China has 2x the number of listed stocks as Japan, and those stocks have 3x the median market cap of Japan.
Figure 2: Stocks, Stock Size, and Growth for the Big Three Countries
Source: Capital IQ, 27 April 2021 Perhaps most notably, China’s median firm growth rates are >5x Japan’s. And China’s exceptional growth rates aren’t just figments of equity analysts’ imaginations: Chinese corporate profits have been growing faster than Japan’s for decades.
Figure 3: Chinese vs Japanese GDP Growth Rates
Source: IMF It’s puzzling, therefore, to note that China’s equity market hasn’t dramatically outperformed the Japanese market for 10 years now.
Despite a massive difference in historic growth rates, the MSCI Japan index returned the exact same amount as the MSCI China index over the past decade, and with way less heartburn along the way.
Figure 4: MSCI Japan vs MSCI China Index (2011–2021)
Source: Capital IQ. Net Total Returns, USD. This is in large part because investors paid a hefty premium to own Chinese stocks throughout the decade. The growth differential, it appears, was more than priced in. The picture today is little changed from a decade ago: the price differential between the two is still one of the biggest for countries outside of US markets, a concerning data point for China bulls.
Figure 5: Chinese vs Japanese Median Stock Trading Multiples Today
Source: Capital IQ. All listed stocks, excluding REITS and capital markets. Chinese stocks are around 25% to 200% more expensive than Japanese stocks, depending on how you measure them.
But this simple analysis assumes a Chinese public equity is the same thing in kind as other developed-market public equities like a Japanese stock. There is a relevant quote, often misattributed to Stalin: “I consider it completely unimportant who in the party will vote, or how; but what is extraordinarily important is this—who will count the votes, and how.” For minority voting shareholders of Chinese “public equities,” we think both may be extremely important. This is because Chinese public equities are neither “public” nor “equitable” to the extent we can measure.
As shown below, Chinese equities have a public float of 45% on average, making them technically not public. Despite China’s maintenance, until recently, of the democratic-sounding “one share, one vote” law, in practice, this means that state-owned or quasi-state-owned institutions will often maintain full control according to academics and Pulitzer Prize winning journalism. This is a system of collective equity that might be thought of as having less of the nuance of James Madison and more of the nuance of Mao’s 1949 concept of The People’s Democratic Dictatorship. This “democracy for the people and dictatorship over the reactionaries,” is most likely why the reactionary practice of shareholder activism is “quite uncommon” in China, according to legal experts.
But why rely on the opinions of experts and academics in their ivory towers? As shown below, when you ask Chinese people themselves, they routinely rank themselves alongside Bhutan, the Kyrgyz Republic, and Colombia on most every metric related to the equitable treatment of shareholders, again making them not technically “equities” to the extent we can measure this.
Figure 6: Public Float and Indicators of Equitable Treatment for “Public Equities”
Source: Capital IQ for float. All publicly listed stocks, excluding REITs and capital markets. Survey rankings from the latest World Bank’s and World Economic Forum’s Global Competitiveness Ranks.
Finally, in comparing Chinese to Japanese equities, it may be useful to consider not just the valuation and transparency risks but also the debt markets these equities are subordinated to.
Below is the aggregate amount of corporate ex-financial debt in China and Japan over the last 20 years. The financial statement growth that makes Chinese equities so attractive compared to Japanese equities has come at the cost of skyrocketing debt.
Figure 7: Total Corporate Ex-Financial Debt ($M)
Source: Fred And while the Chinese ratings agencies have ranked most all issued domestic bonds in the AAA to AA investment grade range, when the imperialist swine at S&P Credit Ratings applied their independent analysis on the publicly available Chinese accounting data, this resulted in a downgrade of the same sample of Chinese issuers from exclusively investment grade to largely speculative and junk grade.
Figure 8: Chinese Domestic Credit Ratings vs S&P Indicative Ratings
Source: S&P Global China is a unique market. We can think of only one historical analogue to a country like China today. A country whose capital markets rose at breakneck speed from the ashes of war and economic catastrophe. A country with a market that emerged as nearly dominant globally after prolonged sustained growth, at massive scale, with high valuations and extremely accommodative corporate lending. A country that adopted many capitalist standards to get there while allowing the government and complex webs of corporate crossholdings to play a heavy-handed role in directing national industrial and technological efforts before hitting peak population and a non-performing loan crisis. That country is Japan in the 1980s, before the asset bubble burst.
But China is quite different from the historical example of Japan for many reasons, including that China is one of the very few officially Marxist-Leninist countries surviving today. North Korea, Laos, and Cuba don’t really have markets, let alone stock markets. As such, this extreme survivorship bias makes it difficult to estimate your long-term probability of realizing a return on (or return of) your capital in Marxist-Leninist states. We are left with only rough comparable examples like the Ho Chi Minh City Stock Exchange in Vietnam and Venezuela’s Caracas Stock Exchange. We can’t say much empirically on such a limited sample, but for what it’s worth, all three markets joined the UN’s Sustainable Stock Exchanges Initiative, giving your capital what some would argue is two layers of communist oversite.
It may be tempting to assume that when you put your money in a foreign country, no matter which one, you will get it back a decade later, as has occurred quite regularly since the ’70s. Capital controls were really something that only our grandparents had to worry about. But foreign investors thinking about Chinese exposure over the next decade have neither the assurance of constrained law nor credible deterrence. Meanwhile, in Japan, investors enjoy the backdrop of a close ally with a pluralistic liberal democratic constitution and the geopolitical insurance policy that only a division of US Marines in Okinawa can provide.
For these reasons, we think of allocation decisions to the largest countries outside of the US as more complicated than a weighting of fully interchangeable financial instruments.
Our conclusion is that, compared to Japanese public equities today, Chinese public equities are not technically public or equitable to the extent we can measure. They are massively more expensive and are probably subordinated to much more dubious lending practices than the government-approved ratings agencies would let on, according to S&P’s mathematical standards. But we must admit that the trailing and one year forward growth is red-hot in the market that’s marked-to-Marxist.
Tyler Durden
Tue, 05/11/2021 – 18:05
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