Mar 14

Today’s News 14th March 2023

  • 10,000 Dutch Farmers Protest Govt's Crippling Nitrogen Emissions Target In The Hague
    10,000 Dutch Farmers Protest Govt’s Crippling Nitrogen Emissions Target In The Hague

    Authored by Thomas Brooke via Remix News,

    Protesters claim the Dutch government is lying about the extent of the emissions problem in order to grab privately owned land…

    Thousands of Dutch farmers protested on Saturday against the government’s policies to reduce nitrogen emissions, warning they will put farms out of business and affect food production.

    Hundreds of tractors from across the Netherlands could be seen driving to the event in The Hague ahead of regional elections this week, and more than 10,000 farmers were in attendance, according to the Reuters news agency.

    Protesters accused the Dutch government of forcing farmers off of privately owned land in order to appease Brussels, and carried banners reading “No farmers, no food” and “There is no nitrogen ‘problem.’”

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    “We are fighting against a corrupt and unjust government,” Eva Vlaardingerbroek, a prominent campaigner in defense of the farmers, told attendees. She spoke of a government that “drives our farmers from their land” and which has “turned on its own population.”

    “For centuries, our farmers have produced food for millions of people worldwide. And instead of what those liars in The Hague claim, they have done so in a responsible and sustainable way.”

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    “But our cabinet doesn’t care about nature. They have simply created a lie to steal our farmers’ land,” she added.

    Prime Minister Mark Rutte’s administration has vowed to take radical action to meet its ambitious target of halving the country’s nitrogen emissions by 2030, and has identified the country’s large agriculture sector as being the main culprit due to its large livestock count and use of fertilizers.

    Last year, the government announced plans to reduce livestock numbers by a third, while farmers have also been told their land could be subject to compulsory buyouts.

    Agricultural workers have staged several demonstrations against the government policy, blocking motorways and supermarket distribution centers in mass protests last year.

    “These reductions are so severe that those rural communities will be totally devastated economically,” said Sander van Diepen, a spokesperson for the Dutch agricultural and horticultural association, LTO Nederland, in June last year.

    Henk Staghouwer, the former Dutch agriculture minister appointed to see through the plans by Mark Rutte, resigned in September last year after a tumultuous summer fraught with mass demonstrations, admitting that upon reflection he was not “the right person to oversee the tasks in front of me.”

    Regional elections for the Dutch Senate are scheduled to take place on March 15.

    Tyler Durden
    Tue, 03/14/2023 – 02:00

  • Mike Wilson Flips Back To Bearish, Says "Sell Any Bounces Until We Make New Bear Market Lows"
    Mike Wilson Flips Back To Bearish, Says “Sell Any Bounces Until We Make New Bear Market Lows”

    A lot has changed since last Monday; in fact pretty much everything was flipped on its head after the two sudden, shocking bank failures over the past 72 hours – events which offered a sideways excuse to those who were bullishly biased – if only for tactical reasons – heading into last week, even though stocks dumped well before the small bank contagion, courtesy of Powell’s Congressional testimony which came out blisteringly hot.

    One such “tactical” bull was Morgan Stanley’s Mike Wilson who after 9 consecutive weeks of beating the bearish drum took a stab at turning bullish, telling the bank’s clients that “one will have to take their own view” of what the fundamentals and technicals suggest (after calling for a sharp drop in stocks for nearly three months which never materialized) and adding that “we could see further upside if the US dollar and interest rates continue their fall from Friday with next resistance for the S&P 500 at 4150 under such conditions.”

    Well, we got both a weaker dollar and lower rates – and in spades – in the past few days, but of course there was a catalyst – namely catastrophic contagion in the regional banking sector after SIVB and SBNY both collapsed, sending shockwaves across the market.

    In any case, after the recent shocking events, Wilson has quickly purged his brief flirtation with “tactical” bullishness, and since he no longer expects stocks to rise (which some sarcastically said was the catalyst why stocks dumped) is once again a die hard member of the “doom and gloom” camp – curiously even as the Fed hiking cycle now seems to lie in ruins with the 2Y absolutely clobbered in the past 3 days at the fastest pace since 1987’s Black Monday.

    In his latest Weekly Warm-up note, the Morgan Stanley strategist writes that “with the unwind of a major bank (SVB) last week and now another (SBNY) over the weekend, it’s clear that the impacts of the Fed’s policy tightening are being felt.” And while the Fed’s intervention to backstop all uninsured deposits at these troubled institutions should help to prevent any further bank runs according to Wilson, he thinks “it does little to change the bigger picture of slowing growth that is already upon us” which of course is ironic because now – more than ever – the Fed is that much closer to capitulating on its hawkishness, and the moment it does so will send stocks limit up.

    For Wilson, however, that is not something to lose sleep over, and he writes that “the cost of deposits has been on the rise for months and the events of last week are likely to put further upward pressure on those costs. Furthermore, Senior Loan Officer Surveys on lending standards have tightened considerably over the past 6 months and should only tighten further.”

    As a result, he expects an “Equity Risk Premium Re-rating… As we have noted for months, we believe the rally from October was always just another bear market rally that would ultimately fade. The end of bear markets are typically punctuated by an event that accelerates the market’s pricing of the true downside in earnings.”

    He then once again makes the claim that his view on earnings is still “very much out of consensus” even though in reality there is nothing that is more consensus than an earnings recession, for Wilson however that is not the case and he believes that it will get “properly priced via the Equity Risk Premium which has remained well below fair value. If such a period of adjustment has begun, one should expect at least a 200bps rise in the ERP from the recent lows of 150bps.”

    This, again, as has been the case for the past 3 months, is the basis for his bearish bias, and he writes that “such a rise [in the ERP] would take the NTM P/E to 13-15x depending on how Treasury yields (and the Fed) react to this growth scare. That equates to significant downside from current levels.”

    Digging a little deeper into his latest note, Wilson explains what – in his view – the collapse of the two banks means for markets:

    First, we would remind readers that Fed policy works with long and variable lags.

    Second, the pace of Fed tightening over the past year is unprecedented when one considers that the Fed has been engaged in aggressive quantitative tightening while raising the Fed Funds Rate by almost 500bps.

    Third, the focus on “market based” measures of Financial Conditions may have lulled both investors and the Fed itself into thinking policy tightening had not yet gone far enough even though more traditional measures like the yield curve have been flashing warnings for the past 6+months. In fact, since mid October of last year, the market based financial conditions measures actually loosened considerably until the upward surprise on January payrolls was released. Since then, financial conditions have tightened again as equities and other risk markets sold off. However, at no point during this time did the trusty yield curve flinch. Instead, it has steadily inverted further, closing last week near its lowest point of the cycle at -120bps.

    Wilson next points out one of the key catalysts behind the bank failures, namely that for the longest time banks failed to pass through higher rates to depositors (especially giant banks like JPM), however that changed recently and the small banks were the first to get whacked, to wit:

    Over the past year, bank funding costs have not kept pace with the higher Fed Funds Rate allowing banks to create credit at profitable NIMs. In short, most banks have been paying well below market rates because depositors have been slow to realize they can get a much better rate elsewhere. But, that has changed more recently with depositors deciding to pull their money from traditional banks and putting it into higher yielding securities like money markets, T-Bills and the like. We expect that trend to continue unless banks decide to raise the rate they pay depositors. That means lower profits and likely lower loan supply.

    Said deposit flight coupled with the fact that loan standards have been tightening sharply tightening as per the latest SLOOS report, makes Wilson believe that tightening “is likely to become even more prevalent given last week’s events and that poses headwinds for money supply, and consequently, economic and earnings growth.” In other words, the MS strategist believes that “it’s now harder to hold the view that growth will prove to be ok in the face of the fastest Fed tightening cycle in modern times. Secondarily, the margin deterioration we have been discussing for months is still getting worse. Any top line short fall will only exacerbate this negative operating leverage dynamic, in our view.”

    Wilson’s bottom line is that Fed policy works with long and variable lags: “many of the key variables used by the Fed and investors to judge whether Fed policy changes are having their desired effect are backward looking–i.e., employment and inflation metrics. Forward looking survey data are often much better at telling us what to expect rather than what is currently happening. On that score, the picture is pessimistic about where growth is likely headed, especially for earnings. Rather than a random or idiosyncratic shock, we view last week’s events as just one more supporting factor for our negative earnings growth outlook–i.e. it only exacerbates key headwinds like credit/money supply growth. In short, Fed policy is starting to bite, and it’s unlikely to reverse even if the Fed were to pause its rate hikes or quantitative tightening–i.e., the die is cast for further earnings disappointments relative to consensus and company expectations.”

    His conclusion:

    We suggest selling any bounces on a government intervention to quell the immediate liquidity crisis at SVB and other institutions until we make new bear market lows, at a minimum. Furthermore, we do think that tighter credit availability from banks will weigh on small cap companies more significantly, and last week’s underperformance by the small cap indices supports that view and further throws cold water on the new bull market narrative we have been hearing from others over the past few months.

    While we actually agree – for once – with Wilson that Fed policy is starting to bite – and how can it not when the “Credit Event” that always accompanies rate hikes which we have been warning about since early 2022 finally kicked in…

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    … and it is always credit events that force the Fed to end its tightening cycle, where we disagree is his argument that “even if the Fed were to pause its rate hikes or quantitative tightening” which it will in just over a week according to Nomura, “the die is cast for further earnings disappointments relative to consensus and company expectations.”

    Yes, the die may be cast for the economy and company earnings, but when it comes to the markets, investors will now sniff out not only the pause but the pivot and the rate cuts – something they are already doing by pricing in 65bps of rate cuts by September, a whopping collapse from 110bps of rate hikes as recently as last Thursday.

    The point being: we agree with Wilson that it’s about to get worse – in a deflationary sense – for the broader economy, and thus earnings, where we disagree is in the market’s reaction because while earnings may collapse and growth may collapse, the Fed will react much more promptly this time now that banks are failing, and will be willing to ignore some latent inflation if it means banking sector stability. And once the Fed capitulates, hold on to your hats as 16x PE are repriced to 20x or more as the muscle memory from the Covid shock kicks in.

    And while we see Mike Wilson’s point, we have long been much more vocal supporters of the (much more accurate) views and predictions made by that other Michael – BofA’s Hartnett – who once again hit the bullseye with his preview of recent events, first warning on Feb 18 that “Fed Will Tighten Untill Something Breaks… And Stocks Will Swoon To 3,800 By March 8” which was absolutely spot on…

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    … and which he followed up by saying that ‘”The End Of The Bear Market Will Coincide With A Credit Event””…

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    … a credit event the likes of which we just had, and now the only missing link is for the Fed to admit as much and restart  the only game in the centrally-planned town.

