Today’s News 15th November 2021

• Bitcoin & The End Of US 'Super Imperialism'
  Bitcoin & The End Of US ‘Super Imperialism’

  Authored by Alex Gladstein via BitcoinMagazine.com,

  In 1972, one year after President Richard Nixon defaulted on the dollar and formally took the United States off of the gold standard for good, the financial historian and analyst Michael Hudson published “Super Imperialism,” a radical critique of the dollar-dominated world economy.

  The book is overlooked by today’s economic mainstream and puts forward a variety of provocative arguments that place it outside of the orthodoxy. However, for those seeking to understand how the dollar won the money wars of the past century, the book makes for essential reading.

  Hudson’s thesis comes from the left-leaning perspective — the title inspired by the German Marxist phrase “überimperialismus” — and yet thinkers of all political stripes, from progressives to libertarians, should find value in its approach and lessons.

  In “Super Imperialism,” Hudson — who has updated the book twice over the past 50 years, with a third edition published just last month — traces the evolution of the world financial system, where U.S. debt displaced gold as the ultimate world reserve currency and premium collateral for financial markets.

  

  How did the world shift from using asset money in the form of gold to balance international payments to using debt money in the form of American treasuries?

  How did, as Hudson puts it, “America’s ideal of implementing laissez-faire economic institutions, political democracy, and a dismantling of formal empires and colonial systems” turn into a system where the U.S. forced other nations to pay for its wars, defaulted on its debt, and exploited developing economies?

  For those seeking to answer the question of how the dollar became so dominant — even as it was intentionally devalued over and over again in the decades after World War I — then “Super Imperialism” has a fascinating, and at times, deeply troubling answer.

  Drawing on extensive historical source material, Hudson argues that the change from the gold standard to what he calls the “Treasury Bill Standard” happened over several decades, straddling the post-World War I era up through the 1970s.

  In short, the U.S. was able to convince other nations to save in dollars instead of in gold by guaranteeing that the dollars could be redeemed for gold. But eventually, U.S. officials rug-pulled the world, refusing to redeem billions of dollars that had been spent into the hands of foreign governments under the promise that they were as good as gold through fixed rate redemption.

  This deceit allowed the U.S. government to finance an ever-expanding military-industrial complex and inefficient welfare state without having to make the traditional trade offs a country or empire would make if its deficit grew too large. Instead, since U.S. policymakers figured out a way to bake American debt into the global monetary base, it never had to pay off its debt. Counterintuitively, Hudson says, America turned its Cold War debtor status into an “unprecedented element of strength rather than weakness.”

  As a result, the U.S. has been able to, in Hudson’s words, pursue domestic expansion and foreign diplomacy with no balance of payment concerns: “Imposing austerity on debtor countries, America as the world’s largest debtor economy acts uniquely without financial constraint.”

  A key narrative in Hudson’s 380-page book is the story of how the U.S. government systematically demonetized gold out of the international economic system. Curiously, he does not mention Executive Order 6102 — passed by President Roosevelt in 1933 to seize gold from the hands of the American public — but weaves a compelling narrative of how the U.S. government pulled the world away from the gold standard, culminating in the Nixon Shock of 1971.

  In Hudson’s view, leaving the gold standard was all about America’s desire to finance war abroad, particularly in Southeast Asia. He says the Vietnam War was “single-handedly” responsible for pushing the U.S. balance-of-payments negative and drastically drawing down America’s once staggering gold reserves.

  Ultimately, Hudson’s thesis argues that unlike classic European imperialism — driven by private sector profit motives — American super imperialism was driven by nation-state power motives. It was not steered by Wall Street, but by Washington. Bretton Woods institutions like the World Bank and International Monetary Fund (IMF) did not primarily help the developing world, but rather harnessed its minerals and raw goods for America and forced its leaders to buy U.S. agricultural exports, preventing them from developing economic independence.

  There are, of course, several criticisms of Hudson’s narrative. It can be argued that dollar hegemony helped defeat the Soviet Union, pressuring its economy and paving the way for a more free world; usher in the age of technology, science, and information; push growth globally with surplus dollars; and isolate rogue regimes. Perhaps most compellingly, history seems to suggest the world “wanted” dollar hegemony, if one considers the rise of the eurodollar system, where even America’s enemies tried to accumulate dollars outside of the control of the Federal Reserve.

  Hudson was not without contemporary critics, either. A 1972 review in The Journal Of Economic History argued that “it would require an exceptionally naive understanding of politics to accept the underlying assertion that the United States government has been clever, efficient, totally unscrupulous, and consistently successful in exploiting developed and developing nations.”

  The reader can be the judge of that. But even with these criticisms in mind, Hudson’s work is important to consider. The undeniable bottom line is that by shifting the world economy from relying on gold to relying on American debt, the U.S. government implemented a system where it could spend in a way no other country could, in a way where it never had to pay back its promises, and where other countries financed its warfare and welfare state.

  “Never before,” Hudson writes, “has a bankrupt nation dared insist that its bankruptcy become the foundation of world economic policy.”

  In 1972, the physicist and futurist Herman Kahn said that Hudson’s work revealed how “the United States has run rings around Britain and every other empire-building nation in history. We’ve pulled off the greatest rip-off ever achieved.”

  Governments always dreamed of transforming their debt into the most valuable asset on earth. This essay explains how the U.S. succeeded in turning this dream into a reality, what the implications for the wider world were, how this era might be coming to a close, and why a Bitcoin standard might be next.

  I. THE RISE AND FALL OF AMERICA AS A CREDITOR NATION

  European powers, tempted by the ability to print paper money to finance war operations, broke off the gold standard entirely during World War I. The metal’s restraint would have resulted in a much shorter conflict but the warring factions decided instead to prolong the violence by debasing their currencies.

  Between 1914 and 1918, German authorities suspended the convertibility of marks to gold and increased the money supply from 17.2 billion marks to 66.3 billion marks, while their British rivals increased their money supply from 1.1 billion pounds to 2.4 billion pounds. They expanded the German monetary base by six-fold and the British monetary base by nearly four-fold.

  While European powers went deeper and deeper into debt, America enriched itself by selling arms and other goods to the allies, all while avoiding conflict in its homeland. As Europe tore itself to shreds, American farms and industrial operations ran full steam. The world at large began to buy more from the U.S. than it sold back, creating a large American current account surplus.

  Post-war, U.S. officials broke with historical precedent and insisted that their European allies repay their war debts. Traditionally, this kind of support was considered a cost of war. At the same time, U.S. officials put up tariff barriers that prevented the allies from earning dollars through more exports to America.

  Hudson argues that the U.S. essentially starved Germany through protectionist policy as it was also unable to export goods to the U.S. market to pay back its loans. Britain and France had to use whatever German reparations they did receive to pay back America.

  The Federal Reserve, Hudson says, held down interest rates so as not to draw investment away from Britain, hoping in this way the English could pay back their war debt. But these low rates in turn helped spark a stock market bubble, discouraging capital outflows to Europe. Hudson argues this dynamic, especially after the Great Crash, created a global economic breakdown that helped trigger nationalism, isolationism, autarky, and depression, paving the way for World War II.

  Hudson summarizes America’s post-World War I global legacy as follows: the devastation of Germany, the collapse of the British Empire, and a stockpiling of gold. At home, President Roosevelt ended domestic convertibility of dollars for gold, made holding gold a felony, and devalued the dollar by 40%. At the same time, the U.S. received most of Europe’s “refugee gold” during the 1930s as the threat of renewed war with Germany led to capital flight from wealthy Europeans. Washington was accumulating gold in its own coffers, just as it was stripping the precious metal from the public.

  As World War II neared, Germany halted reparations payments, drying up the allied cash flow. Britain was unable to pay its debts, something it wouldn’t be able to fully do for another 80 years. Capital flight to the “safe” U.S. accelerated, combining with Roosevelt’s tariffs and export-boosting dollar devaluation to further enlarge America’s balance-of-payments position and gold stock. America became the world’s largest creditor nation.

  This advantage grew even more dramatic when the allies spent the rest of their gold to fight the Nazis. By the end of the 1940s, the U.S. held more than 70% of non-Soviet-central-bank-held gold, around 700 million ounces.

  In 1922, European powers had gathered in Genoa to discuss the reconstruction of Central and Eastern Europe. One of the outcomes was an agreement to partially go back to the gold standard through a “gold exchange” system where central banks would hold currencies which could be exchanged for gold, instead of the metal itself, which was to be increasingly centralized in financial hubs like New York and London.

  In the later stages of World War II in 1944, the U.S. advanced this concept even further at the Bretton Woods conference in New Hampshire. There, a proposal put forth by British delegate John Maynard Keynes to use an internationally-managed currency called the “bancor” was rejected. Instead, American diplomats — holding leverage over their British counterparts as a result of their gold advantage and the bailouts they had extended through Lend-Lease Act policies — created a new global trade system underpinned by dollars, which were promised to be backed by gold at the rate of $35 per ounce. The World Bank, International Monetary Fund, and General Agreement on Tariffs and Trade were created as U.S.-dominated institutions which would enforce the worldwide dollar system.

  Moving forward, U.S. foreign economic policy was very different from what it was after World War I, when Congress gave priority to domestic programs and America adopted a protectionist stance. U.S. policymakers theorized that America would need to remain a “major exporter to maintain full employment during the transition back to peacetime life” after World War II.

  “Foreign markets,” Hudson writes, “would have to replace the War Department as a source of demand for the products of American industry and agriculture.”

  This realization led the U.S. to determine it could not impose war debt on its allies like it did after World War I. A Cold War perspective began to take over: if the U.S. invested abroad, it could build up the allies and defeat the Soviets. The Treasury and the World Bank lent funds to Europe as part of the Marshall Plan so that it could rebuild and buy American goods.

  Hudson distinguishes the new U.S. imperial system from the old European imperial systems. He quotes Treasury Secretary Morgenthau, who said Bretton Woods institutions “tried to get away from the concept of control of international finance by private financiers who were not accountable to the people,” pulling power away from Wall Street to Washington. In dramatic contrast to “classic” imperialism, which was driven by corporate interests and straightforward military action, in the new “super imperialism” the U.S. government would “exploit the world via the international monetary system itself.” Hence why Hudson’s original title for his book was “Monetary Imperialism.”

  The other defining feature of super imperialism versus classic imperialism was that the former is based on a debtor position, while the latter was based on a creditor position. The American approach was to force foreign central banks to finance U.S. growth, whereas the British or French approach was to extract raw materials from colonies, sell them back finished goods, and exploit low wage or even slave labor.

  Classic imperialists, if they ran into enough debt, would have to impose domestic austerity or sell off their assets. Military adventurism had restraints. But Hudson argues that with super imperialism, America figured out not just how to avoid these limits but how to derive positive benefits from a massive balance-of-payments deficit. It forced foreign central banks to absorb the cost of U.S. military spending and domestic social programs which defended Americans and boosted their standards of living.