    Michael Wilson’s full note can be found here.

    Tyler Durden
    Mon, 03/13/2023 – 23:57

  • Silicon Valley Bank Crisis: The Liquidity Crunch We Predicted Has Now Begun
    Silicon Valley Bank Crisis: The Liquidity Crunch We Predicted Has Now Begun

    Authored by Brandon Smith via Alt-Market.us

    There has been an avalanche of information and numerous theories circulating the past few days about the fate of a bank in California know as SVB (Silicon Valley Bank). SVB was the 16th largest bank in the US until it abruptly failed and went into insolvency on March 10th. The impetus for the collapse of the bank is tied to a $2 billion liquidity loss on bond sales which caused the institution’s stock value to plummet over 60%, triggering a bank run by customers fearful of losing some or most of their deposits.

    There are many fine articles out there covering the details of the SVB situation, but what I want to talk about more is the root of it all. The bank’s shortfalls are not really the cause of the crisis, they are a symptom of a wider liquidity drought that I predicted here at Alt-Market months ago, including the timing of the event.

    First, though, let’s discuss the core issue, which is fiscal tightening and the Federal Reserve. In my article ‘The Fed’s Catch-22 Taper Is A Weapon, Not A Policy Error’, published in December of 2021, I noted that the Fed was on a clear path towards tightening into economic weakness, very similar to what they did in the early 1980s during the stagflation era and also somewhat similar to what they did at the onset of the Great Depression. Former Fed Chairman Ben Bernanke even openly admitted that the Fed caused the depression to spiral out of control due to their tightening policies.

    In that same article I discussed the “yield curve” being a red flag for an incoming crisis:

    “…The central bank is the largest investor in US bonds. If the Fed raises interest rates into weakness and tapers asset purchases, then we may see a repeat of 2018 when the yield curve started to flatten. This means that short term treasury bonds will end up with the same yield as long term bonds and investment in long term bonds will fall.”

    As of this past week the yield curve has been inverted, signaling a potential liquidity crunch. Both Jerome Powell (Fed Charman) and Janet Yellen (Treasury Secretary) have indicated that tightening policies will continue and that reducing inflation to 2% is the goal. Given the many trillions of dollars the Fed has pumped into the financial system in the past decade as well as the overall weakness of general economy, it would not take much QT to crush credit markets and by extension stock markets.

    As I also noted in 2021:

    “We are now at that stage again where price inflation tied to money printing is clashing with the stock market’s complete reliance on stimulus to stay afloat. There are some that continue to claim the Fed will never sacrifice the markets by tapering. I say the Fed does not actually care, it is only waiting for the right time to pull the plug on the US economy.”

    But is that time now?  I expanded on this analysis in my article ‘Major Economic Contraction Coming In 2023 – Followed By Even More Inflation’, published in December of 2022. I noted that:

    “This is the situation we are currently in today as 2022 comes to a close. The Fed is in the midst of a rather aggressive rate hike program in a “fight” against the stagflationary crisis that they created through years of fiat stimulus measures. The problem is that the higher interest rates are not bringing prices down, nor are they really slowing stock market speculation. Easy money has been too entrenched for far too long, which means a hard landing is the most likely scenario.”

    I continued:

    “In the early 2000s the Fed had been engaged in artificially low interest rates which inflated the housing and derivatives bubble. In 2004, they shifted into a tightening process. Rates in 2004 were at 1% and by 2006 they rose to over 5%. This is when cracks began to appear in the credit structure, with 4.5% – 5.5% being the magic cutoff point before debt became too expensive for the system to continue the charade. By 2007/2008 the nation witnessed an exponential implosion of credit…”

    Finally, I made my prediction for March/April of 2023:

    “Since nothing was actually fixed by the Fed back then, I will continue to use the 5% funds rate as a marker for when we will see another major contraction…The 1% excise tax added on top of a 5% Fed funds rate creates a 6% millstone on any money borrowed to finance future buybacks. This cost is going to be far too high and buybacks will falter. Meaning, stock markets will also stop, and drop. It will likely take two or three months before the tax and the rate hikes create a visible effect on markets. This would put our time frame for contraction around March or April of 2023.”

    We are now in the middle of March and it appears that the first signs of liquidity crisis are bubbling to the surface with the insolvency of SVB and the shuttering of another institution in New York called Signature Bank.

    Everything is tied back to liquidity. With higher rates, banks are hard-pressed to borrow from the Fed and companies are hard-pressed to borrow from banks. This means companies that were hiding financial weakness and exposure to bad investments using easy credit no longer have that option. They won’t be able to artificially support operations that are not profitable, they will have to abandon stock buybacks that make their shares appear valuable and they will have to initiate mass layoffs in order to protect their bottom line.

    SVB is not quite Bear Stearns, but it is likely a canary in the coal mine, telling us what is about to happen on a wider scale. Many of their depositors were founded in venture capital fueled by easy credit, not to mention all the ESG related companies dependent on woke loans. That money is gone – It’s dead. Those businesses are quietly but quickly crumbling which also conjured a black hole for deposits within SVB. It’s a terribly destructive cycle. Surely, there are numerous other banks in the US in the same exact position.

    I believe this is just the beginning of a liquidity and credit crisis that will combine with overt inflation to produce perhaps the biggest economic crash America has ever seen.  SVB’s failure may not be THE initiator, only one among many. I suspect that in this scenario larger US banks may avoid the kind of credit crash that we saw with Bear Stearns and Lehman Brothers in 2008. But, contagion could still strike multiple mid-sized banks and the effects could be similar in a short period of time.

    With all the news flooding the wire on SVB it’s easy to forget that all of this boils down to a single vital issue: The Fed’s stimulus measures created an economy utterly addicted to easy and cheap liquidity. Now, they have taken that easy money away. In light of the SVB crash, will the central bank reverse course on tightening, or will they continue forward and risk contagion?

    For now, Janet Yellen and the Fed have implemented a limited backstop and a guarantee on deposits at SVB and Signature. This will theoretically prevent a “haircut” on depositor accounts and lure retail investors with dreams of endless stimulus.  It is a half-measure, though – Central bankers have to at least look like they are trying. 

    SVB’s assets sit at around $200 billion and Signature’s assets are around $100 billion, but what about interbank exposure and what about the wider implications?  How many banks are barely scraping by to meet their liquidity obligations, and how many companies have evaporating deposits?  The backstop will do nothing to prevent a major contagion.

    There are many financial tricks that might slow the pace of a credit crash, but not by much.  And, here’s the kicker – Unlike in 2008, the Fed has created a situation in which there is no escape. If they do pivot and return to systemic bailouts, stagflation will skyrocket even more. If they don’t use QE, then banks crash, companies crash and even bonds become untenable, which puts the world reserve status of the Dollar under threat. What does that lead to? More stagflation. In either case, rapidly rising prices on most necessities will be the consequence.

    How long will this process take? It all depends on how the Fed responds. They might be able to drag the crash out for a few months with various stop-gaps. If they go back to stimulus then the banks will be saved along with equities (for a while) but rising inflation will suffocate consumers in the span of a year and companies will still falter. My gut tells me that they will rely on contained interventions but will not reverse rate hikes as many analysts seem to expect.

    The Fed will goose markets up at times using jawboning and false hopes of a return to aggressive QE or near-zero rates, but ultimately the trend of credit markets and stocks will be steady and downward.  Like a brush fire in a wind storm, once the flames are sparked there is no way to put things back the way they were.  If their goal was in fact a liquidity crunch, well, mission accomplished.  They have created that exact scenario.  Read my articles linked above to understand why they might do this deliberately.

    In the meantime, it appears that my predictions on timing are correct so far. We will have to wait and see what happens in the coming weeks. I will keep readers apprised of events as new details unfold.  The situation is rapidly evolving.

    Tyler Durden
    Mon, 03/13/2023 – 23:20

  • 'Goosebumps' Author R.L. Stine Accuses Publisher Of Progressive 'Censorship'
    ‘Goosebumps’ Author R.L. Stine Accuses Publisher Of Progressive ‘Censorship’

    Authored by Naveen Athrappully via The Epoch Times (emphasis ours),

    The author of the popular horror book series “Goosebumps” has recently admitted to being ignorant about some versions of his books being edited by the publisher.

    Florida Governor Ron DeSantis’s book “The Courage to Be Free: Florida’s Blueprint for America’s Revival,” for sale on a store shelf on Feb. 28, 2023 in Titusville, Florida. (Joe Raedle/Getty Images)

    American novelist R.L. Stine is the creator of the Goosebumps series of books, which is considered the second-highest selling in the world, trailing only Harry Potter. Goosebumps is estimated to have sold over 300 million copies worldwide. During a 2018 ebook re-release, publisher Scholastic edited the books to align with progressive ideologies that reflect a leftist version of social justice, diversity, and gender equality. There were rumors that Stine made the edits, but the author has refuted it.

    “The stories aren’t true. I’ve never changed a word in Goosebumps. Any changes were never shown to me,” Stine said in a March 7 tweet. He was replying to another Twitter user’s post, which said, “The fact he supports censorship and the alteration of works of art is quite disturbing. How shameful.”

    The 1996 book “Attack of the Jack-O’-Lanterns” described a character as “tall and good-looking, with dark brown eyes and a great, warm smile.” It has now been changed to “tall and good-looking, with brown skin, dark brown eyes, and a great, warm smile.” The line “all four people were very overweight” was changed to “All four people were huge,” cited the British newspaper The Times.

    “Don’t Go to Sleep!” from 1997 had a boy dismissing Tolstoy’s book Anna Karenina as “girl’s stuff.” The boy dismisses the book in the new version because it is “not interesting.”

    Changing Goosebumps

    The word “crazy,” which was mentioned multiple times in the Goosebumps series, has been removed and replaced with terms like “scary,” “wild,” “silly,” “stressed,” and “lost her mind.” The word “nutcase” has been replaced with “weirdo” while “a real nut” has been changed to “a real wild one.

    Scholastic, the world’s largest publisher and distributor of children’s books, insists the edits were necessary to keep up with the times. “Scholastic reviewed the text to keep the language current and avoid imagery that could negatively impact a young person’s view of themselves today, with a particular focus on mental health,” said the publisher, according to The Times.

    A line from the 1997 book “I Live in Your Basement” that originally said, “did he really expect me to be his slave—forever?” has been changed to “did he really expect me to do this—forever?” removing the word “slave.”

    A character from the 1998 novel “Bride of the Living Dummy” was originally dressed as a clown with black rings painted around his eyes. The color of the rings has been changed to red.

    Read more here…

    Tyler Durden
    Mon, 03/13/2023 – 23:00

  • Jan. 6 Attorney Alleges FBI Criminally Altered Evidence, Requests Special Master Review Of Leaked Messages
    Jan. 6 Attorney Alleges FBI Criminally Altered Evidence, Requests Special Master Review Of Leaked Messages

    Authored by Gary Bai via The Epoch Times (emphasis ours),

    Rogers Roots, an attorney representing Dominic Pezzola, a Jan. 6, 2021, Capitol breach defendant, alleged on Sunday that the FBI had committed crimes by altering evidence and requested that the court appoint a special master to review the evidence.

    Protesters loyal to President Donald Trump rally at the U.S. Capitol in Washington on Jan. 6, 2021. (AP Photo/ Jose Luis Magana)

    Roots’s move came days after the testimony of FBI Special Agent Nicole Miller, who was involved in the agency’s investigations of the Jan. 6 defendants. When cross-examining Miller, Nick Smith, an attorney representing Proud Boys member Ethan Nordean (listed as co-defendant on Pezzola’s case), revealed classified FBI emails that were hidden in a tab in an Excel spreadsheet, which included a directive to Miller to “destroy” 338 pieces of evidence and “edit out” an FBI agent from an informant report.

    “Destroying evidence is a federal crime. It actually falls under a federal crime under more than one statute. The same goes with altering documents, altering records, that is a federal crime,” the John Pierce Law attorney told The Epoch Times in an interview on Sunday.

    In a filing on Sunday, Roots requested that Timothy J. Kelly, a Trump appointee presiding over the case, either dismiss the case in its entirety or appoint a special master to independently review the FBI messages that were revealed in court.

    “The unceremonious and uninhibited nature of Miller’s discussion of committing these serious crimes suggests an FBI culture of corruption and lawlessness that must be immediately stopped, and fully investigated,” Roots said in the filing.

    “Accordingly, this case must be dismissed en toto and with prejudice,” Roots’s filing continues. “Even if the Court were to overlook this massive trail of FBI corruption and the trial were to proceed, defendants have a right to cross-examine Agent Miller regarding all of these crimes, her missing emails, her discussions of violating defendants’ 6th amendment rights, her discussions of evidence tampering, and her discussions of altering documents involving [confidential human sources] in this case.”

    “All January 6 prosecutions should be paused for evidentiary hearings and investigations by a Special Master and Special Counsel,” the filing reads.

    The Leaked Messages

    A key question about these leaked messages is whether they fall under the scope of evidence in the case.

    Roots said in the filing that the messages show a violation of due process, reiterating his argument in an earlier filing that the FBI’s monitoring of communications between a co-defendant, Zachary Rehl, and his attorney violated the Sixth Amendment, which prohibits invasion of the right to counsel (Matter of Fusco v. Moses).

    “Miller’s hidden messages reveal casual discussions among the FBI regarding the monitoring of codefendant Rehl’s trial strategy, Rehl’s defenses and ‘interesting’ points, and ways the government can get around Rehl’s defenses,” Roots said in the Sunday filing.

    In the filing, Roots requested the court dismiss Pezzola’s case with prejudice, appoint a special counsel, appoint a special master, schedule extensive evidentiary hearings, and release Pezzola from custody.

    The DOJ, on the other hand, said that because Rehl and his attorney were communicating over a monitored prison system, they waived the right to attorney-client privileges.

    “The government has not obtained any privileged communications between defendant Rehl and Moseley,” the government wrote in response to Roots’s contentions in a filing on Sunday. “As the government explained in a separate filing … Rehl and Moseley made a fully informed choice to communicate with one another over a monitored jail email system. In doing so, they waived any privilege.”

    Read more here…

    Tyler Durden
    Mon, 03/13/2023 – 22:00

  • The Bank Crisis Has Democrats Scrambling Behind The Scenes To Find A Scapegoat
    The Bank Crisis Has Democrats Scrambling Behind The Scenes To Find A Scapegoat

    Democratic representatives are scrambling in the wake of the potentially contagious Silicon Valley Bank implosion, looking for a way to divert attention away from them should the crisis expand.  

    One avenue for scapegoating the event that has been suggested among Dems and the media is to blame a 2018 law that eased Dodd-Frank capital requirements for midsize and small banks.  Republicans led the effort to pass the law, which President Donald Trump signed, but 33 House Democrats and 17 Senate Democrats also voted for it. 

    No mention, of course, of the cancerous exposure SVB had to numerous woke investments through venture capital, including money losing ESG related projects, climate change-based companies and World Economic Forum stakeholder capitalism projects.

    The Dems have found their narrative, which is an old narrative:  “The conservatives did it.”

    What Democrats do not seem to understand is that the easing of Dodd-Frank capital requirements was in direct response to the Federal Reserve’s announced plan to tighten liquidity and raise interest rates through 2018.  With more expensive credit and a shrinking Fed balance sheet, reducing requirements for bank buffers was one of the few ways to prevent the stimulus addicted lending sector from plummeting.  The extra capital also allowed banks to continue lending to companies that engage in stock buybacks, keeping stock markets afloat.

    With a larger capital buffer even more liquidity dries up, revealing the true economic weakness underneath that Dems have denied for the past few years.  So, if Biden and the Dems get what they want (more strict capital requirements for banks), then there will be an even swifter collapse of markets and the overall economy due to lack of liquidity.    

    By the end of 2018, markets began to plunge anyway under the strain of higher interest rates, which led to the Fed reversing course, and this seems to be what Democrats are really hoping for.  They have called for endless liquidity measures and have consistently demanded lower rates and looser monetary policy.  However, when Donald Trump’s Administration called for rate cuts during his term, Dems attacked.  Once again, when Republicans do it, it’s wrong; when they do it, it’s good policy.  

    Another issue to consider is that each successive program by the Fed to employ bailouts and QE accelerates the inflation crisis.  While both sides of the aisle seem to want helicopter money when they are in power so they can boast about rising stock markets and improved employment, the Dems are now facing a systemic stagflationary event; the same event they originally claimed did not exist.  This means that any pursuit of new QE in the face of a credit crunch would lead to an immediate spike in inflation once again, crushing the middle class.  

    Are Democrats willing to accept responsibility for something like that?  Not a chance.

    The Biden Administration has so far taken full credit for the slowdown of consumer inflation as well as the shrinking deficit, but these changes are only due to the tightening actions of the central bank which sets policy independent of the White House.  Democrats can’t have it both ways – They can’t take credit for reduced inflation when the Fed tightens policy against their wishes, and then not take credit for the consequences of higher inflation when they badger the Fed to inject more stimulus.

    The only recourse for the political left is to somehow lay the blame on conservatives no matter which way the wind blows, inflation or deflation.   

    Emergency congressional hearings have been organized to determine the cause of the SVB crisis and the course of action needed.  Democrats including Sen. Sharrod Brown and Rep. Maxine Waters were quick to applaud the backstop initiated by the Fed and the Treasury Department, attempting to calm market concerns and reassure investors and depositors that all is well.  Maxine Waters stated that Republicans and Democrats needed to “work together to protect the safety of the financial system”, which is likely a thinly veiled assertion that Republicans must support raising the debt ceiling and commit to even more spending.  

    Biden took a slightly different tone, vowing to hold the people who caused the mess responsible, specifically referring to Republicans.  Of course, to legitimately hold the true culprits responsible would require that Biden punish himself – As it was the Fed along with the Obama/Biden Administration that launched the ongoing stimulus bonanza in 2008/2009.  Obama and Biden doubled the national debt from $10 trillion to $20 trillion in the span of a mere eight years.  The normalization of fiat money creation to avoid economic consequences has created the very inflationary crisis and banking weakness we are facing today. 

    And, if banks cannot withstand even a moderate rise in interest rates and reduced liquidity because of their addiction to Fed stimulus, then it is fitting if the system crashes under a new Biden regime.

    Tyler Durden
    Mon, 03/13/2023 – 21:40

  • Victor Davis Hanson: The March Madness Of The President
    Victor Davis Hanson: The March Madness Of The President

    Authored by Victor Davis Hanson via AmGreatness.com,

    Joe Biden’s political utility and near senility serve as exemptions for his often sexist, racist, and creepy riffs…

    Another couple of weeks, another bout of madness from Joe Biden and his team.

    Of recent Biden delusions, consider:

    Biden went off in one of his impromptu Corn Pop, or “beat-up-Trump-behind-the-bleachers” fables. These often slurred and nearly unintelligible tales characteristically virtue signal Biden’s own victimhood and “courage.” 

    They are interspersed with his bizarre propensity for eerie female contact. So we see or hear of his long record of blowing into the ears and hair, or squeezing the necks of young girls. He hugs, for far too long, mature women. He can call out among a crowd an anonymous attractive teen stranger. Or, recently he relates an incoherent but quasi-sexual vignette. 

    So Joe recalled his patient days in his usual off-topic “no lie/not kidding/no joke” manner (i.e., tip offs that he’s lying). He told us that a noble nurse once would “come in and do things that I don’t think you learn in medical school—in nursing school.” The president got a nervous laugh from the apparent quasi-pornographic reference (but then again Joe is excused because he is a “feminist”), before he detailed her technique:  

    She’d whisper in my ear.  I didn’t—couldn’t understand her, but she’d whisper, and she’d lean down. She’d actually breathe on me to make sure that I was—there was a connection, a human connection.

    A woman leaning over to blow into a prone man’s ear certainly constitutes a “human connection.” Yet all of Joe’s fables have different Homeric-style retellings. Two years ago he claimed that the same nurse in question actually blew into his nostrils. What a strange air-pressure technique that must have entailed for a person recovering from brain surgery. But perhaps it was consistent with biblical references to God blowing the spirit of life into the nose of man.

    About a week later, referencing that hospital stay, Biden added that doctors “had to take the top of my head off a couple times, see if I had a brain”—a reference that did not reassure the nation he is not enfeebled. 

    No one in the media had much of a reaction because Joe Biden’s political utility and near senility serve as exemptions for his often sexist, racist, and creepy riffs. 