  Hudson points to the Korean War as the major event that shifted America’s considerable post-World War II balance-of-payments surplus into a deficit. He writes that the fight on the Korean peninsula was “financed essentially by the Federal Reserve’s monetizing the federal deficit, an effort that transferred the war’s cost onto some future generation, or more accurately from future taxpayers to future bondholders.”

  II. THE FAILURE OF BRETTON WOODS

  In the classic gold standard system of international trade, Hudson describes how things worked:

  “If trade and payments among countries were fairly evenly balanced, no gold actually changed hands: the currency claims going in one direction offset those going in the opposite direction. But when trade and payments were not exactly in balance, countries that bought or paid more than they sold or received found themselves with a balance-of-payments deficit, while nations that sold more than they bought enjoyed a surplus which they settled in gold… If a country lost gold its monetary base would be contracted, interest rates would rise, and foreign short-term funds would be attracted to balance international trade movements. If gold outflows persisted, the higher interest rates would deter new domestic investment and incomes would fall, thereby reducing the demand for imports until balance was restored in the country’s international payments.”

  Gold helped nations account with each other in a neutral and straightforward way. However, just as European powers discarded the restraining element of gold during World War I, Hudson says America did not like the restraint of gold either, and instead “worked to ‘demonetize’ the metal, driving it out of the world financial system — a geopolitical version of Gresham’s Law,” where bad money drives out the good. By pushing a transformation of a world where the premium reserve was gold to a world where the premium reserve was American debt, the U.S. hacked the system to drive out the good money.

  By 1957, U.S. gold reserves still outnumbered dollar reserves of foreign central banks three to one. But in 1958, the system saw its first cracks, as the Fed had to sell off more than $2 billion of gold to keep the Bretton Woods system afloat. The ability of the U.S. to hold the dollar at $35 per ounce of gold was being called into question. In one of his last acts in office, President Eisenhower banned Americans from owning gold anywhere in the world. But following the presidential victory of John F. Kennedy — who was predicted to pursue inflationist monetary policies — gold surged anyway, breaking $40 per ounce. It was not easy to demonetize gold in a world of increasing paper currency.

  American and European powers tried to band-aid the system by creating the London Gold Pool. Formed in 1961, the pool’s mission was to fix the gold price. Whenever market demand pushed up the price, central banks coordinated to sell part of their reserves. The pool came under relentless pressure in the 1960s, both from the dollar depreciating against the rising currencies of Japan and Europe and from the enormous expenditures of Great Society programs and the U.S. war in Vietnam.

  Some economists saw the failure of the Bretton Woods system as inevitable. Robert Triffin predicted that the dollar could not act as the international reserve currency with a current account surplus. In what is known as the “Triffin dilemma,” he theorized that countries worldwide would have a growing need for that “key currency,” and liabilities would necessarily expand beyond what the key country could hold in reserves, creating a larger and larger debt position. Eventually the debt position would grow so large so as to cause the currency to collapse, destroying the system.

  By 1964, this dynamic began to visibly kick in, as American foreign debt finally exceeded the Treasury’s gold stock. Hudson says that American overseas military spending was “the entire balance-of-payments deficit as the private sector and non-military government transactions remained in balance.”

  The London Gold Pool was held in place (buoyed by gold sales from the Soviet Union and South Africa) until 1968, when the arrangement collapsed and a new two-tiered system with a “government” price and a “market” price emerged.

  That same year, President Lyndon B. Johnson shocked the American public when he announced he would not run for another term, possibly in part because of the stress of the unraveling monetary system. Richard Nixon won the presidency in 1968, and his administration did its part to convince other nations to stop converting dollars to gold.

  By the end of that year, the U.S. had drawn down its gold from 700 million to 300 million ounces. A few months later, Congress removed the 25% gold backing requirement for federal reserve notes, cutting one more link between the U.S. money supply and gold. Fifty economists had signed a letter warning against such an action, saying it would “open the way to a practically unlimited expansion of Federal Reserve notes… and a decline and even collapse in the value of our currency.”

  In 1969, with the end of Bretton Woods palpably close, the IMF introduced Special Drawing Rights (SDRs) or “paper gold.” These currency units were supposed to be equal to gold, but not redeemable for the metal. The move was celebrated in newspapers worldwide as creating a new currency that would “fill monetary needs but exist only on books.” In Hudson’s view, the IMF violated its founding charter by bailing out the U.S. with billions of SDRs.

  He says the SDR strategy was “akin to a tax levied upon payments surplus nations by the United States… it represented a transfer of goods and resources from civilian and government sectors of payments-surplus nations to payments deficit countries, a transfer for which no tangible quid pro quo was to be received by the nations who had refrained from embarking on the extravagance of war.”

  By 1971, short-term dollar liabilities to foreigners exceeded $50 billion, but gold holdings dipped below $10 billion. Mirroring the World War I behavior of Germany and Britain, the U.S. inflated its money supply to 18-times its gold reserves while it waged the Vietnam War.

  III. THE DEATH OF THE GOLD STANDARD AND THE RISE OF THE TREASURY BILL STANDARD

  As it became clear that the U.S. government could not possibly redeem extant dollars for gold, foreign countries found themselves in a trap. They could not sell off their U.S. treasuries or refuse to accept dollars, as this would collapse the dollar’s value in currency markets, advantaging U.S. exports and harming their own industries. This is the key mechanism that made the Treasury bill system work.

  As foreign central banks received dollars from their exporters and commercial banks, Hudson says they had “little choice but to lend these dollars to the U.S. government.” They also gave seigniorage privilege to the U.S. as foreign nations “earned” a negative interest rate on American paper promises most years between the end of World War II and the fall of the Berlin Wall, in effect paying Washington to hold their money on a real basis.

  “Instead of U.S. citizens and companies being taxed or U.S. capital markets being obliged to finance the rising federal deficit,” Hudson writes, “foreign economies were obliged to buy the new Treasury bonds… America’s Cold War spending thus became a tax on foreigners. It was their central banks who financed the costs of the war in Southeast Asia.”

  American officials, annoyed that the allies never paid them back for World War I, could now get their pound of flesh in another way.

  French diplomat Jacques Rueff gave his take on the mechanism behind the Treasury bill standard in his book, “The Monetary Sin Of The West”:

  “Having learned the secret of having a ‘deficit without tears,’ it was only human for the US to use that knowledge, thereby putting its balance of payments in a permanent state of deficit. Inflation would develop in the surplus countries as they increased their own currencies on the basis of the increased dollar reserves held by their central banks. The convertibility of the reserve currency, the dollar, would eventually be abolished owing to the gradual but unlimited accumulation of sight loans redeemable in US gold.”

  The French government was vividly aware of this, and persistently redeemed its dollars for gold during the Vietnam era, even sending a warship to Manhattan in August 1971 to collect what they were owed. A few days later, on August 15, 1971, President Nixon went on national television and formally announced the end of the dollar’s international convertibility to gold. The U.S. had defaulted on its debt, leaving tens of billions of dollars abroad, all of a sudden unbacked. By extension, every currency that was backed by dollars became pure fiat. Rueff was right, and the French were left with paper instead of precious metal.

  Nixon could have simply raised the price of gold, instead of defaulting entirely, but governments do not like admitting to their citizenry that they have been debasing the public’s money. It was much easier for his administration to break a promise to people thousands of miles away.

  As Hudson writes, “more than $50 billion of short-term liabilities to foreigners owed by the U.S. on public and private account could not be used as claims on America’s gold stock.” They could, of course, “be used to buy U.S. exports, to pay obligations to U.S. public and private creditors, or to invest in government corporate securities.”

  These liabilities were no longer liabilities of the U.S. Treasury. American debt had been baked into the global monetary base.

  “IOUs,” Hudson says, became “IOU-nothings.” The final piece of the strategy was to “roll the debt over” on an ongoing basis, ideally with interest rates below the rate of monetary inflation.

  Americans could now obtain foreign goods, services, companies, and other assets in exchange for mere pieces of paper: “It became possible for a single nation to export its inflation by settling its payment deficit with paper instead of gold… a rising world price level thus became in effect a derivative function of U.S. monetary policy,” Hudson writes.

  If you owe $5,000 to the bank, it’s your problem. If you owe $5 million, it’s theirs. President Nixon’s Treasury Secretary John Connolly riffed on that old adage, quipping at the time: “The dollar may be our currency, but now it’s your problem.”

  IV. SUPER IMPERIALISM IN ACTION: HOW THE U.S. MADE THE WORLD PAY FOR THE VIETNAM WAR

  As the U.S. deficit increased, government spending accelerated, and Americans — in a phenomenon hidden from the average citizen — watched as other nations paid “the cost of this spending spree” as foreign central banks, not taxes, financed the debt.

  The game which the Nixon administration was playing, Hudson writes, “was one of the most ambitious in the economic history of mankind … and was beyond the comprehension of the liberal senators of the United States… The simple device of not hindering the outflow of dollar assets had the effect of wiping out America’s foreign debt while seeming to increase it. At the same time, the simple utilization of the printing press — that is, new credit creation — widened the opportunities for penetrating foreign markets by taking over foreign companies.”

  He continues:

  “American consumers might choose to spend their incomes on foreign goods rather than to save. American business might choose to buy foreign companies or undertake new direct investment at home rather than buy government bonds, and the American government might finance a growing world military program, but this overseas consumption and spending would nonetheless be translated into savings and channeled back to the United States. Higher consumer expenditures on Volkswagens or on oil thus had the same effect as an increase in excise taxes on these products: they accrued to the U.S. Treasury in a kind of forced saving.” 

  By repudiating gold convertibility of the dollar, Hudson argues “America transformed a position of seeming weakness into one of unanticipated strength, that of a debtor over its creditors.”

  “What was so remarkable about dollar devaluation,” he writes, “is that far from signaling the end of American domination of its allies, it became the deliberate object of U.S. financial strategy, a means to enmesh foreign central banks further in the dollar-debt standard.”

  One vivid story about the power of the Treasury bill standard — and how it could force big geopolitical actors to do things against their will — is worth sharing. As Hudson tells it:

  “German industry had hired millions of immigrants from Turkey, Greece, Italy, Yugoslavia and other Mediterranean countries. By 1971 some 3 percent of the entire Greek population was living in Germany producing cars and export goods… when Volkswagens and other goods were shipped to the United States… companies could exchange their dollar receipts for deutsche marks with the German central bank… but Germany’s central bank could only hold these dollar claims in the form of U.S. Treasury bills and bonds… It lost the equivalent of one-third the value of its dollar holdings during 1970-74 when the dollar fell by some 52 percent against the deutsche mark, largely because the domestic US inflation eroded 34 percent of the dollar’s domestic purchasing power.”

  In this way, Germany was forced to finance America’s wars in Southeast Asia and military support for Israel: two things it strongly opposed.

  Put another way by Hudson: “In the past, nations sought to run payments surpluses in order to build up their gold reserves. But now all they were building up was a line of credit to the U.S. Government to finance its programs at home and abroad, programs which these central banks had no voice in formulating, and which were in some cases designed to secure foreign policy ends not desired by their governments.”