    Instead, the media wrote off the nurse breathing into good ol’ Joe’s orifices as belonging to the same weird genre that a while back gave us inner-city kids stroking the golden hairs on Joe’s tan legs, or the shower revelations of Ashley Biden’s diary, or his “you ain’t’ black,” “put y’all back in chains,” and “junkie” sorts of racial condescension (e.g., “Why the hell would I take a test? C’mon, man. That’s like saying you, before you got on this program, you take a test where you’re taking cocaine or not. What do you think? Huh? Are you a junkie?”). 

    Joe also blustered to a crowd during Black History Month, “I may be a white boy, but I’m not stupid.” 

    The crowd laughed at the idea that the jester Biden believes white people are usually stupid, but that he, Joe, the exception to his race, is not stupid, despite being white. At least Biden finally referenced himself as “boy.” Usually he has used that racial putdown for prominent blacks like Maryland Governor Wes Moore or a senior White House advisor Cedric Richmond.

    The February-March madness of Joe was not through. Sometimes, his venom renders him disgustedly comic, as when he took the occasion of mass American deaths from fentanyl on his watch, to chuckle that the carnage was at least worse under Trump (an abject lie): 

    ‘I should digress, probably. I’ve read, she [Rep. Marjorie Taylor Greene], she was very specific recently, saying that a mom, a poor mother who lost two kids to fentanyl, that, that I killed her sons. Well, the interesting thing is that fentanyl they took came during the last administration.’ Followed by the Biden laugh.

    Apparently, 100,000 dead at least deserves from Joe a “Trump did it” chuckle.

    Joe, for the third time in two years, tripped and nearly fell ascending the ramp of Air Force One. At some point even his supporters will concede that when octogenarians repeatedly stumble and fall, if not put under careful watch or provided a walker, it is only a matter of time until they break a hip and become bedridden.

    In another replay, once again Biden finished his remarks, turned around to exit—and had no idea where he was going to go or whose invisible hand he was supposed to shake.

    Amid all this, Biden more or less stuck to his now tired rhetorical themes. 

    One is the serial denunciation of the MAGA Republicans. Usually, he trashes them as semi-fascists or un-American, often in the context of his “unity speeches.” After calling for reconciliation, bipartisanship, and unity, Joe then usually tightens his face, grimaces, and starts yelling about the MAGA dregs and chumps. 

    If Biden is really angry, he adds the intensive adjective “Ultra” for the MAGAites. He gets particularly incensed when referencing the one percent who “don’t pay their fair share” (the one percent pays over 40 percent of all income tax revenues). Biden is oblivious that the entire Biden clan is under popular suspicion of not reporting all of the millions of dollars in quid pro quos leveraging they raked in from foreign governments without registering as their agents.

    Note that his entire team, when stung by charges of incompetency or illegality, usually follows Joe’s tactic of “Trump did it.” So when Pete Buttigieg was criticized for ignoring the East Palestine rail wreck and reminded of his past serial transportation failures, junkets, and incoherent systemic racism charges, he retreated to blaming Trump for the derailment. 

    Buttigieg falsely claimed that Trump’s past lifting of particular electric railcar brake regulations caused the wheel bearing failure in East Palestine, a lie that even members of his department could not stomach.

    Two, Joe creates elaborate fables. In the past two weeks, he returned to his civil rights lie that he was a campus activist agitating for racial justice. At least he did not add his usual fillips of being arrested or standing up to apartheid police in South Africa.

    In Biden’s world, he brags he has reduced inflation. Yet when he entered office in January 2021, the annualized inflation rate was 1.7 percent. Two years later in January 2023 inflation went up to 6.4 percent, after hitting a high in June 2022 of 9.1 percent—6.4 percentage points higher than when he took office. In mid-March we will learn of the February 2023 annualized rate, but it is expected to climb back to more than 8 percent. 

    If anyone compares the current price of eggs, or rent, or diesel fuel, or a natural gas heating bill or building materials to their respective costs when Biden entered office, then he would know Biden’s inflation is cumulative and has nearly destroyed the affordability of shelter, food, and fuel—the stuff of life.

    He mentioned lowering heating and cooling costs of American homes through his climate change advocacy. In truth, on average electric rates shot up over 10 percent last year. Natural gas and fuel went even higher to over 25 percent in a single year. 

    Biden talks about his low unemployment rate of 3.4 percent. But it is almost identical to what the Trump Administration achieved—without Biden’s high interest rates and acute inflation—in the months before the massive COVID lockdowns. 

    Moreover, current low employment is largely a reflection of reduced labor participation—due to early retirements, exits during the pandemic, fear of COVID, long COVID, the zoom culture, and most importantly the Biden continuance of massive COVID-era subsidies that discourage employment. The labor participation rate has hit near historic lows under Biden, lower than the pre-COVID rate under Trump. 

    It was not until last month that the Biden economy finally achieved the level of total employed Americans who had been working in January 2020 on the eve of the Covid lockdowns. 

    As far as interest rates for 30-year fixed mortgages, they were 2.9 percent when Biden took office. Now they are currently over 7 percent. 

    In sum, Biden repeats the same patterns of deception: crash the economy as evidenced by many of its major indicators, then when a data point reveals a slight and likely temporary monthly recovery, he brags he “reduced” inflation, interest, or unemployment.

    We also heard during the same week from Biden Attorney General Merrick Garland who was shredded during his testimony to the Senate. He argued that the vastly disproportionate FBI response to violence against abortion centers versus attacks on pro-life groups was only due to the differences between light and dark—literally: abortion centers are attacked during daytime; in contrast, pro-life shelters are attacked during night. 

    Apparently his Justice Department and the FBI shut down at sunset and reawaken at dawn—as if either most violent crime does not occur at night or there is nothing to be done about it when it does. 

    Garland further embarrassed himself when he could not explain the disproportionate use of force in arresting or detaining conservative suspects versus the virtual exemptions given prominent left-wing suspects. 

    Most embarrassingly, when asked why he did not charge mobs that swarmed the homes of conservative Supreme Court justices to influence their decisions—a federal felony—he lamely claimed there were federals protecting the residences.

    In Garland’s world, some criminals committing felonies are completely exempt if law enforcement prevents further violent manifestations of their criminal behavior. So illegally swarm a Supreme Court justice’s residence to influence a court decision, but then stop short of escalating further by the sight of law enforcement—and, presto, you never committed a crime in the first place. 

    Garland finished off his recent nonsense by repeating the lie that five police officers were killed due to the January 6 protests. In fact, none were. Officer Brian Sicknick died of natural causes after the protests were over. The other four committed suicide weeks or even months later and no one has connected their self-induced deaths with any act of the protestors. 

    About the same time, a beleaguered Pete Buttigieg went off on riffs about Tucker Carlson, who, he implied, lacked the grassroots, working-man fides of Buttigieg.

    He claimed that for all the criticism he has endured, he believes that he will be remembered for posterity for his fight against “climate change”—although he did not point to any concrete result in reducing carbon emissions due to his singular policies. 

    In fact, Buttigieg will be known but for other characteristics: He repeatedly emphasizes his identity politics gay stature both to note his supposedly pathbreaking courage and to claim victimhood when attacked. He sees transportation through the lens of race and so chases the unicorn of white privilege, whether concerning past freeway routes or the makeup of current construction crews (falsely charging that white men are overrepresented on them). Under his tenure as Transportation Secretary, the country experienced dangerous supply interruptions, ossified ports, and harbor-bound trains robbed in Wild West fashion. 

    Buttigieg’s diversity mandates either did nothing to ameliorate, or actually led to, a series of near-miss airline crashes, the complete shutdown of the airline industry due to computer glitches and weather, the implosion for a week of Southwest Airlines, the East Palestine derailment disaster, and labor interruptions. In all these cases he either was on leave or a junket, wrote them off as Trump’s fault, or contextualized them as no big deal. 

    Delusional Homeland Security Secretary Alejandro Majorkas has declared the border closed and the nation secure, even as 100,000 Americans per year have died from overdoses of fentanyl shipped with impunity across the open border by Mexican cartels. When upwards of 7 million aliens flow across the border illegally since Biden took office, it is written off as Trump’s fault. 

    Finally, last week there were several interviews with FBI Director Christopher Wray. He could not explain why his agency goes full military mode to arrest a father and husband for protesting at an abortion clinic while having no clue who has been attacking pro-life shelters. 

    In Wray’s mind, the performance art sweep into Mar-a-Lago, which he claims was not a “raid,” was no different from having Biden’s lawyers quietly conduct their own “investigations” of Biden’s improper removal of classified documents (improper with an asterisk, since no vice president has the president’s legal authority to declassify whatever he wishes). 

    Wray could not explain why the FBI sat on the Biden trove until the midterm election was over and then only acted to further search Biden residences when its own asymmetrical protocols came under fire. 

    Add up the last few weeks, and we learned that Christopher Wray’s FBI is doing splendidly in its even enforcement of the law. Merrick Garland’s Justice Department is absolutely disinterested and treats all sides equally. Alejandro Mayorkas has closed the border and we are now “secure.” Pete Buttigieg is building a legacy for the ages as a climate change crusader.

    And an eloquent and dynamic Joe Biden has compiled an impressive legislative record on his way to a great presidency—with the energy, we are told by Dr. Jill Biden, that is more impressive than any 30-year-old’s.

    Tyler Durden
    Mon, 03/13/2023 – 21:20

  • Big Trouble In Little Banks – Bailout Sparks Buying Panic In Bonds, Bitcoin, & Bullion
    Big Trouble In Little Banks – Bailout Sparks Buying Panic In Bonds, Bitcoin, & Bullion

    The Fed/TSY/FDIC stepped in and saved the world again last night… but nobody told regional banks, whose shares are down dramatically today…

    Admittedly off the lows of the day, but all with multiple trading halts today. FRC, WAL, and MYFW are the highest default risk banks in the Russell 3000 Banks Subsector, according to Bloomberg…

    Source: Bloomberg

    But it’s not just the small banks who are seeing default risk increase, all of the global majors are seeing CDS spreads rise…

    Source: Bloomberg

    And Credit Suisse CDS has never closed higher (and is now more than double the risk than at the peak of the financial crisis)…

    Source: Bloomberg

    With the regional bank index continuing to crash-land…

    After a year of hiking rates and hawkish FedSpeak, all it took to tighten financial conditions drastically was a open-ended facility to bail out the financial system. Bloomberg’s financial conditions index tightened massively overnight…

    Source: Bloomberg

    And the market has completely blown up any hopes that The Fed had for a hawkish path from here with the terminal rate plunging and significant rate-cuts being priced in. For context, the market expected over 110bps of rate-hikes by September on Wednesday, it now believes that by September, rates will be over 65bps lower… “in the words of the Virgin Mary, come again!”