  Hudson’s thesis was that America had forced other countries to pay for its wars regardless of whether they wanted to or not. Like a tribute system, but enforced without military occupation. “This was,” he writes, “something never before accomplished by any nation in history.”

  V. OPEC TO THE RESCUE

  Hudson wrote “Super Imperialism” in 1972, the year after the Nixon Shock. The world wondered at the time: What will happen next? Who will continue to buy all of this American debt? In his sequel, “Global Fracture,” published five years later, Hudson got to answer the question.

  The Treasury bill standard was a brilliant strategy for the U.S. government, but it came under heavy pressure in the early 1970s.

  Just two years after the Nixon Shock, in response to dollar devaluation and rising American grain prices, Organization of the Petroleum Exporting Countries (OPEC) nations led by Saudi Arabia quadrupled the dollar price of oil past $10 per barrel. Before the creation of OPEC, “the problem of the terms of trade shifting in favor of raw-materials exporters had been avoided by foreign control over their economies, both by the international minerals cartel and by colonial domination,” Hudson writes.

  But now that the oil states were sovereign, they controlled the massive inflow of savings accrued through the skyrocketing price of petroleum.

  This resulted in a “redistribution of global wealth on a scale that hadn’t been seen in living memory,” as economist David Lubin puts it.

  In 1974, the oil exporters had an account surplus of $70 billion, up from $7 billion the year before: an amount nearly 5% of US GDP. That year, the Saudi current account surplus was 51% of its GDP.

  The wealth of OPEC nations grew so fast that they could not spend it all on foreign goods and services.

  “What are the Arabs going to do with it all?” asked The Economist in early 1974.

  In “Global Fracture,” Hudson argues that it became essential for the U.S. “to convince OPEC governments to maintain petrodollars [meaning, a dollar earned by selling oil] in Treasury bills so as to absorb those which Europe and Japan were selling out of their international monetary reserves.”

  As detailed in the precursor to this essay — “Uncovering The Hidden Costs Of The Petrodollar” — Nixon’s new Treasury Secretary William Simon traveled to Saudi Arabia as part of an effort to convince the House of Saud to price oil in dollars and “recycle” them into U.S. government securities with their newfound wealth.

  On June 8, 1974, the U.S. and Saudi governments signed a military and economic pact. Secretary Simon asked the Saudis to buy up to $10 billion in treasuries. In return, the U.S. would guarantee security for the Gulf regimes and sell them massive amounts of weapons. The OPEC bond bonanza began.

  “As long as OPEC could be persuaded to hold its petrodollars in Treasury bills rather than investing them in capital goods to modernize its economies or in ownership of foreign industry,” Hudson says, “the level of world oil prices would not adversely affect the United States.”

  At the time, there was a public and much-discussed fear in America of Arab governments “taking over” U.S. companies. As part of the new U.S.-Saudi special relationship, American officials convinced the Saudis to reduce investments in the U.S. private sector and simply buy more debt.

  The Federal Reserve continued to inflate the money supply in 1974, contributing to the fastest domestic inflation since the Civil War. But the growing deficit was eaten up by the Saudis and other oil-exporters, who would recycle tens of billions of dollars of petrodollar earnings into U.S. treasuries over the following decade.

  “Foreign governments,” Hudson says, “financed the entire increase in publicly-held U.S. federal debt” between the end of WWII and the 1990s, and continued with the help of the petrodollar system to majorly support the debt all the way to the present day.

  At the same time, the U.S. government used the IMF to help “end the central role of gold that existed in the former world monetary system.” Amid double-digit inflation the institution sold off gold reserves in late 1974, to try and keep any possible upswing in gold down as a result of a new law in the United States that finally made it legal again for Americans to own gold.

  By 1975, other OPEC nations had followed Saudi Arabia’s lead in supporting the Treasury bill standard. The British pound sterling was finally phased out as a key currency, leaving, as Hudson writes, “no single national currency to compete with the dollar.”

  The legacy of the petrodollar system would live on for decades, forcing other countries to procure dollars when they needed oil, causing America to defend its Saudi partners when threatened with aggression from Saddam Hussein or Iran, discouraging U.S. officials from investigating Saudi Arabia’s role in the 9/11 attacks, supporting the devastating Saudi war in Yemen, selling billions of dollars of weapons to the Saudis, and making Aramco the second-most valuable company in the world today.

  VI. EXPLOITATION OF THE DEVELOPING WORLD

  The Treasury bill standard carried massive costs. It was not free. But these costs were not paid for by Washington, but were often borne by citizens in Middle Eastern countries and in poorer nations across the developing world.

  Even pre-Bretton Woods, gold reserves from regions like Latin America were sucked up by the U.S. As Hudson describes, European nations would first export goods to Latin America. Europe would take the gold — settled as the balance-of-payments adjusted — and use it to buy goods from the U.S. In this way, gold was “stripped” from the developing world, helping the U.S. gold stock reach its peak of nearly $24.8 billion (or 700 million ounces) in 1949.

  Originally designed to help rebuild Europe and Japan, the World Bank and International Monetary Fund became in the 1960s an “international welfare agency” for the world’s poorest nations, per The Heritage Foundation. But, according to Hudson, that was a cover for its true purpose: a tool through which the U.S. government would enforce economic dependency from non-Communist nations worldwide.

  The U.S. joined the World Bank and IMF only “on the condition that it was granted unique veto power… this meant that no economic rules could be imposed that U.S. diplomats judged did not serve American interests.”

  America began with 33% of the votes at the IMF and World Bank which — in a system that required an 80% majority vote for rulings — indeed gave it veto power. Britain initially had 25% of the votes, but given its subordinate role to the U.S. after the war, and its dependent position as a result of Lend-Lease policies, it would not object to Washington’s desires.

  A major goal of the U.S. post-WWII was to achieve full employment, and international economic policy was harnessed to help achieve that goal. The idea was to create foreign markets for American exports: raw materials would be imported cheaply from the developing world, and farm goods and manufactured goods would be exported back to those same nations, bringing the dollars back.

  Hudson says that U.S. congressional hearings regarding Bretton Woods agreements revealed “a fear of Latin American and other countries underselling U.S. farmers or displacing U.S. agricultural exports, instead of the hope that these countries might indeed evolve towards agricultural self-sufficiency.”

  The Bretton Woods institutions were designed with these fears in mind: “The United States proved unwilling to lower its tariffs on commodities that foreigners could produce less expensively than American farmers and manufacturers,” writes Hudson. “The International Trade Organization, which in principle was supposed to subject the U.S. economy to the same free trade principles that it demanded from foreign governments, was scuttled.”

  In a meta-version of how the French exploit Communauté Financière Africaine (CFA) nations in Africa today, the U.S. employed many double standards, did not comply with the most-favored-nation rule, and set up a system that forced developing countries to “sell their raw materials to U.S.-owned firms at prices substantially below those received by American producers for similar commodities.”

  Hudson spends a significant percentage of “Super Imperialism” making the case that this policy helped destroy economic potential and capital stock of many developing countries. The U.S., as he tells it, forced developing nations to export fruit, minerals, oil, sugar, and other raw goods instead of investing in domestic infrastructure and education — and forced them to buy American foodstuffs instead of grow their own.

  Post-1971, why did the Bretton Woods institutions continue to exist? They were created to enforce a system that had expired. The answer, from Hudson’s perspective, is that they were folded into this broader strategy, to get the (often dictatorial) leaders of developing economies to spend their earnings on food and weapons imports. This prevented internal development and internal revolution.

  In this way, “super imperial” financial and agricultural policy could, in effect, accomplish what classic imperial military policy used to accomplish. Hudson even claims that “Super Imperialism” the book was used as a “training manual” in Washington in the 1970s by diplomats seeking to learn how to “exploit other countries via their central banks.”

  In Hudson’s telling, U.S.-directed aid was not used for altruism, but for self interest. From 1948 to 1969, American receipts from foreign aid approximated 2.1 times its investments.

  “Not exactly an instrument of altruistic American generosity,” he writes. From 1966 to 1970, the World Bank “took in more funds from 20 of its less developed countries than it disbursed.”

  In 1971, Hudson says, the U.S. government stopped publishing data showing that foreign aid was generating a transfer of dollars from foreign countries to the U.S. He says he got a response from the government at the time, saying “we used to publish that data, but some joker published a report showing that the U.S. actually made money off the countries we were aiding.”

  Former grain-exporting regions of Latin America and Southeast Asia deteriorated to food-deficit status under “guidance” from the World Bank and IMF. Instead of developing, Hudson argues that these countries were retrogressing.

  Normally, developing countries would want to keep their mineral resources. They act as savings accounts, but these countries couldn’t build up capacity to use them, because they were focused on servicing debt to the U.S. and other advanced economies. The World Bank, Hudson argues, pushed them to “draw down” their natural resource savings to feed themselves, mirroring subsistence farming and leaving them in poverty. The final “logic” that World Bank leaders had in mind was that, in order to conform with the Treasury bill standard, “populations in these countries must decline in symmetry with the approaching exhaustion of their mineral deposits.”

  Hudson describes the full arc as such: Under super imperialism, world commerce has been directed not by the free market but by an “unprecedented intrusion of government planning, coordinated by the World Bank, IMF, and what has come to be called the Washington Consensus. Its objective is to supply the U.S. with enough oil, copper, and other raw materials to produce a chronic over-supply sufficient to hold down their world price. The exception of this rule is for grain and other agricultural products exported by the United States, in which case relatively high world prices are desired. If foreign countries still are able to run payments surpluses under these conditions, as have the oil-exporting countries, their governments are to use the process to buy U.S. arms or invest in long-term illiquid, preferably non-marketable U.S. treasury obligations.”

  This, as Allen Farrington would say, is not capitalism. Rather, it’s a story of global central planning and central bank imperialism.

  Most shockingly, the World Bank in the 1970s under Robert McNamara argued that population growth slowed down development, and advocated for growth to be “curtailed to match the modest rate of gain in food output which existing institutional and political constraints would permit.”

  Nations would need to “follow Malthusians policies” to get more aid. McNamara argued that “the population be fitted to existing food resources, not that food resources be expanded to the needs of existing or growing populations.”

  To stay in line with World Bank loans, the Indian government forcibly sterilized millions of people.

  As Hudson concludes: the World Bank focused the developing world “on service requirements rather than on the domestic needs and aspirations of their peoples. The result was a series of warped patterns of growth in country after country. Economic expansion was encouraged only in areas that generated the means of foreign debt service, so as to be in a position to borrow enough to finance more growth in areas that might generate yet further means of foreign debt service, and so on ad infinitum.

  “On an international scale, Joe Hill’s ‘We go to work to get the cash to buy the food to get the strength to go to work to get the cash to buy the food to get the strength to go to work to get the cash to buy the food…’ became reality. The World Bank was pauperizing the countries that it had been designed in theory to assist.”

  VII. FINANCIAL IMPLICATIONS OF THE TREASURY BILL STANDARD

  By the 1980s, the U.S. had achieved, as Hudson writes, “what no earlier imperial system had put in place: a flexible form of global exploitation that controlled debtor countries by imposing the Washington Consensus via the IMF and World Bank, while the Treasury Bill standard obliged the payments-surplus nations of Europe and East Asia to extend forced loans to the U.S. government.”

  But threats still remained, including Japan. Hudson explains how in 1985 at the Louvre Accords, the U.S. government and IMF convinced the Japanese to increase their purchasing of American debt and revalue the yen upwards so that their cars and electronics became more expensive. This is how, he says, they disarmed the Japanese economic threat. The country “essentially went broke.”

  On the geopolitical level, super imperialism not only helped the U.S. defeat its Soviet rival — which could only exploit the economically-weak COMECON countries — but also kept any potential allies from getting too strong. On the financial level, the shift from the restraint of gold to the continuous expansion of American debt as the global monetary base had a staggering impact on the world.

  Despite the fact that today the U.S. has a much larger labor force and much higher productivity than it did in the 1970s, prices have not fallen and real wages have not increased. The “FIRE” sector (finance, insurance, and real estate) has, Hudson says, “appropriated almost all of the economic gains.” Industrial capitalism, he says, has evolved into finance capitalism.

  For decades, Japan, Germany, the U.K., and others were “powerless to use their economic strength for anything more than to become the major buyers of Treasury bonds to finance the U.S. federal budget deficit… [these] foreign central banks enabled America to cut its own tax rates (at least for the wealthy), freeing savings to be invested in the stock market and property boom,” according to Hudson.

  The past 50 years witnessed an explosion of financialization. Floating currency markets sparked a proliferation of derivatives used to hedge risk. Corporations all of a sudden had to invest resources in foreign exchange futures. In the oil and gold markets, there are hundreds or thousands of paper claims for each unit of raw material. It is not clear if this is a direct result of leaving the gold standard, but is certainly a prominent feature of the post-gold era.

  Hudson argues that U.S. policy pushes foreign economies to “supply the consumer goods and investment goods that the domestic U.S. economy no longer is supplying as it post-industrializes and becomes a bubble economy, while buying American farm surpluses and other surplus output. In the financial sphere, the role of foreign economies is to sustain America’s stock market and real estate bubble, producing capital gains and asset-price inflation even as the U.S. industrial economy is being hollowed out.”

  Over time, equities and real estate boomed as “American banks and other investors moved out of government bonds and into higher-yielding corporate bonds and mortgage loans.” Even though wages remained stagnant, prices of investments kept going up, and up, and up, in a velocity previously unseen in history.

  As financial analyst Lyn Alden has pointed out, the post-1971 fiat-based financial system has contributed to structural trade deficits for the U.S. Instead of drawing down gold reserves to maintain the system like it did during the Bretton Woods framework, America has drawn down and “sold off” its industrial base, where more and more of its stuff is made elsewhere, and more and more of its equity markets and real estate markets are owned by foreigners. The U.S., she argues, has extended its global power by sacrificing some of its domestic economic health. This sacrifice has mainly benefitted U.S. elites at the cost of blue-collar and middle-income workers. Dollar hegemony, then, might be good for American elites and diplomats and the wider empire, but not for the everyday citizen.

  Data from the work of political economists Shimson Bichler and Jonathan Nitzan highlights this transformation and shines a light on how wealth is moving to the haves from the have-nots: In the early 1950s, a typical dominant capital firm commanded a profit stream 5,000 times the income of an average worker; in the late 1990s, it was 25,000 times greater. In the early 1950s, the net profit of a Fortune 500 firm was 500 times the average; in the late 1990s, it was 7,000 times greater. Trends have accelerated since then: Over the past 15 years, the eight largest companies in the world grew from an average market capitalization of $263 billion to $1.68 trillion.

  Inflation, Bichler and Nitzan argue, became a “permanent feature” of the 20th century. Prices rose 50-times from 1900 to 2000 in the U.K. and U.S., and much more aggressively in developing countries. They use a staggering chart that shows consumer prices in the U.K. from 1271 to 2007 to make the point. The visual is depicted in log-scale, and shows steady prices all the way through the middle of the 16th century, when Europeans began exploring the Americas and expanding their gold supply. Then prices remain relatively steady again though the beginning of the 20th century. But then, at the time of World War I, they shoot up dramatically, cooling off a bit during the depression, only to go hyperbolic since the 1960s and 1970s as the gold standard fell apart and as the world shifted onto the Treasury bill standard.

  Bitchler and Nitzan disagree with those who say inflation has a “neutral” effect on society, arguing that inflation, especially stagflation, redistributes income from workers to capitalists, and from small businesses to large businesses. When inflation rises significantly, they argue that capitalists tend to gain, and workers tend to lose. This is typified by the staggering increase in net worth of America’s richest people during the otherwise very difficult last 18 months. The economy continues to expand, but for most people, growth has ended.

  Bichler and Nitzan’s meta point is that economic power tends to centralize, and when it cannot anymore through amalgamation (merger and acquisition activity), it turns to currency debasement. As Rueff said in 1972, “Given the option, money managers in a democracy will always choose inflation; only a gold standard deprives them of the option.”

  As the Federal Reserve continues to push interest rates down, Hudson notes that prices rise for real estate, bonds, and stocks, which are “worth whatever a bank will lend.” Writing more recently in the wake of the Global Financial Crisis, he said “for the first time in history people were persuaded that the way to get rich was by running into debt, not by staying out of it. New borrowing against one’s home became almost the only way to maintain living standards in the face of this economic squeeze.”

  This analysis of individual actors neatly mirrors the global transformation of the world reserve currency over the past century: from a mechanism of saving and capital accumulation to a mechanism of one country taking over the world through its growing deficit.

  Hudson pauses to reflect on the grotesque irony of pension funds trying to make money by speculating. “The end game of finance capitalism,” he says, “will not be a pretty sight.”

  VIII. COUNTER-THEORIES AND CRITICISMS

  There is surely a case to be made for how the world benefited from the dollar system. This is, after all, the orthodox reading of history. With the dollar as the world reserve currency, everything as we know it grew from the rubble of World War II.

  One of the strongest counter-theories relates to the USSR, where it seems clear that the Treasury bill standard — and the unique ability for the U.S. to print money that could purchase oil — helped America defeat the Soviet Union in the Cold War.

  To get an idea of what the implications are for liberal democracy’s victory over totalitarian communism, take a look at a satellite image of the Korean peninsula at night. Compare the vibrant light of industry in the south with the total darkness of the north.

  So perhaps the Treasury bill standard deserves credit for this global victory. After the fall of the Berlin Wall, however, the U.S. did not hold another Bretton Woods to decentralize the power of holding the world’s reserve currency. If the argument is that we needed the Treasury bill standard to defeat the Soviets, then the failure to reform after their downfall is puzzling.

  A second powerful counter-theory is that the world shifted from gold to U.S. debt simply because gold could not do the job. Analysts like Jeff Snider assert that demand for U.S. debt is not necessarily part of some scheme but rather as a result of the world’s thirst for pristine collateral.

  In the late 1950s, as the U.S. enjoyed its last years with a current account surplus, something else major happened: the creation of the eurodollar. Originally borne out of an interest from the Soviets and their proxies to have dollar accounts that the American government could not confiscate, the idea was that banks in London and elsewhere would open dollar-denominated accounts to store earned U.S. dollars beyond the purview of the Federal Reserve.

  Sitting in banks like Moscow Narodny in London or Banque Commerciale pour L’Europe du Nord in Paris, these new “eurodollars” became a global market for collateralized borrowing, and the best collateral one could have in the system was a U.S. treasury.

  Eventually, and largely due to the changes in the monetary system post-1971, the eurodollar system exploded in size. It was unburdened by Regulation Q, which set a limit on interest rates on bank deposits in the U.S. Eurodollar banks, free from this restriction, could charge higher rates. The market grew from $160 billion in 1973 to $600 billion in 1980 — a time when the inflation-adjusted federal funds rate was negative. Today, there are many more eurodollars than there are actual dollars.

  To revisit the Triffin dilemma, the demand for “reserve” dollars worldwide would inevitably lead to a draining of U.S. domestic reserves and, subsequently, confidence in the system breaking down.

  How can a stockpile of gold back an ever-growing global reserve currency? Snider argues that the Bretton Woods system could never fulfill the role of a global reserve currency. But a dollar unbacked by gold could. And, the argument goes, we see the market’s desire for this most strongly in the growth of the eurodollar.

  If even America’s enemies wanted dollars, then how can we say that the system only came into dominance through U.S. design? Perhaps the design was simply so brilliant that it co-opted even America’s most hated rivals. And finally, in a world where gold had not been demonetized, would it have remained the pristine collateral for this system? We’ll never know.

  A final major challenge to Hudson’s work is found in the discourse arguing that the World Bank has helped increase living standards in the developing world. It is hard not to argue that most are better off in 2021 than in 1945. And cases like South Korea are provided to show how World Bank funding in the 1970s and 1980s were crucial for the country’s success.

  But how much of this relates to technology deflation and a general rise in productivity, as opposed to American aid and support? And how does this rise compare differentially to the rise in the West over the same period? Data suggests that, under World Bank guidance between 1970 and 2000, poorer countries grew more slowly than rich ones.

  One thing is clear: Bretton Woods institutions have not helped everyone equally. A 1996 report covering the World Bank’s first 50 years of operations found that “of the 66 less developed countries receiving money from the World Bank for more than 25 years, 37 are no better off today than they were before they received such loans.” And of these 37, most “are poorer today than they were before receiving aid from the Bank.”

  In the end, one can argue that the Treasury bill standard helped defeat Communism; that it’s what the global market wanted; and that it helped the developing world. But what cannot be argued is that the world left the era of asset money for debt money, and that as the ruler of this new system, the U.S. government gained special advantages over every other country, including the ability to dominate the world by forcing other countries to finance its operations.

  IX. THE END OF AN ERA?

  In Enlightenment philosopher Immanuel Kant’s landmark 1795 essay “Toward Perpetual Peace,” he argues for six primary principles, one of which is that “no national debt shall be contracted in connection with the external affairs of the state”:

  “A credit system, if used by the powers as an instrument of aggression against one another, shows the power of money in its most dangerous form. For while the debts thereby incurred are always secure against present demands (because not all the creditors will demand payment at the same time), these debts go on growing indefinitely. This ingenious system, invented by a commercial people in the present century, provides a military fund which may exceed the resources of all the other states put together. It can only be exhausted by an eventual tax-deficit, which may be postponed for a considerable time by the commercial stimulus which industry and trade receive through the credit system. This ease in making war, coupled with the warlike inclination of those in power (which seems to be an integral feature of human nature), is thus a great obstacle in the way of perpetual peace.”

  Kant seemingly predicted dollar hegemony. With his thesis in mind, would a true gold standard have deterred the war in Vietnam? If anything, it seems certain that such a standard would have made the war at least much shorter. The same, obviously, can be said for World War I, the Napoleonic Wars, and other conflicts where the belligerents left the gold standard to fight.