    Source: Bloomberg

    For context, today was the biggest gain in the 3rd ED contact (which is currently the Sept 2023 contract) since 1987…

    Source: Bloomberg

    The shift in the market’s expectation for the Fed’s rate trajectory is simply stunning…

    Source: Bloomberg

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    Stocks rallied after the bailout, but we note that the US Majors were unable to get back to pre-SVB-Fail levels. Small Caps (heavy with financials) have been clubbed like a baby seal…

    Notably, 0DTE players faded the initial rebound in stocks…

    HIRO Indicator | SpotGamma™

    And obviously, financials were the biggest losers. On the flip-side, only defensives were bid (Healthcare and Utes)…

    Source: Bloomberg

    Credit markets blew out today (on a spread basis), exceeding (relatively) the shift in equity risk…

    Source: Bloomberg

    Bonds were aggressively bid across the curve with the short-end a massive outperformer over the last three days.

    Source: Bloomberg

    On the day, the 30Y yields ended unchanged with 2Y down over 50bps..

    Source: Bloomberg

    The 2Y yield is down almost 100bps in the last three days, dropping back below 4.00% – its lowest since Sept 2022…

    Source: Bloomberg

    …the biggest yield drop since ‘Black Monday’ in 1987…

    Source: Bloomberg

    The yield curve steepened dramatically with 2s30s up over 50bps today to their least inverted since mid-Nov…

    Source: Bloomberg

    Well, Powell is officially Volcker: the 2s10s just steepened at the fastest pace since the Volcker economic crematorium unleashed the worst recession since World War 2

    Source: Bloomberg

    The market’s inflation expectations (1Y CPI Swaps) plunged…

    Source: Bloomberg

    Bond volatility (MOVE) exploded today to its highest since June 2009…

    Source: Bloomberg

    Shorter-term, the decoupling between VIX and MOVE from late Feb is starting to unwind, but equity risk has a long way to go…

    Source: Bloomberg

    The dollar dumped down to three-week lows…

    Source: Bloomberg

    As alternative-currencies were sought as safe-havens, sending bitcoin soaring higher (above $24,000)…

    Source: Bloomberg

    And gold spiked above $1900…

    Oil prices puked overnight, with WTI down to a $72 handle before bouncing back, but late on, it started to slide again, ending down over 3%…

    Finally, systemic risk indicators are starting to flash red with FRA-OIS spiking (signaling stress in the banking system)…

    Source: Bloomberg

    And global dollar liquidity is drying up fast…

    Source: Bloomberg

    But Biden said “the banking system was safe”

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    If The Fed’s backstop is so good, and the banking system is so resilient, why are these systemic signals worsening?

    Tyler Durden
    Mon, 03/13/2023 – 21:02

  • Greta Thunberg Deletes Tweet Claiming "Climate Change Will Wipe Humanity" By 2023
    Greta Thunberg Deletes Tweet Claiming “Climate Change Will Wipe Humanity” By 2023

    Greta Thunberg embarrassingly deleted a tweet from 2018 that was connected to an article predicting the extinction of humans by 2023 due to climate change.

    “A top climate scientist is warning that climate change will wipe out all humanity unless we stop using fossil fuels over the next five years,” Thunberg’s tweet read, citing an article from some obscure website that no longer exists.  

    On Saturday, Jack Posobiec first revealed the deleted tweet. 

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    The self-described “autistic climate justice activist” was merely a teenager with no credentials when she touted end-of-the-world prophecies that millions of ‘climate-tards’ believed. Progressive media outlets, ‘green’ lawmakers, corporate execs, and non-governmental organizations praised her for her bold predictions that have turned out to be nothing but lies. 

    Greta is a ‘useful idiot’ for the climate change scam. Every decade a new and improved climate activist emerges. It just so happened that a child replaced former Vice President Al Gore. 

    Recall Gore released a 2006 documentary called “An Inconvenient Truth” that warned global sea level could rise as much as 20 feet “in the near future.”

    The true weakness of the climate movement lies in its intellectually deficient spokespeople, like Greta and Gore. 

    So who comes next? Well, we found the new and improved Greta 2.0. 

    https://platform.twitter.com/widgets.js

    Tyler Durden
    Mon, 03/13/2023 – 21:00

  • As Banking Collapses Erode Trust, Bitcoin Fixes Moral Hazard
    As Banking Collapses Erode Trust, Bitcoin Fixes Moral Hazard

    Authored by Mickey Koss via BitcoinMagazine.com,

    As the underlying issues in our economy are exposed by recent banking failures, Bitcoin stands as a trustless, alternative money…

    https://platform.twitter.com/widgets.js

    As unrealized losses piled up, Silicon Valley Bank (SVB) gradually, then suddenly became insolvent, followed by the collapse of Signature Bank and people beginning to wake up to issues pervading our financial system. Modern day bank runs, though digital, can force banks to sell reserve assets at a loss, inevitably leading to insolvency.

    https://platform.twitter.com/widgets.js

    As Balaji Srinivasan has pointed out, what was once considered the gold standard for risk-free reserve assets is now on the precipice of a potential new banking crisis. Is this the end of the U.S. treasury as we know it?

    If nothing else, the events over the weekend — from SVB’s failure to issues with other financial institutions to alarming intervention by the government — demonstrate just how fragile the system has become, underscoring its dependence upon money printing even as it is being undone by the low-yield, low-interest-rate environment that was caused by the printing in the first place. The dichotomy is stark, but there are lessons to be learned.

    YOU CAN’T TAPER A PONZI: WHY THE LEGACY BANKING SYSTEM IS RIPE FOR FAILURE

    The way the banking system works is, essentially, banks take your deposits and lend them out at higher interest rates than they pay you. They often keep reserves in U.S. treasury bonds, among other things, and everything seems to work until it doesn’t.

    https://platform.twitter.com/widgets.js

    With the Federal Reserve’s tightening cycle, raising interest rates meant decreasing the price of bonds, devaluing banks’ staple reserve asset. When depositors come to redeem their deposits, banks are forced to sell their assets at a loss, eventually becoming unable to stem the bleeding.

    Regional banks will bear the brunt of this hit, as demonstrated by the recent collapse of SVB. Federal regulators are desperately trying to prop up confidence in the system by backing 100% of depositors’ money, but at what cost?

    https://platform.twitter.com/widgets.js

    Depositors are surely already fleeing to the big boys, which will result in a more concentrated and fragile system than before. I think everyone knows deep down that they won’t be able to save every bank customer. Just how much money printing will the public tolerate in the name of financial stability?

    https://platform.twitter.com/widgets.js

    In terms of equity holders, why would anybody want to hold stock in a small bank at this point? If banks fail and the Feds choose to make depositors whole while everybody else suffers, all of the risk is transferred onto everyone but the depositors, incentivizing stock sell offs and eating away at struggling banks’ risk-absorbing capital. This move could force smaller banks into much worse positions than they were before.

    SYSTEMIC TRUST VS. SYSTEMIC TRUSTLESSNESS

    The scenario playing out before us is a stark illustration of what happens when trust starts to break down in a system fundamentally based on the idea of trusting, rather than verifying. In modern times, people think they need to hold their money in banks, but they have to trust the banks to maintain effective risk-management strategies in order to secure their deposits.

    Bitcoin is fundamentally different. You can eliminate reserve requirements, duration and interest rate risks, counterparty risks and the like. There is no trust in Bitcoin. There is only code. It is backed one to one with itself, and as long as you hold your own keys properly, you don’t need to worry about a bank run.

    As companies struggle to make payroll this week, I think this might just be a spark that lights a fire behind Bitcoin. Trustless money might just be the thing that helps to stem the tide of catastrophe in a system where trust appears to be crumbling.

    Tyler Durden
    Mon, 03/13/2023 – 20:40

  • Spring-Breakers Begin South Florida Invasion As Police Prepare For Chaos
    Spring-Breakers Begin South Florida Invasion As Police Prepare For Chaos

    South Florida has been a popular destination for college students during spring break, particularly in cities such as Miami Beach, Panama City Beach, and Fort Lauderdale. However, in recent years, the influx of these visitors has led to overcrowding and rowdy behavior. 

    South Florida law enforcement agencies in Miami-Dade, Broward, and Palm Beach are preparing for potential turmoil that could occur on the streets and beaches.

    Last year, around this time, Miami Beach declared a curfew after a series of shootings, street fights, and stampedes. Using last year as a guide, the chaos could only be days away, perhaps, as early as this weekend. 

    Already, The Sun reports, “packed beaches, plenty of booze flowing, parties raging” in Fort Lauderdale. Here are some of the scenes from the beach town:

    Some Floridians have expressed their concerns about the impending chaos and have said they don’t want spring breakers in their town. 

    https://platform.twitter.com/widgets.js

    Well, too bad. Spring break traffic is already en route to Miami. 

    https://platform.twitter.com/widgets.js

    Individuals who relocated to South Florida from the Northeast to escape the pandemic and chaos of imploding liberal cities might want to stay away from beaches and metro areas in anticipation of what is predicted to be a wild week.

    Tyler Durden
    Mon, 03/13/2023 – 20:20

  • Should The Names Of Stanford Student Disrupters Be Published?
    Should The Names Of Stanford Student Disrupters Be Published?

    Authored by Alan Dershowitz via The Gatestone Institute,

    Once again, a conservative speaker had been shouted down by censorial law students who didn’t want him to speak. This time it was Stanford, last time it was Yale. Then it was Georgetown.

    If the Stanford Dean of diversity, equity and inclusion gets her way, this censorship of conservative speakers will spread to other campuses. Among the worst offenders in this all-too-common censorship fest was Dean Tirien Steinbach. In what appears to be a written statement prepared in advance, she effectively silenced the speaker, federal Judge Kyle Duncan, by monopolizing his space. She sought to justify not inviting speakers who might offend the sensibilities of students who she claims to be responsible for “protecting” and providing “safe spaces” against uncomfortable ideas.

    After paying lip service to free speech, she suggested reconsidering Stanford’s speech policy, repeatedly asked whether “the squeeze is worth the juice”. She questioned whether Judge Duncan, whose opinions and views cause “hurt” to students, should have been invited to speak. Her bottom-line message was that offending some students is worse than allowing others to hear from a controversial speaker. This from a high-ranking administrator who was purporting to speak on behalf of the university.

    The real victims of this censorship were the students who were denied the opportunity to hear Judge Duncan’s full presentation.