  “The unique ability of the U.S. government,” Hudson says, “to borrow from foreign central banks rather than from its own citizens is one of the economic miracles of modern times.”

  But “miracle” is in the eye of the beholder. Was it a miracle for the Vietnamese, the Iraqis, or the Afghans?

  Nearly 50 years ago, Hudson writes that “the only way for America to remain a democracy is to forgo its foreign policy. Either its world strategy must become inward-looking or its political structure must become more centralized. Indeed since the start of the Vietnam War, the growth of foreign policy considerations has visibly worked to disenfranchise the American electorate by reducing the role of congress in national decision making.”

  This trend obviously has become much more magnified in recent history. In the past few years America has been at war in arguably as many as seven countries (Afghanistan, Iraq, Syria, Yemen, Somalia, Libya and Niger), yet the average American knows little to nothing about these wars. In 2021, the U.S. spends more on its military than do the next 10 countries combined. Citizens have more or less been removed from the decision-making process, and one of the key reasons — perhaps the key reason — why these wars are able to be financed is through the Treasury bill standard.

  How much longer can this system last?

  In 1977, Hudson revisits the question on everyone’s mind in the early 1970s: “Will OPEC supplant Europe and Japan as America’s major creditors, using oil earnings to buy U.S. Treasury securities and thereby fund U.S. federal budget deficits? Or will Eastern Hemisphere countries subject the U.S. to a gold-based system of international finance in which renewed U.S. payment deficits will connote a loss of its international financial leverage?”

  We of course know the answer: OPEC did indeed fund the U.S. budget for the next decade. Eastern hemisphere countries then failed to subject the U.S. to a gold-based system, in which payments deficits marked loss of leverage. In fact, the Japanese and Chinese in turn kept buying American debt once the oil countries ran out of money in the 1980s.

  The system, however, is once again showing cracks.

  As of 2013, foreign central banks have been dishoarding their U.S. treasuries. As of today, the Federal Reserve is the majority purchaser of American debt. The world is witnessing a slow decline of the dollar as the dominant reserve currency, both in terms of percentage of foreign exchange reserves and in terms of percentage of trade. These still significantly outpace America’s actual contribution to global GDP — a legacy of the Treasury bill standard, for sure — but they are declining over time.

  De-dollarization toward a multi-polar world is gradually occurring. As Hudson says, “Today we are winding down the whole free lunch system of issuing dollars that will not be repaid.”

  X. BITCOIN VS. SUPER IMPERIALISM

  Writing in the late 1970s, Hudson predicts that “without a Eurocurrency, there is no alternative to the dollar, and without gold (or some other form of asset money yet to be accepted), there is no alternative to national currencies and debt-money serving international functions for which they have shown themselves to be ill-suited.”

  Thirty years later, in 2002, he writes that “today it would be necessary for Europe and Asia to design an artificial, politically created alternative to the dollar as an international store of value. This promises to be the crux of international political tensions for the next generation.”

  It’s a prescient comment, though it wasn’t Europe or Asia that designed an alternative to the dollar, but Satoshi Nakamoto. A new kind of asset money, bitcoin has a chance to unseat the super-imperial dollar structure to become the next world reserve currency.

  As Hudson writes, “One way to discourage governments from running payments deficits is to oblige them to finance these deficits with some kind of asset they would prefer to keep, yet can afford to part with when necessary. To date, no one has come up with a better solution than that which history has institutionalized over a period of about two thousand years: gold.”

  In January 2009, Satoshi Nakamoto came up with a better solution. There are many differences between gold and bitcoin. Most importantly, for the purposes of this discussion, is the fact that bitcoin is easily self-custodied and thus confiscation-resistant.

  Gold was looted by colonial powers worldwide for hundreds of years, and, as discussed in this essay, was centralized mainly into the coffers of the U.S. government after World War I. Then, through shifting global monetary policy of the ’30s, ’40s, ’50s, ’60s, and ’70s, gold was demonetized, first domestically in the U.S. and then internationally. By the 1980s, the U.S. government had “killed” gold as a money through centralization and through control of the derivatives markets. It was able to prevent self-custody, and manipulate the price down.

  Bitcoin, however, is notably easy to self-custody. Any of the billions of people on earth with a smartphone can, in minutes, download a free and open-source Bitcoin wallet, receive any amount of bitcoin, and back up the passphrase offline. This makes it much more likely that users will actually control their bitcoin, as opposed to gold investors, who often entered through a paper market or a claim, and not actual bars of gold. Verifying an inbound gold payment is impossible to do without melting the delivery bar down and assaying it. Rather than go through the trouble, people deferred to third parties. In Bitcoin, verifying payments is trivial.

  In addition, gold historically failed as a daily medium of exchange. Over time, markets preferred paper promises to pay gold — it was just easier, and so gold fell out of circulation, where it was more easily centralized and confiscated. Bitcoin is built differently, and could very well be a daily medium of exchange.

  In fact, as we see more and more people demand to be paid in bitcoin, we get a glimpse of a future where Thier’s law (found in dollarizing countries, where good money drives out the bad) is in full effect, where merchants would prefer bitcoin to fiat money. In that world, confiscation of bitcoin would be impossible. It may also prove hard to manipulate the spot price of bitcoin through derivatives. As BitMEX founder Arthur Hayes writes:

  “Bitcoin is not owned or stored by central, commercial, or bullion banks. It exists purely as electronic data, and, as such, naked shorts in the spot market will do nothing but ensure a messy destruction of the shorts’ capital as the price rises. The vast majority of people who own commodity forms of money are central banks who it is believed would rather not have a public scorecard of their profligacy. They can distort these markets because they control the supply. Because bitcoin grew from the grassroots, those who believe in Lord Satoshi are the largest holders outside of centralised exchanges. The path of bitcoin distribution is completely different to how all other monetary assets grew. Derivatives, like ETFs and futures, do not alter the ownership structure of the market to such a degree that it suppresses the price. You cannot create more bitcoin by digging deeper in the ground, by the stroke of a central banker’s keyboard, or by disingenuous accounting tricks. Therefore, even if the only ETF issued was a short bitcoin futures ETF, it would not be able to assert any real downward pressure for a long period of time because the institutions guaranteeing the soundness of the ETF would not be able to procure or obscure the supply at any price thanks to the diamond hands of the faithful.”

  If governments cannot kill bitcoin, and it continues its rise, then it stands a good chance to eventually be the next reserve currency. Will we have a world with bitcoin-backed fiat currencies, similar to the gold standard? Or will people actually use native Bitcoin itself — through the Lightning Network and smart contracts — to do all commerce and finance? Neither future is clear.

  But the possibility inspires. A world where governments are constrained from undemocratic forever wars because restraint has once again been imposed on them through a neutral global balance-of-payments system is a world worth looking forward to. Kant’s writings inspired democratic peace theory, and they may also inspire a future Bitcoin peace theory.

  Under a Bitcoin standard, citizens of democratic countries would more likely choose investing in domestic infrastructure as opposed to military adventurism. Foreigners would no longer be as easily forced to pay for any empire’s wars. There would be consequences even for the most powerful nation if it defaults on its debt.

  Developing countries could harness their natural resources and borrow money from markets to finance Bitcoin mining operations and become energy sovereign, instead of borrowing money from the World Bank to fall deeper into servitude and the geopolitical equivalent of subsistence farming.

  Finally, the massive inequalities of the past 50 years might also be slowed, as the ability of dominant capital to enrich itself in downturns through rent-seeking and easy monetary policy could be checked.

  In the end, if such a course for humanity is set, and Bitcoin does eventually win, it may not be clear what happened:

  Did Bitcoin defeat super imperialism?

  Or did super imperialism defeat itself?

  Tyler Durden
  Mon, 11/15/2021 – 00:00

• Belarus Leader Asks Russia To Station Nuclear-Capable Missiles Near Poland & Ukraine
  Belarus Leader Asks Russia To Station Nuclear-Capable Missiles Near Poland & Ukraine

  With Belarus’ longtime strongman ruler Alexander Lukashenko in the international spotlight over this past week as tensions soar with Poland over the migrant border crisis, he’s been touting his close relationship with Putin while also threatening to shut off the Yamal natural gas pipeline to Europe – something which Putin warned against in fresh statements this weekend. 

  The threat to shut off energy supplies to Europe is something the Kremlin has distanced itself from, given especially it puts Russia in an awkward position at a moment the Nord Stream 2 pipeline is in the last hurdles of German regulatory approval. The Belarus matter can now be use by critics of NS2 to further their argument that Russia is being handed too much geopolitical and resource leverage over Europe’s energy independence. The fight over the Russia-to-Germany pipeline is not over.

  Despite Putin cautioning Minsk as the row with Europe rapidly escalates, Lukashenko is asking for more, as Reuters reports over the weekend: “Pesident of Belarus Alexander Lukashenko wants Russian nuclear-capable Iskander missile systems to deploy in the south and west of the country, he said in an interview with a Russian defense magazine published on Saturday.”

  

  “I need several divisions in the west and the south, let them stand (there),” Lukashenko was quoted as saying. Reuters summarized further of the hugely provocative request: 

  Lukashenko told National Defense magazine that he needed the Iskander mobile ballistic missile system, which has a range of up to 500 kilometers (311 miles) and can carry either conventional or nuclear warheads.

  Despite the Kremlin not commenting on the statements when pressed by Western reporters, there’s little doubt that it’s the most inconvenient moment possible to open up such a discussion as provocative as nuclear weapons – again given it appears Russia is trying to distance itself from some of Belarus’ leaders’ most outlandish statements. 

  It should be noted that Lukashenko floated the idea of deploying the nuke-capable systems “in the south and west” of Belarus. Crucially, the countries lying to the west of Belarus are EU members Poland and Lithuania, and to the south lies NATO-friendly Ukraine. 

  

  While Russia and Belarus remain part of a closely cooperative “union state” – such an action as Russia transferring such weaponry to Belarus would without doubt trigger a crisis on par with the 2014 Crimean crisis, and potentially leading to war with NATO. 

  Tyler Durden
  Sun, 11/14/2021 – 23:30

• Is The Yuan's 2015 Devaluation The Wrong Template To Look At Now
  Is The Yuan’s 2015 Devaluation The Wrong Template To Look At Now

  By Ye Xie, Bloomberg Markets Live commentator and reporter

  Three things we learned last week:

  1. The yuan’s relentless rise is fueling fear of a repeat of the 2015 debacle.

  With the trade-weighted yuan at the strongest in five years, there’s growing concern that the currency is becoming so expensive that it will eventually crash. “This is a repeat of what got the RMB in trouble in 2014,” Robin Brooks, chief economist at the Institute of International Finance, tweeted. “Back then, RMB was quasi-pegged to the dollar, which rose sharply, dragging RMB up with it. That episode ended with the surprise “step” RMB devaluation in Aug 2015.”

  
   
  The similarities between now and then are many. Like 2015, the economy is faltering amid a deleveraging campaign, just as the Fed moves to reduce policy accommodation. But concern over similarities may be overblown. The ongoing pandemic has been a boon for China’s balance of payments. It reinforced China’s role as a global factory, resulting in a record trade surplus. Meanwhile, traveling abroad has diminished, cutting off a dominant source of capital outflows. Instead of outflows like in 2015, money has been pouring into stocks and bonds, as well as via FDI. In short, a strong yuan has fundamental support, noted Morgan Stanley. (Their strategists recommend long yuan vs euro and the Indian rupee.)

  
   
  2. Beijing is stepping up efforts to calm the real-estate market.

  High-yield property bonds rebounded strongly late last week, amid reports of some easing of restrictions in the housing market. On Friday, the PBOC reiterated a pledge to foster the “steady and sound” development of the property market. The authorities are trying to stop the contagion from spreading to stronger companies. But developers still need to come up with money somewhere to repay the debt, and there’s still a lot coming due. The tide is going out and we’ll know who’s swimming naked.
   
  3. Inflation concerns pushed forward Fed rate-hike expectations.

  The U.S. 10-year TIPS breakeven rate surged to the highest since 2006, following a shocking CPI report that exceeded all economists’ estimates. Meanwhile real yields dropped to record lows. The set-up looks similar to the one before the Taper Tantrum in 2013 when the Fed’s abrupt hawkish pivot roiled global markets. In China, while PPI rose to the highest in 26 years, the pass-through to CPI remains limited, allowing some flexibility for the PBOC to ease policy, when needed.

  

  Tyler Durden
  Sun, 11/14/2021 – 23:00

• "Certainly On My Mind" – NY Gov. Jokes About Banning Zoom To Get Workers Back In Offices 
  “Certainly On My Mind” – NY Gov. Jokes About Banning Zoom To Get Workers Back In Offices 

  New York Governor Kathy Hochul joked with ABC7 New York that she wouldn’t sanction Zoom to get people back to work in Manhattan as the latest employment survey found less than a third of workers are back in the office. 

  “…short of banning Zoom, which I’m not going to do – but it’s certainly something on my mind as we want people back downtown,“ Hochul joked with reporters.

  The scary part of which is that, as many have become increasingly aware of in the last two years, when a Democratic leader says they won’t do something… it usually means, at some point, they will (remember “two weeks to flatten the curve”, vaccine passports are a conspiracy theory, etc…). 

  The newly elected governor is desperate for workers to return to the borough as the Zoom-boom during the virus pandemic has kept many at home. In return, the local economy languishes as businesses, such as eateries, bars, and other street shops, suffer due to a decline of office workers. 

  “It is very safe here and we want people to come back. They’re missing the vitality, the energy and the innovation that is spurred by the connections of human beings,” Hochul said.

  Perhaps it’s time to stop the incessant and accelerating fearmongering about the virus then?

  According to Partnership for New York City, only 28% of Manhattan office workers were back in the city on an average workday in November. 

  “Of Manhattan’s one million office workers, 28% are back. And of those, only 8% are back full time,” said Kathryn Wylde, who heads Partnership for New York City.

  

  By Jan. 30, employers expect about half of workers will return to the office on an average weekday, with 57% in the office at least three days a week while 21% remain remote. 

  The highest average daily workplace attendance is real estate, with 77%, followed by financial services (27%) and law firms (27%).

  We have routinely commented on the slow return of workers. Kastle Systems, whose electronic access systems secure thousands of office buildings across NYC, shows an increasing number of workers returned to the office at the beginning of November. Since September, the index has risen nearly fourteen percentage points from 20% to about 34%. Overall, the index remains well below pre-pandemic levels. 

  

  Kastle’s numbers appear similar to Partnership for New York City’s survey data. Even though Hochul joked about banning Zoom, the governor has only one job: get re-elected. And will do so by any means possible as she must revive Manhattan’s economy. So don’t be surprised if she sanctions companies for not returning workers to office buildings or even goes after Zoom, as one third of companies surveyed said they expect to reduce their city office space requirements in the next five years.

  This means remote work is here to stay… and the politicians won’t like that at all!

  Tyler Durden
  Sun, 11/14/2021 – 22:30

• 'A World Gone Mad': Upscale LA Neighborhood Wrestles With Worsening Homeless Crisis
  ‘A World Gone Mad’: Upscale LA Neighborhood Wrestles With Worsening Homeless Crisis

  Authored by Jamie Joseph via The Epoch Times,

  Abbott Kinney Boulevard is a picture-perfect hidden gem in the Venice neighborhood of Los Angeles, known for its boutique shops and locally-owned dining joints. The mile-long strip sings to the tune of upper-middle-class patrons who come to Venice Beach to soak in its peculiar rhythm. The neighborhood’s tight-knit community of homeowners who have lived in the area for decades are proud to reside in this unique nook of town.

  

  But over the last year, the community within this stretch of Venice grew even closer over a common frustration: the growing homeless encampments.

  The issue is not new to Los Angeles as a whole, which has more than 41,000 people living on its streets, according to the latest homeless count, with more than 66,000 homeless people countywide. A forecast by the Economic Roundtable estimates that number could reach nearly 90,000 by the year 2023.

  Venice has approximately 2,000 people living unhoused, making it the second largest congregant of homeless people in the city after Skid Row in downtown Los Angeles.

  Drugs, needles, trash, violence, fires, and encampments have become all too common to the Venice community. They say their pleas for help often fall on deaf ears when it comes to their city leaders, while tourists, homeowners, workers, and other homeless people have become victims to random assaults by a more violent crowd of transients.

  “It’s a world gone mad,” Venice resident Deborah Keaton told The Epoch Times. “It’s our own making too. I’m a liberal, a Democrat, and we voted for these measures that decriminalize a lot of this behavior, and so there’s no repercussions for these guys.”

  

  When Keaton steps outside her home on North Venice Blvd. between Abbott Kinney and Electric Ave., her reality is not the white-picket fence experience she bought into 30 years ago when she purchased her home. An encampment, including a handful of parked RVs, has popped up adjacent to her house, making hers the closest house to the neighborhood’s new hot spot for crime and drug dealing.

  The transients living inside the RVs play loud music all day and night, she said. She filed a police report against the apparent ringleader of the RV encampment, Brandon Washington, because she says he approached her gate and allegedly made threats against her family.

  “He rang the bell, and he was wasted, and he said to me: ‘I just need to know all the evil people, is your husband evil? Because I need to kill your husband,’” Keaton said. “It was scary.”

  She captured the entire interaction on her Ring doorbell camera.

  “There’s no repercussions for these guys, and they can’t be held and they know it. A lot of these guys have been arrested 400 times,” she said.

  Neighbors allege Washington—who often appears to be on drugs—has prostituted women in the RVs, in addition to dealing methamphetamine to other homeless people. Keaton said in the summer a woman was hiding in her backyard, because she said Washington was “pimping her out.”

  These stories have become all too common in Venice.

  Ansar El Muhammad, who goes by “Brother Stan” in Venice, knows the plight of Washington all too well. About 20 years ago, Washington was in Muhammad’s niece’s wedding. Both were born and raised in Venice and ran in the same circles.

  “Even though everybody is up in arms about this, these are human beings,” Muhammad told The Epoch Times. “Brandon’s a good guy, it’s the drugs that are doing that to him. So, I understand the neighbors’ perspective.”

  Muhammad has become somewhat of a neighborhood protector, taking matters into his own hands. He runs H.E.L.P.E.R Foundation, a gang intervention coalition serving the Venice and Mar Vista neighborhoods.

  Venice neighbors say they trust him so much they call him first when there’s a safety or noise issue. The homeless trust him, too, so he is able to keep the peace.

  Most of the vagrants in Venice are involved in some element of gang activity, even if they are not officially part of a set, he said. Drug addiction is also rampant among the homeless, making it more difficult for them to accept resources.

  “So, for my friend over here, what do I do? I build rapport, I have to wait for him to say ‘Stan, I’m ready,’” he said.

  

  Other outreach workers across the county have told The Epoch Times the same thing—contact must be repeatedly made before some people accept help.

  Pat, an unsheltered resident in Venice Beach, told The Epoch Times earlier this year there should be more solutions by city leaders to encourage special rehab programs that would “give people a sense of accountability.”

  “There’s got to be a way, a path forward from sleeping on the pavement to eventually having a place. But I think all of the energy to give that path forward should come from the person in that situation,” he said.

  Neighbors Criticize Local Policies

  The Los Angeles Sheriff’s Department Homeless Outreach and Services Team (LASD HOST) conducted a cleanup of the sidewalk surrounding the RVs on Sept. 8 and 9, but Keaton said they won’t enforce any measures that would force the RVs to move. She fears the trash will pile up again and attract additional criminal activity.

  “The LAPD says they can’t enforce it because it comes down from the mayor’s office, but according to the Sheriff’s Department, the LAPD are not supposed to take orders from the mayor’s office—but that’s the deal,” Keaton said.

  Venice Neighborhood Council Board member Soledad Ursua told The Epoch Times the RVs receive citations, but a homeless service provider in the area allegedly pays for the tickets.

  Ursua said the pandemic also changed the homeless situation by encouraging transients to move to new residential areas in the city near commercial areas.

  “This is different because there’s people who are totally selling drugs, they’re doing drugs, and it’s outside a residence,” Ursua said.

  “I’ve had to clean up human feces in my carport three times,” she added.

  During the summer, HOST conducted a massive cleanup and outreach effort on the Venice boardwalk. Los Angeles Sheriff Alex Villanueva deployed deputies to the area while media reports slammed city leaders for not addressing the issue. Encampment fires were at an all time high: more than 54 percent of all fires in Los Angeles were caused by encampments this year, the Los Angeles Fire Department reported.

  The neighborhood experienced a sharp uptick in crime during the summer, too, according to statistics provided to the Venice Neighborhood Council by LAPD Capt. Steve Embrich.

  Year-to-date numbers showed that robberies nearly tripled since the same period last year. Homeless-related robberies were up 260 percent, homeless-related assaults with a deadly weapon were up 118 percent, property crimes and area burglaries were up 85 percent, and grand theft auto was up 74 percent.

  “We’ve been inundated with calls, with concerns, with images from the news, from people picking up the phone, emailing, sending us letters, about what’s going on in Venice,” Villanueva told reporters during a press conference inside the Hall of Justice on June 23. “And that is a microcosm of what’s going on throughout the entire county of Los Angeles.”

  Los Angeles Councilmember Mike Bonin—who was also a local advocate for defunding the LAPD—countered Villanueva’s efforts and asked the Los Angeles Homeless and Poverty Committee to shift $5 million in budgeted aid to fund housing programs in his district. Those funds were sent to the St. Joseph Center to conduct outreach on the boardwalk.

  However, some tents have started popping back up on the boardwalk, with residents saying many homeless individuals have just been moved around.

  An unhoused member of the Venice community, Butch Say, believes most homeless people in Venice don’t want the help. Say, who described himself as a traveling nomad, told The Epoch Times during the boardwalk cleanup that most of them prefer to live on the street.