    An angry Judge Duncan responded, “Don’t feel sorry for me. I’m a life-tenured judge. What outrages me is that these kids are being treated like dogshit by fellow students and administrators.”

    As the late Justice Thurgood Marshall once observed, “The freedom to speak and the freedom to hear are inseparable; They are two sides of the same coin.”

    To her credit, the dean of the law school, Jenny Martinez, condemned the disrupters, writing, “However well-intentioned, attempts at managing the room in this instance went awry… The way this event unfolded was not aligned with out institutional commitment to freedom of speech.” She gave no indication of whether anyone would be disciplined.

    To be sure, protesting, picketing and even brief heckling of speakers is also protected free speech, but shouting speakers down with the intent to silence them is not.

    It is explicitly prohibited by Stanford’s rules. Yet that’s exactly what occurred without apparent consequences to the disrupters.

    The disrupters also attempted to shame the sponsors of the speech by disclosing their names and subjecting them to harassment. This suggests a possible response to the disrupters. Following the Yale disruptions, some judges have announced that they will no longer hire law clerks from Yale. Similar announcements regarding Stanford are likely. In my view, that amounts to collective punishment of the innocent along with guilty. Many law students from these schools do not agree with disrupting speakers, and they should not be denied clerkships. Instead, the names of the disrupters might be published and made available to potential employers, so they can decide whether they want to hire graduates with such intolerance for diversity of viewpoints.

    I made a similar suggestion about publishing the names of Berkeley law students who voted to ban all Zionists — that is, believers in Israel’s right to exist — from speaking at 14 law school clubs, including feminist, Black and gay organizations.

    As one who well remembers McCarthyite “blacklists,” I’m uncomfortable about publishing the names of student censors. But if they are proud of their very public efforts to silence speakers with whom they disagree, they should be proud to have their names published so that potential employers can have relevant information before they make hiring decisions.

    That would be far better than judges and other employers refusing to hire ANY students from the offending schools.

    Law schools are supposed to teach advocacy skills and a commitment to the rule of law. They should have and enforce vigorous free speech policies. They should not have deans, like Steinbach, who are part of the problem, rather than part of the solution.

    Stanford should apologize to Judge Duncan for the dean’s actions and inactions. He observed that in his view, “This was a set up. She was working with the students.” Stanford should discipline any students who violated its speech policies. Most importantly, it should foster values of diversity of viewpoints, rather than merely diversity of race and ethnicity. Perhaps the law school should appoint a new dean of “diversity of opinions, tolerance for other views and free speech”.

    Tyler Durden
    Mon, 03/13/2023 – 20:00

  • Simon Black: The Unraveling Can Happen In An Instant
    Simon Black: The Unraveling Can Happen In An Instant

    Authored by Simon Black via SovereignMan.com,

    If SVB is insolvent, so is everyone else

    On Sunday afternoon, September 14, 2008, hundreds of employees of the financial giant Lehman Brothers walked into the bank’s headquarters at 745 Seventh Avenue in New York City to clear out their offices and desks.

    Lehman was hours away from declaring bankruptcy. And its collapse the next day triggered the worst economic and financial devastation since the Great Depression.

    The S&P 500 fell by roughly 50%. Unemployment soared. And more than 100 other banks failed over the subsequent 12 months. It was a total disaster.

    These bank, it turned out, had been using their depositors’ money to buy up special mortgage bonds. But these bonds were so risky that they eventually became known as “toxic securities” or “toxic assets”.

    These toxic assets were bundles of risky, no-money-down mortgages given to sub-prime “NINJAs”, i.e. borrowers with No Income, No Job, no Assets who had a history of NOT paying their bills.

    When the economy was doing well in 2006 and 2007, banks earned record profits from their toxic assets.

    But when economic conditions started to worsen in 2008, those toxic assets plunged in value… and dozens of banks got wiped out.

    Now here we go again.

    Fifteen years later… after countless investigations, hearings, “stress test” rules, and new banking regulations to prevent another financial meltdown, we have just witnessed two large banks collapse in the United States of America– Signature Bank, and Silicon Valley Bank (SVB).

    Now, banks do fail from time to time. But these circumstances are eerily similar to 2008… though the reality is much worse. I’ll explain:

    1) US government bonds are the new “toxic security”

    Silicon Valley Bank was no Lehman Brothers. Whereas Lehman bet almost ALL of its balance sheet on those risky mortgage bonds, SVB actually had a surprisingly conservative balance sheet.

    According to the bank’s annual financial statements from December 31 of last year, SVB had $173 billion in customer deposits, yet “only” $74 billion in loans.

    I know this sounds ridiculous, but banks typically loan out MOST of their depositors’ money. Wells Fargo, for example, recently reported $1.38 trillion in deposits. $955 billion of that is loaned out.

    That means Wells Fargo has made loans with nearly 70% of its customer’s money, while SVB had a more conservative “loan-to-deposit ratio” of roughly 42%.

    Point is, SVB did not fail because they were making a bunch of high-risk NINJA loans. Far from it.

    SVB failed because they parked the majority of their depositors’ money ($119.9 billion) in US GOVERNMENT BONDS.

    This is the really extraordinary part of this drama.

    US government bonds are supposed to be the safest, most ‘risk free’ asset in the world. But that’s totally untrue, because even government bonds can lose value. And that’s exactly what happened.

    Most of SVB’s portfolio was in long-term government bonds, like 10-year Treasury notes. And these have been extremely volatile.

    In March 2020, for example, interest rates were so low that the Treasury Department sold some 10-year Treasury notes at yields as low as 0.08%.

    But interest rates have increased so much since then; last week the 10-year Treasury yield was more than 4%. And this is an enormous difference.

    If you’re not terribly familiar with the bond market, one of the most important things to understand is that bonds lose value as interest rates rise. And this is what happened to Silicon Valley Bank.

    SVB loaded up on long-term government bonds when interest rates were much lower; the average weighted yield in their bond portfolio, in fact, was just 1.78%.

    But interest rates have been rising rapidly. The same bonds that SVB bought 2-3 years ago at 1.78% now yield between 3.5% and 5%… meaning that SVB was sitting on steep losses.

    They didn’t hide this fact.

    Their 2022 annual report, published on January 19th of this year, showed about $15 billion in ‘unrealized losses’ on their government bonds. (I’ll come back to this.)

    By comparison, SVB only had about $16 billion in total capital… so $15 billion in unrealized losses was enough to essentially wipe them out.

    Again– these losses didn’t come from some mountain of crazy NINJA loans. SVB failed because they lost billions from US government bonds… which are the new toxic securities.

    2) If SVB is insolvent, so is everyone else… including the Fed.

    This is where the real fun starts. Because if SVB failed due to losses in its portfolio of government bonds, then pretty much every other institution is at risk too.

    Our old favorite Wells Fargo, for example, recently reported $50 billion in unrealized losses on its bond portfolio. That’s a HUGE chunk of the bank’s capital, and it doesn’t include potential derivative losses either.

    Anyone who has purchased long-term government bonds– banks, brokerages, large corporations, state and local governments, foreign institutions– are all sitting on enormous losses right now.

    The FDIC (the Federal Deposit Insurance Corporation, i.e. the primary banking regulator in the United States) estimates unrealized losses among US banks at roughly $650 billion.

    $650 billion in unrealized losses is similar in size to the total subprime losses in the United States back in 2008; and if interest rates keep rising, the losses will continue to increase.

    What’s really ironic (and a bit comical) about this is that the FDIC is supposed to guarantee bank deposits.

    In fact they manage a special fund called Deposit Insurance Fund, or DIF, to insure customer deposits at banks across the US– including the deposits at the now defunct Silicon Valley Bank.

    But the DIF’s balance right now is only around $128 billion… versus $650 billion (and growing) unrealized losses in the banking system.

    Here’s what really crazy, though: where does the DIF invest that $128 billion? In US government bonds! So even the FDIC is suffering unrealized losses in its insurance fund, which is supposed to bail out banks that fail from their unrealized losses.

    You can’t make this stuff up, it’s ridiculous!

    Now there’s one bank in particular I want to highlight that is incredibly exposed to major losses in its bond portfolio.

    In fact last year this bank reported ‘unrealized losses’ of more than $330 billion against just $42 billion in capital… making this bank completely and totally insolvent.

    I’m talking, of course, about the Federal Reserve… THE most important central bank in the world. It’s hopelessly insolvent, and FAR more broke than Silicon Valley Bank.

    What could possibly go wrong?

    3) The ‘experts’ should have seen this coming

    Since the 2008 financial crisis, legislators and bank regulators have rolled out an endless parade of new rules to prevent another banking crisis.

    One of the most hilarious was the new rule that banks had to pass “stress tests”, i.e. war game scenarios to see whether or not banks would be able to survive certain fluctuations in macroeconomic conditions.

    SVB passed its stress tests with flying colors. It also passed its FDIC examinations, its financial audits, and its state regulatory audits. SVB was also followed by dozens of Wall Street analysts, many of whom had previously issued emphatic BUY ratings on the stock after analyzing its financial statements.

    But the greatest testament to this absurdity was the SVB stock price in late January.

    SVB published its 2022 annual financial report after the market closed on January 19, 2023. This is the same financial report where they posted $15 billion in unrealized losses which effectively wiped out the bank’s capital.

    The day before the earnings announcement, SVB stock closed at $250.04. The day after the earnings call, the stock closed at $291.44.

    In other words, despite SVB management disclosing that their entire bank capital was effectively wiped out, ‘expert’ Wall Street investors excitedly bought the stock and bid the price up by 16%. The stock continued to soar, reaching a high of $333.50 a few days later on February 1st.

    In short, all the warning signs were there. But the experts failed again. The FDIC saw Silicon Valley Bank’s dismal condition and did nothing. The Federal Reserve did nothing. Investors cheered and bid the stock up.

    And this leads me to my next point:

    4) The unraveling can happen in an instant.

    A week ago, everything was still fine. Then, within a matter of days, SVB’s stock price plunged, depositors pulled their money, and the bank failed. Poof.

    The same thing happened with Lehman Brothers in 2008. In fact over the past few years we’ve been subjected to example after example of our entire world changing in an instant.

    We all remember that March 2020 was still fairly normal, at least in North America. Within a matter of days people were locked in their homes and life as we knew it had fundamentally changed.

    5) This is going to keep happening.

    Long-time readers won’t be surprised about this; I’ve been writing about these topics for years– bank failures, looming instability in the financial system, etc.