  “They go, ‘No, I love it out here. Nobody tells me what to do, and I run around in my underwear,” he said. “You know, whatever. They’re crazy. What can I say? It’s Venice.”

  Not a ‘Housing’ Problem

  While Los Angeles dealt with a homeless crisis prior to the COVID-19 pandemic, city restrictions may have exacerbated the problem. Curfew on tents in public were rolled back and sanitation crews were cut to mitigate the spread of the virus. Other city codes were suspended, too. As a result, many homeless people—mostly addicts—flocked to the beach.

  In a previous interview with The Epoch Times, local bar owner Luis Perez said Venice always had a quirky community of homeless individuals, but they were largely artists and entertainers. They weren’t addicts. He said he saw homeless individuals being bussed in and dropped off on the boardwalk.

  As state and city leaders peddle the state-sanctioned “housing first” model, which suggests the solution to homelessness lies within building more affordable housing units, Venice Beach natives have a different perspective.

  “A lot of them don’t want housing. See, this is the issue—they put all this money in here for housing, but there’s less than 5 percent of this population across the city that want it. They say ‘to hell with housing,’” Muhammad said. “You know why? Because they’re addicts.”

  

  On Nov. 10, Gov. Gavin Newsom visited West Los Angeles VA Medical Center. During the press conference, Newsom told reporters that $22 billion in funds is being invested to address “the issue of affordability, housing, and homelessness, to support these efforts all across the state of California.”

  “Yes, I see what you see, yes I’m mindful of what is happening, but I’m also more optimistic than I’ve ever been. We are seeing progress,” he said.

  But residents say they look around, and the problem seems to be getting worse.

  “I voted for Proposition HHH. I [would] be the first one to say I want a solution. And honestly, I would probably vote for another one if I thought the money was going to be correctly spent,” said Venice Neighborhood Council Board member Robert Thibodeau.

  “But the thing is, where’s the light on the ground solutions? Where’s the FEMA style response, the striking sort of immediate solutions that you would have with [Hurricane] Katrina, because to me, this is Katrina.”

  Local business owners—the heartbeat of Venice—have been speaking out, too. Klaus Moeller, co-owner of Ben & Jerry’s on the boardwalk, told The Epoch Times in an email during the summer that “this is not a local homeless problem.”

  “This is a problem about out-of-state transients and drug dealers/users moving in because they can act without repercussions,” he said.

  Moeller added his employees have been attacked by transients on the boardwalk.

  Neighbors also criticized Proposition HHH, a $1.2 billion bond passed in 2016 by Angelenos to build 10,000 supportive housing units. As of February, the city controller discovered only 489 of the bond-funded units were ready for occupancy.

  Because of the lack of supportive housing, a number of tiny home villages have popped up across the county as lower-cost alternative for interim housing. However, some residents say they won’t make much of a difference.

  “They wouldn’t move indoors. It’s not a housing crisis—it’s an addiction crisis,” Los Angeles native and new Venice resident, Kate Linden, told The Epoch Times.

  Linden said she emails Lt. Geff Deedrick—who leads the HOST efforts—weekly letting him know what’s going on. But the HOST team can only come in when they are given orders.

  Previously, Lt. Deedrick told The Epoch Times: “The HOST team provides that guardian mentality, so you can have a safe space for those discussions, but that’s where the policy makers and executives and those things, we leave that to them; we deploy at the direction of the sheriff.”

  

  Residents Launch Recall Campaign

  Many Venice neighbors who originally voted in Councilmember Bonin to represent them in the 11th district, like Keaton, are pulling back their support. Earlier this year, a recall campaign was launched, and on Nov. 10, petitioners collected enough signatures to move forward in the recall election process.

  They blame Bonin for the increased homelessness and lack of enforcement on street camping that they say brings gang activity into the neighborhood. On Oct. 22, the Los Angeles City Council voted to ban encampments in 54 specified areas, with Bonin and Councilmember Nithya Raman the only two dissenting votes.

  Thibodeau said Bonin’s views are on the “radical fringe,” that aligns with special interest groups and far-left activists. Thibodeau, who identifies as a centrist, said he’s sent dozens of emails to Bonin’s office with no response.

  “The sad thing is lot of this has happened because of a higher level of tolerance in the community and a compassion in the community—we’ve been abused, because we’re compassionate people,” Thibodeau told The Epoch Times.

  “He will not enforce [camping restrictions] in his district. So, now what, he’s in charge of policing too?”

  During a city council meeting last month, Bonin voted not to enforce a ban on camping due to a lack of prior street engagement to notify the homeless. But according to city documents (pdf), the cost of signage and outreach would cost as much as $2 million.

  “There was an agreement about street engagements, and I think we need to live by that part as well,” Bonin said. “I am certain that a lot of work has been done, but it still isn’t to the level of what we committed to as a body. And I’m concerned about us losing the commitment to the street engagement strategy and not making sure that it is adequately resourced.”

  Adding to the residents’ frustrations, the LAPD has their hands tied due to the city’s catch-and-release policies. Homeless people who commit crimes are often back on the streets within hours if they refuse services.

  Thibodeau said he believes Bonin is transforming Venice into a “containment zone” by not enforcing any anti-camping ordinances. Meanwhile, Bonin is planning several large supportive housing developments in Venice Beach and Mar Vista.

  Bonin and Los Angeles Mayor Eric Garcetti also championed A Bridge Housing supportive units in Venice for $8 million that came out of Prop. HHH funds. Residents say most of the homeless who reside in the shelter are “dual residents,” meaning they have a bed in the shelter as well as a tent on the street.

  “There are no new planned facilities in Pacific Palisades. Brentwood happens to have the VA but nowhere else in Brentwood … so we’re making a Containment Zone here like Skid Row,” he said.

  As far as the sidewalk on N. Venice Boulevard taken over by RVs and tents, Thibodeau said, “Living next to this stuff is very draining.” He said he’s thinking about organizing street protests to address the issue.

  Councilmember Bonin’s office did not respond to a request for comment by press deadline.

  Tyler Durden
  Sun, 11/14/2021 – 22:00

• Billionaire Late-Bloomers – It's Never Too Late To Join The 'Tres Comas' Club
  Billionaire Late-Bloomers – It’s Never Too Late To Join The ‘Tres Comas’ Club

  More often than not, individuals and media alike focus on the success stories of early bloomers.

  These early-age accomplishments of some of the richest people in the world are highlighted as marvels. The early achievements of hoodie-wearing CEOs like Mark Zuckerberg or Evan Spiegel—who became billionaires at ages 23 and 25, respectively—come to mind.

  But, as Visual Capitalist’s Omri Wallach and Aran Ali detail below, there’s also the case to be made for the late bloomer. According to the Census Bureau, a 35-year-old is three times more likely to found a successful start-up than someone aged 22.

  The infographic above, from Virtual College, highlights 45 billionaires who had their breakthrough later in life, by the age of their respective breakthrough.

  

  Billionaires With Career Breakthroughs at or After Age 35

  Though these late successes span many different industries and countries, there are many consistent through lines.

  The 45 billionaires highlighted had an average age of 41 and an average net worth of $10 billion.

  

  Here are just a few highlights of late career breakthroughs:

  Jack Ma

  Ma is best known for co-founding Alibaba and becoming one of China’s wealthiest people, but his start came rather unexpectedly. After failing to secure jobs as a fresh graduate and starting his own translation company, Ma went on a business trip to the U.S. and discovered the internet (and a lack of Chinese websites). Over time, he connected Chinese companies with American coders to create websites, and soon saw room in the market for a business-to-business marketplace, which became Alibaba. The company secured millions in investment and would go on to become one of China’s leading forces in tech, all without Ma writing a single line of code.

  Amancio Ortega

  As the former CEO of fashion chain Zara and its parent company Inditex, Ortega is Europe’s third wealthiest person. That success came after opening the first Zara store in 1975 with his then-wife Rosalía Mera, with their store focusing on cheaper versions of high-end fashion. Ortega fine-tuned the design and manufacturing process to produce new trends more quickly, helping to pioneer the concept of “fast fashion,” and soon becoming a fashion powerhouse.

  Jim Simons

  Simons was once lauded as the world’s greatest investor, largely due to his outlandish returns of over 60% before fees. But he actually started in the academic field, acquiring a PhD in mathematics—he worked in many faculties, and even as a codebreaker for the NSA. Eventually, Simons utilized his mathematical knowledge on Wall Street, where he had his breakthrough in 1982 by starting his model-based hedge fund—Renaissance Technologies, and built a net worth of $24.6 billion.

  Dietrich Mateschitz

  One of the 60 richest people in the world, Austrian businessman Mateschitz got his start in marketing for Unilever and then cosmetics company Blendax. His breakthrough came on a business trip to Thailand, where the 40-year-old discovered that the local energy drink Krating Daeng helped his jet lag. Mateschitz and the drink’s creator, Chaleo Yoovidhya, each put up $500,000 to turn the drink into an exported energy brand, and Red Bull was born.

  James Dyson

  Before Dyson was a household name of vacuums, fans, and dryers, The UK’s James Dyson was an industrial engineer with many ideas for inventions. After getting frustrated with the bags of Hoover vacuum cleaners, Dyson had the idea for a bagless cyclone vacuum, and developed one after more than 5,000 prototypes over five years (and supported by his wife’s salary). At first he couldn’t find a manufacturer or success in the UK, so Dyson instead sold his vacuums in Japan and ended up winning the 1991 International Design Fair Prize there. Thirty years later, Dyson’s success led to a royal knighting and becoming the fourth richest person in the UK.

  Late Bloomers: The Rule Not The Exception

  It’s helpful to remember that these stories might be incredible and successful on a grand scale, but they are not entirely unique.

  According to the U.S. Census Bureau, the majority of successful businesses have been founded by middle-aged people and the average age of a company’s founder at the time of founding is 41.9 years. Experience definitely pays dividends, and the saying that “life is a marathon, not a sprint” seems especially true for this list of late breakthrough billionaires.

  Tyler Durden
  Sun, 11/14/2021 – 21:30

• China Macro Data Weakens Across The Board, Credit Impulse Contracts Most In 10 Years
  China Macro Data Weakens Across The Board, Credit Impulse Contracts Most In 10 Years

  After a slew of disappointing macro data in September (including the Q3 GDP slump), China’s economy (upon which we get the usual monthly avalanche of data tonight) was expected to continue to show signs of slowing growth as the PBOC has definitely erred on the side of caution recently (refraining from cutting banks’ reserve requirement ratio since a reduction in July, and has keeping policy interest rates steady since early last year).

  China’s credit impulse is anything but supportive, contracting at its most aggressive pace since April 2011…

  

  Ahead of tonight’s prints, the signals from business surveys are mixed (in other words, useless), with the private Caixin PMI showing both services and manufacturing rising, while Beijing’s official PMI showed declines in both segments of the economy…

  

  So what did the ‘hard’ data look like?