    Late last year I recorded a podcast explaining how the Fed was engineering a financial meltdown by raising interest rates so quickly, and they would have to choose between a rock and a hard place, i.e. higher inflation versus financial catastrophe.

    This is the financial catastrophe, but it’s just getting started. Like Lehman Brothers in 2008, SVB is just the tip of the iceberg. There will be other casualties– not just in banks, but money market funds, insurance companies, and even businesses.

    Foreign banks and institutions are also suffering losses on their US government bonds… and that has negative implications on the US dollar’s reserve status.

    Think about it: it’s bad enough that the US national debt is outrageously high, that the federal government appears to be a bunch of fools incapable of solving any problem, and that inflation is terrible.

    Now on top of everything else, foreigners who bought US government bonds are suffering tough losses as well.

    Why would anyone want to continue with this insanity? Foreigners have already lost so much confidence in the US and the dollar… and financial losses from their bond holdings could accelerate that trend.

    This issue is particularly of mind now that China is flexing its international muscle, most recently in the Middle East making peace between Iran and Saudi Arabia. And the Chinese are starting to actively market their currency as an alternative to the dollar.

    But no one in charge seems to understand any of this.

    The guy who shakes hands with thin air insisted this morning that the banking system is safe. Nothing to see here, people.

    The Federal Reserve– which is the ringleader of this sad circus– doesn’t seem to understand anything either.

    In fact Fed leadership spent all of last week insisting that they were going to keep raising interest rates.

    Even after last week’s banking crisis, the Fed probably still hasn’t figured it out. They appear totally out of touch with what’s really happening in the economy. And when they meet again next week, it’s possible they’ll raise rates even higher (and trigger even more unrealized losses).

    So this drama is far from over.

    Tyler Durden
    Mon, 03/13/2023 – 19:20

  • Michigan Governor Admits COVID-19 Lockdowns Went Too Far
    Michigan Governor Admits COVID-19 Lockdowns Went Too Far

    Michigan Gov. Gretchen Whitmer (D) admitted on Sunday that her administration’s pandemic-era lockdown policies went too far, such as her April 2020 executive order barring most stores from selling gardening supplies, including seeds and plants, to Americans who anted to grow their own fruits and vegetables.

    “There were moments where, you know, we had to make some decisions that in retrospect don’t make a lot of sense, right? If you went to the hardware store, you could go to the hardware store but we didn’t want people to be congregating around the garden supplies,” Whitmer told CNN’s Chris Wallace.

    “People said ‘oh, she’s outlawed seeds.’ It was February in Michigan, no one was planting anyway,” she continued (except it was in April). “But that being said, some of those policies I look back and think, you know, maybe that was a little more than what we needed to do.”

    Whitmer’s office even published a list of prohibited items deemed “not necessary to sustain or protect life,” which couldn’t be sold during the height of the pandemic, and which required that businesses physically restrict customers from certain areas of stores, or to remove nonessential items – including gardening items, flooring materials, furniture and paint.

    Just weeks after Whitmer imposed the statewide controversial ban, the order was rescinded due to widespread backlash, including from the Institute for Justice.

    In a letter (pdf), the non-profit law firm criticized the governor’s “unconstitutional prohibition” for “impeding the rights of the many Michigan families who seek to grow their own food.” -Epoch Times

    Whitmer’s order even banned travel from one residence to another, including vacation properties, rental properties, or second homes within the state.

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    Tyler Durden
    Mon, 03/13/2023 – 19:00

  • Johnstone: Imperial Narrative Managers Always Try To Make Peace Seem Unnatural
    Johnstone: Imperial Narrative Managers Always Try To Make Peace Seem Unnatural

    Authored by Caitlin Johnstone via Medium.com,

    I’ve been ranting all week about the shocking war-with-China propaganda escalation in Australian mainstream media, and I feel like I could easily scream about it for another month without running out of vitriol for the disgusting freaks who are pushing this filth into the consciousness of my countrymen. One really really can’t say enough unkind things about people who are openly trying to pave the way toward an Atomic Age world war; in a remotely sane world such monsters would be driven from human civilization and die cold and alone in the wilderness with nothing but their bloodlust to keep them company.

    One of the most obnoxious things said during this latest propaganda push appeared in the joint statement provided by the five “experts” (read: empire-funded China hawks) recruited by The Sydney Morning Herald and The Age to share their obscenely hawkish opinions in an official-looking media presentation. This paragraph has been rattling around in my head since I first read it:

    “Australia must prepare itself. Most important of all is a psychological shift. Urgency must replace complacency. The recent decades of tranquillity were not the norm in human affairs but an aberration. Australia’s holiday from history is over. Australians should not feel afraid but be alert to the threats we face, the tough decisions we must make and know that they have agency. This mobilisation of mindset is the essential prerequisite to any successful confrontation of China.”

    Do you see what they’re doing there? These professional China hawks are explicitly trying to frame peace as a strange “aberration”, and war as the status quo norm. They’re saying Australians require a “psychological shift” and a “mobilisation of mindset” from thinking peace is normal and healthy to thinking war is normal and healthy.

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    Which is of course ass-backwards and shit-eating insane. Every normal, healthy person regards peace as the default position and violence as a rare and alarming aberration which must be avoided whenever possible.

    We know this is true from our normal human experience of our own personal lives. None of us spend the majority of our time getting into fist fights, for example; anyone who spends most of their waking life physically assaulting people has probably been locked up a long time ago. If you have ever been in a fist fight you will recall that it was experienced as a rare and alarming occurrence, and everything in your body was screaming at you that this was a freakish and unnatural thing which must end as quickly as possible the entire time. In healthy people violence is experienced as abnormal, and its absence is experienced as normal.

    This normal, baseline position is what imperial narrative managers spend their time trying to “psychologically shift” everyone away from, propagandizing us instead into accepting continuous conflict and danger as the norm. Such a shift is beneficial to the empire, to war profiteers, and to professional war propagandists, and is entirely destructive to everyone else. It causes us to accept material conditions which directly harm our own interests, and it makes us crazy and neurotic as a civilization.

    You see it all the time though, like whenever there’s a push to withdraw imperial troops from some part of the Middle East they’ve been in for years, or the slightest discussion of maybe not raising the military budget this year, or skepticism that pouring weapons into a violence-ravaged part of the world is the wisest and most helpful thing to do.

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    Any time we see the slightest beginnings of the tiniest movement toward stepping away from the path of nonstop warmongering and militarism, pundits and politicians begin bleating words like “isolationism” and “appeasement” in an attempt to make calls for de-escalation, demilitarization, diplomacy and detente look freakish and abnormal in contrast to the sane, responsible status quo of hurtling toward nuclear armageddon at full tilt.

    Their job is to abnormalize peace and normalize war, which means our job as healthy human beings is to do the exact opposite. We must help everyone understand the horrors of war and the unfathomable nightmares that can be unleashed by reckless brinkmanship, and help people to understand that peace is what’s healthy and to imagine a future where it is the norm.

    The bad news is that we are pushing against a narrative-manufacturing apparatus that is backed by the might of a globe-spanning empire. The good news is that our vision is the one that’s based on truth, and deep down everyone can sense it. All we need to do to get people viewing peace as normal and war as abnormal is to remind people of what they already know inside.

    *  *  *

    My work is entirely reader-supported, so if you enjoyed this piece please consider sharing it around, following me on Facebook, Twitter, Soundcloud or YouTube, throwing some money into my tip jar on Patreon or Paypal, or buying an issue of my monthly zine. If you want to read more you can buy my books. The best way to make sure you see the stuff I publish is to subscribe to the mailing list for at my website or on Substack, which will get you an email notification for everything I publish. Everyone, racist platforms excluded, has my permission to republish, use or translate any part of this work (or anything else I’ve written) in any way they like free of charge. For more info on who I am, where I stand, and what I’m trying to do with this platform, click here. All works co-authored with my husband Tim Foley.

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    Tyler Durden
    Mon, 03/13/2023 – 18:40

  • DB: "Today's Events Are Consistent With An Imminent US Recession"
    DB: “Today’s Events Are Consistent With An Imminent US Recession”

    One of the better big picture recaps of today’s price action comes from DB FX strategist George Saravelos, who writes that “the market is sending a consistent message today: it fears that a US recession is about to start.”

    Below we excerpt from his note:

    We are now pricing in Fed cuts rather than hikes, the yield curve is bull steepening sharply, commodities and equities are down with cyclicals underperforming.This is all consistent with an imminent US recession.

    Without taking a strong view on whether this will indeed happen, it is worth making three observations.

    • First, a systemic financial event is not a necessary condition for recessionary dynamics. Competition for deposits is likely to become irreversibly more intense in the US banking system going forward, leading to an upward drift in the bank-based cost of financing and an extra layer of tightening hitting the real economy. How large this is remains to be seen but as our economists have highlighted, the starting point of bank lending conditions has in any case already been extremely weak.

    • Second, the dollar is behaving extremely unusually, down against the vast majority of G10 and EM currencies despite a recession priced in. Can this be sustained? If dollar funding and money markets remain well behaved, we argued earlier today the answer is most likely yes. This is an exceptionally unusual cycle where the dollar has front-loaded recessionary pricing far more than any other period in history. What is more, given the relative starting point of monetary policy, there remains asymmetric potential for an interest rate differential narrowing against the USD even in a slower global growth environment. In other words, what matters most for the USD is if the Fed decides to paused then eventually cut.

    • Third, the correlation breakdown between risk appetite and the dollar will put pressure on portfolio construction if sustained. Most asset manager’s asset allocation has over the last decade been constructed on the basis of a negative correlation between the USD and risk appetite. When equities sell-off, the dollar rallies providing natural protection for foreign currency investors and creating an incentive to hold dollar positions unhedged. We highlighted earlier this year how this dynamic was slowly starting to shift. If the dollar entirely stops providing hedging value to underlying US risky asset positions it would likely add another leg of pressure to the USD.

    More in the full note available to pro subs.

    Tyler Durden
    Mon, 03/13/2023 – 18:20

  • China To Host Major Middle East Summit After 'Success' Of Iran-Saudi Deal
    China To Host Major Middle East Summit After ‘Success’ Of Iran-Saudi Deal

    Via The Cradle,

    A high-level gathering of Gulf Arab states and Iranian officials is on track to take place later this year in the Chinese capital Beijing, according to sources that spoke with the Wall Street Journal (WSJ).

    Chinese President Xi Jinping pitched the idea for the summit during a regional summit he attended in Riyadh last December. According to the report published on Sunday, the leaders from the six-country Gulf Cooperation Council (GCC) welcomed Xi’s proposal to reduce tensions with Iran.

    Via AP

    On Friday, Beijing brokered a historic deal to restore relations between Iran and Saudi Arabia. These two superpowers cut ties in 2016 and have historically backed rivaling factions in regional conflicts.

    The agreement was praised across the Global South. It was described by many as a significant power play by China in becoming a top power broker in West Asia at a time when US influence continues to diminish.

    This reality was made evident during last week’s secret talks between Iranian and Saudi officials in Beijing, where, per the WSJ, “all parties agreed not to use English in the negotiations, with speeches and documents conducted in Arabic, Farsi or Mandarin.”

    The agreement gives Riyadh and Tehran two months to hammer out all details before the countries’ foreign ministers meet to sign a finalized deal. Sources say the Iran-GCC summit would occur “sometime after that.”

    According to the report, the deal signed on Friday calls – among other things – for Saudi Arabia to order Iran International to “tone-down critical coverage” of the Islamic Republic. At the same time, Tehran reportedly agreed to “stop encouraging cross-border attacks on Saudi Arabia” by Yemen’s Ansarallah resistance movement.

    Saudi officials have hopes that Beijing can “use its economic ties to influence Iran’s behavior,” as China remains the biggest importer of Iranian oil.

    According to Iran’s state-owned Mehr News Agency, ahead of Friday’s deal, China allowed Tehran to access parts of funds frozen in Chinese banks due to Washington’s “maximum pressure” sanctions campaign.

    During his visit to Riyadh in December, Xi called on Arab states to remain “independent and defend their common interests,” adding that China “supports Arab states in independently exploring development paths suited to their national conditions and holding their future firmly in their own hands.”

    He also vowed to import more oil and natural gas from Gulf Arab states while not interfering in their affairs, a departure from Washington’s long-standing policy of interference and domination.

    Tyler Durden
    Mon, 03/13/2023 – 18:00

  • Late Season Nor'easter Set To Wallop Millions In Northeast
    Late Season Nor’easter Set To Wallop Millions In Northeast

    Besides the regional banking crisis dominating headlines Monday morning, the Northeast is bracing for a late-winter nor’easter that will bring heavy snow, rain, and strong winds. The National Weather Service said the storm’s impacts would begin tonight.

    Heavy snow rates and strong winds up to 50 mph will produce dangerous conditions and might impede travel in parts of the Northeast, the Weather Prediction Center wrote in an early morning update. 

    The heavy-wet nature of the snow, combined with max wind gusts up to 50 mph, will result in scattered to widespread power outages and tree damage. Similar impacts could be felt along the I-95 corridor from New York City to Boston.

     In addition, March Nor Easters tend to favor the more elevated terrain for receiving the heaviest snowfall totals. Snowfall totals greater than 12 inches are expected in the Catskills and southern Adirondacks in New York State, Berkshires and Worcester Hills in Massachusetts, Monadnocks and White Mountains in New Hampshire, and southern Green Mountains in Vermont. Localized maximum totals of 24-30 inches are possible. 

    Widespread minor coastal flooding and beach erosion may be possible through Wednesday as the low-pressure stalls and deepens off the coast of New England.

    Millions of people across Northeastern Pennsylvania, New York, and New England are under winter storm warnings, watches, and advisories. 

    Forecasted snowfall amounts for the Northeast through midweek.

    However, for New York City, Bob Oravec, a meteorologist at the Weather Prediction Center, told NYTimes that the storm’s going to be “predominantly” a rain event for the metro area. 

    Tyler Durden
    Mon, 03/13/2023 – 17:40

  • Hudson: Why The Banking System Is Breaking Up
    Hudson: Why The Banking System Is Breaking Up

    Authored by Michael Hudson,

    The collapses of Silvergate and Silicon Valley Bank are like icebergs calving off from the Antarctic glacier. The financial analogy to the global warming causing this collapse of supporting shelving is the rising temperature of interest rates, which spiked last Thursday and Friday to close at 4.60 percent for the U.S. Treasury’s two-year bonds. Bank depositors meanwhile were still being paid only 0.2 percent on their deposits. That has led to a steady withdrawal of funds from banks – and a corresponding decline in commercial bank balances with the Federal Reserve.

    Most media reports reflect a prayer that the bank runs will be localized, as if there is no context or environmental cause. There is general embarrassment to explain how the breakup of banks that is now gaining momentum is the result of the way that the Obama Administration bailed out the banks in 2008 with fifteen years of Quantitative Easing to re-inflate prices for packaged bank mortgages – and with them, housing prices, along with stock and bond prices.

    The Fed’s $9 trillion of QE (not counted as part of the budget deficit) fueled an asset-price inflation that made trillions of dollars for holders of financial assets – the One Percent with a generous spillover effect for the remaining members of the top Ten Percent. The cost of home ownership soared by capitalizing mortgages at falling interest rates into more highly debt-leveraged property. The U.S. economy experienced the largest bond-market boom in history as interest rates fell below 1 percent. The economy polarized between the creditor positive-net-worth class and the rest of the economy – whose analogy to environmental pollution and global warming was debt pollution.

    But in serving the banks and the financial ownership class, the Fed painted itself into a corner: What would happen if and when interest rates finally rose?

    In Killing the Host I wrote about what seemed obvious enough. Rising interest rates cause the prices of bonds already issued to fall – along with real estate and stock prices. That is what has been happening under the Fed’s fight against “inflation,” its euphemism for opposing rising employment and wage levels. Prices are plunging for bonds, and also for the capitalized value of packaged mortgages and other securities in which banks hold their assets on their balance sheet to back their deposits.

    The result threatens to push down bank assets below their deposit liabilities, wiping out their net worth – their stockholder equity. This is what was threatened in 2008. It is what occurred in a more extreme way with S&Ls and savings banks in the 1980s, leading to their demise. These “financial intermediaries” did not create credit as commercial banks can do, but lent deposits out in the form of long-term mortgages at fixed interest rates, often for 30 years. But in the wake of the Volcker spike in interest rates that inaugurated the 1980s, the overall level of interest rates remained higher than the interest rates that S&Ls and savings banks were receiving. Depositors began to withdraw their money to get higher returns elsewhere, because S&Ls and savings banks could not pay higher their depositors higher rates out of the revenue coming in from their mortgages fixed at lower rates. So even without fraud Keating-style, the mismatch between short-term liabilities and long-term interest rates ended their business plan.

    The S&Ls owed money to depositors short-term, but were locked into long-term assets at falling prices. Of course, S&L mortgages were much longer-term than was the case for commercial banks. But the effect of rising interest rates has the same effect on bank assets that it has on all financial assets. Just as the QE interest-rate decline aimed to bolster the banks, its reversal today must have the opposite effect. And if banks have made bad derivatives trades, they’re in trouble.

    Any bank has a problem of keeping its asset valuations higher than its deposit liabilities. When the Fed raises interest rates sharply enough to crash bond prices, the banking system’s asset structure weakens. That is the corner into which the Fed has painted the economy by QE.

    The Fed recognizes this inherent problem, of course. That is why it avoided raising interest rates for so long – until the wage-earning bottom 99 Percent began to benefit by the recovery in employment. When wages began to recover, the Fed could not resist fighting the usual class war against labor. But in doing so, its policy has turned into a war against the banking system as well.

    Silvergate was the first to go, but it was a special case. It had sought to ride the cryptocurrency wave by serving as a bank for various currencies. After SBF’s vast fraud was exposed, there was a run on cryptocurrencies. Investor/gamblers jumped ship. The crypto-managers had to pay by drawing down the deposits they had at Silvergate. It went under.

    Silvergate’s failure destroyed the great illusion of cryptocurrency deposits. The popular impression was that crypto provided an alternative to commercial banks and “fiat currency.” But what could crypto funds invest in to back their coin purchases, if not bank deposits and government securities or private stocks and bonds? What is crypto, ultimately, if not simply a mutual fund with secrecy of ownership to protect money launderers?

    Silicon Valley Bank also is in many ways a special case, given its specialized lending to IT startups. New Republic bank also has suffered a run, and it too is specialized, lending to wealthy depositors in the San Francisco and northern California area. But a bank run was being talked up last week, and financial markets were shaken up as bond prices declined when Fed Chairman Jerome Powell announced that he actually planned to raise interest rates even more than he earlier had targeted, in view of the rising employment making wage earners more uppity in their demands to at least keep up with the inflation caused by the U.S. sanctions against Russian energy and food and the actions by monopolies to raise prices “to anticipate the coming inflation.” Wages have not kept pace with the resulting high inflation rates.

    It looks like Silicon Valley Bank will have to liquidate its securities at a loss. Probably it will be taken over by a larger bank, but the entire financial system is being squeezed. Reuters reported on Friday that bank reserves at the Fed were plunging. That hardly is surprising, as banks are paying about 0.2 percent on deposits, while depositors can withdraw their money to buy two-year U.S. Treasury notes yielding 3.8 or almost 4 percent. No wonder well-to-do investors are running from the banks.

    The obvious question is why the Fed doesn’t simply bail out banks in SVB’s position. The answer is that the lower prices for financial assets looks like the New Normal. For banks with negative equity, how can solvency be resolved without sharply reducing interest rates to restore the 15-year Zero Interest-Rate Policy (ZIRP)?

    There is an even larger elephant in the room: derivatives. Volatility increased last Thursday and Friday. The turmoil has reached vast magnitudes beyond what characterized the 2008 crash of AIG and other speculators. Today, JP Morgan Chase and other New York banks have tens of trillions of dollar valuations of derivatives – casino bets on which way interest rates, bond prices, stock prices and other measures will change.

    For every winning guess, there is a loser. When trillions of dollars are bet on, some bank trader is bound to wind up with a loss that can easily wipe out the bank’s entire net equity.

    There is now a flight to “cash,” to a safe haven – something even better than cash: U.S. Treasury securities. Despite the talk of Republicans refusing to raise the debt ceiling, the Treasury can always print the money to pay its bondholders. It looks like the Treasury will become the new depository of choice for those who have the financial resources. Bank deposits will fall. And with them, bank holdings of reserves at the Fed.

    So far, the stock market has resisted following the plunge in bond prices. My guess is that we will now see the Great Unwinding of the great Fictitious Capital boom of 2008-2015. So the chickens are coming hope to roost – with the “chicken” being, perhaps, the elephantine overhang of derivatives fueled by the post-2008 loosening of financial regulation and risk analysis.

    Tyler Durden
    Mon, 03/13/2023 – 17:20

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