  • China Industrial Production YTD YoY +10.9% BEAT +10.8% Exp DOWN from +11.8% in September

  • China Retail Sales YTD YoY +14.9% BEAT +14.7% Exp DOWN from +16.4% in September

  • China Fixed Asset Investment YTD YoY +6.1% MISS +6.5% Exp DOWN from +7.3% in September

  • China Property Investment YTD YoY +7.2% MISS +7.8% Exp DOWN from +8.8% in September

  • China Surveyed Jobless Rate 4.9% MEET 4.9% Exp SAME as 4.9% in September

  So, as expected, all indicators are weaker from September to October but Industrial Production and Retail Sales managed very modest, and well-engineered, beats. On the investment side, it was a different story with big misses…

  

  Additionally, China New Home Prices fell 0.25% MoM, the second monthly contraction in a row and accelerating lower, with prices rising MoM in just 13 of the 70 cities (well down from the 27 cities that saw prices rise MoM in September).

  

  Given the mixed picture, it is definitely premature to call any lows here in China’s economy.

  So where do we go from here?

  As Bloomberg’s Chief China Markets Correspondent, Sofia Horta e Costa, notes, the central bank has little room for error.

  • If liquidity tightens too much, there could be a repeat of the credit squeeze a year ago at a time when the economy is already under pressure.

  • Too generous, and the PBOC may undo efforts to deleverage.

  Last year, the central bank left so much extra cash in the financial system that only a few months later, Chinese officials were clamping down on excessive leverage and warning of the risk of asset bubbles.

  Tyler Durden
  Sun, 11/14/2021 – 21:07

• Was Rittenhouse's Possession Of The AR-15 Unlawful?
  Was Rittenhouse’s Possession Of The AR-15 Unlawful?

  Authored by Jonathan Turley,

  In covering the motions hearing last week in the trial of Kyle Rittenhouse, I noted a surprising comment from Judge Bruce Schroeder that he had “spent hours” with the Wisconsin gun law and could not state with certainty what it means in this case.

  The statement could effectively knock out the misdemeanor gun possession count — the one count that could still be in play for the jury after the prosecution’s case on the more serious offense appeared to collapse in court. A close examination of that provision reveals ample reason to question not just its meaning but its application to this case.

  

  The unlawful possession of the gun has been a prominent fact cited not only by the prosecutors but the press.

  At trial, however, prosecutor Thomas Binger at points seemed to be learning the governing law from Rittenhouse. For example, he pressed Rittenhouse on why he did not just purchase a handgun rather than an AR-15.  Rittenhouse replied he could not possess a hand gun at his age. Binger then asked in apparent disbelief that the law allowed him to have an AR-15 but not a handgun and Rittenhouse said yes.  Binger then moved on after seemingly drawing out a point for the defense.

  The exchange was all the more baffling because it drew attention to the fact that one of Binger’s alleged “victims” was an adult named Gaige Grosskreutz who also decided to bring a handgun to the protests and pointed his 9mm at the head of Rittenhouse when he was shot in the arm.

  However, the most damaging moment came outside of the presence of the jury when the judge drilled down on the law. He told the prosecutors “I have been wrestling with this statute with, I’d hate to count the hours I’ve put into it, I’m still trying to figure out what it says, what’s prohibited. I have a legal education.” He added that he failed to understand how an “ordinary citizen” could understand what is illegal.

  It is hard to understand how the count could be given to the jury without a clear understanding of what it means. It is also hard to instruct a jury on an ambiguous statute. Criminal laws are supposed to be interpreted narrowly.   It is called the “rule of lenity” and has been around in the English system for centuries. For example,  in 1547, the court was faced with a law making it a felony to steal  “Horses, Geldings or Mares.” Given the use of plural nouns, the court ruled that it did not apply to stealing just one horse.

  The problem with the Wisconsin statute is not a problem of pluralization but definition. It is not clear that the statute actually bars possession by Rittenhouse. Indeed, it may come down to the length of Rittenhouse’s weapon and the prosecutors never bothered to measure it and place it into evidence.

  In Wisconsin, minors cannot possess short-barreled rifles under Section 941.28. Putting aside the failure to put evidence into the record to claim such a short length, it does not appear to be the case here. Rittenhouse used a Smith & Wesson MP-15 with an advertised barrel length of 16 inches and the overall length is 36.9 inches. That is not a short barrel.

  Then there is the rest of the statute and ultimately the word “and.”  Under Section 948.60(2)(a) (“Possession of a dangerous weapon by a person under 18”), “[a]ny person under 18 years of age who possesses or goes armed with a dangerous weapon is guilty of a Class A misdemeanor.” That makes Rittenhouse guilty, right?

  Well, you then have to look at the subsection (c), which states that “This section applies only to a person under 18 years of age who possesses or is armed with a rifle or a shotgun if the person is in violation of s. 941.28 or is not in compliance with ss. 29.304 and 29.593.”

  Since there is no evidence that Rittenhouse violated Section 941.28, he presumably must be in violation of both sections 29.304 and 29.593.. The defense conceded Rittenhouse was in violation of Section 29.593, which requires certification for weapons. However, he is not in violation of section 29.304, entitled “Restrictions on hunting and use of firearms by persons under 16 years of age.” As the title indicates, the section makes it illegal for persons under 16 to use firearms. Rittenhouse was 17 at the time and the prosecution has not challenged that fact.

  If Rittenhouse were convicted on that count, it could face a serious challenge on appeal. Indeed, it is curious is why Schroeder would even submit the count to the jury if it is uncontested that Rittenhouse was 17. If that is the correct interpretation of the statute, there would be no way for a jury to reasonably convict Rittenhouse. It is akin to giving the jury a criminal count based on his use of force as a police officer when there is no evidence that he was a police officer.

  The defense also offered legislative history to support the narrower interpretation but the prosecution opposed such reliance on material beyond of the language itself. However, that language is difficult to square with the charge and the evidence in this case.

  Rittenhouse is obviously facing other counts. However, on that count, the question comes down to the “and.” To paraphrase Johnnie Cochran from the O.J. Simpson trial, if that clause “doesn’t fit, you must acquit.”

  Tyler Durden
  Sun, 11/14/2021 – 21:00

• The Enormous Mental Health Impact Of COVID-19
  The Enormous Mental Health Impact Of COVID-19

  While only a miniscule percentage of humans on Earth have not been affected in some way by the Covid-19 pandemic, the ways in which people’s lives have been altered are as diverse as the severity of the effects themselves (with some having even seen positives to come out of the situation).

  However, as Statista’s Martin Armstrong notes, one negative impact which has been felt to similar degrees around the world though is that on our mental health.

  Latest estimates from the OECD show that increases in the prevalence of depression or its symptoms have been observed in all of the countries in its remit that have available data.

  

  You will find more infographics at Statista

  The largest increase has been in Mexico which went from 3 percent of adults pre-pandemic to 28 percent in 2020.

  Sweden has the highest level of the countries with data pre- and post-pandemic start at 30 percent.

  South Korea however has an estimated share of 37 percent, although there are no data points for a pre-pandemic comparison.

  Tyler Durden
  Sun, 11/14/2021 – 20:30

• Medicare Premiums Set To Soar; Biden Admin Blames Drug Costs & COVID
  Medicare Premiums Set To Soar; Biden Admin Blames Drug Costs & COVID

  By Zachary Stieber of the Epoch Times,

  President Joe Biden’s administration on Friday announced it is raising Medicare premiums, a move it blamed in part on the cost of drugs.

  

  The Medicare Part B standard monthly premium will rise by nearly $22 to $170.10 next year, the Centers for Medicare & Medicaid Services said.

  “The increase in the Part B premium for 2022 is continued evidence that rising drug costs threaten the affordability and sustainability of the Medicare program,” Chiquita Brooks-LaSure, administrator of the agency, said in a statement.

  “The Biden-Harris Administration is working to make drug prices more affordable and equitable for all Americans, and to advance drug pricing reform through competition, innovation, and transparency,” she added.

  The move also stemmed from the limiting of the monthly premium increase this year in the Continuing Appropriations Act and from “spending trends driven by COVID-19,” the agency said.

  “It also reflects the need to maintain a contingency reserve for unanticipated increases in health care spending, particularly certain drug costs.”

  One drug in particular was a major factor. Officials said the uncertainty surrounding the potential use of the Alzheimer’s drug Aduhelm by people covered by Medicare meant they needed to store away a higher level of reserves. The agency in July began analyzing whether Medicare would cover the drug but has not yet finished the analysis.

  

  In addition to the monthly premium, the annual deductible will rise from $203 to $233. Also, Medicare Part A inpatient deductibles will jump $72 to $1,556 next year, and Medicare part A daily coinsurance and skilled nursing facility coinsurance will both increase at least $9.

  Officials pointed out that many Americans covered by Medicare will see a net increase in Social Security benefits. The Social Security Administration announced last month that recipients will get a 5.9 percent increase in benefits.

  However, the 14.5 percent jump in Medicare premiums—the highest since 2016—will eat up the entire adjustment for Social Security recipients with the lowest benefits, according to Senior Citizens League, a nonpartisan seniors group.

  “Social Security recipients with higher benefits should be able to cover the $21.60 per month increase, but they may not wind up with as much left over as they were counting on,” Mary Johnson, a policy analyst for the group, said in a statement.

  Further, inflation is causing the cost of all variety of goods to rise, including core spending priorities like groceries.

  Medicare is a federal health insurance program for Americans 65 or older. Americans can start receiving Social Security as early as age 62, though they receive more if they wait until full retirement age.

  Tyler Durden
  Sun, 11/14/2021 – 20:00

• All Of A Sudden The CDC Has Stopped Talking About Herd Immunity
  All Of A Sudden The CDC Has Stopped Talking About Herd Immunity

  In case you haven’t noticed, the CDC no longer looks as concerned with herd immunity as it once did. 

  In what should come as no surprise to anyone watching the Covid related narrative closely (or those who have been watching the herd immunity narrative from the get-go), the CDC has “set aside herd immunity as a national goal,” according to a new report from the LA Times.

  What used to be a relatively simple concept has now turned into something “very complicated”, according to Dr. Jefferson Jones, a medical officer on the CDC’s COVID-19 Epidemiology Task Force.

  “Thinking that we’ll be able to achieve some kind of threshold where there’ll be no more transmission of infections may not be possible,” he said to a panel that advises the CDC last week.

  While Jones says vaccines are effective against Covid, “even if vaccination were universal, the coronavirus would probably continue to spread,” the report says. 

  Ergo, herd immunity seems to now be off the table. “We would discourage” thinking in terms of “a strict goal,” Jones said. 

  Dr. Oliver Brooks, a member of the CDC’s Advisory Committee on Immunization Practices told the L.A. Times that “we do need to increase” the uptake of Covid shots. 

  Brooks admitted that the focus moving away from herd immunity “almost makes you less motivated to get more people vaccinated.”

  

  He also told the L.A. Times he was worried that if the CDC backs off its herd immunity target, it’ll prevent them from reaching their vaccine targets. 

  It marks the latest of many 180 degree changes of heart on issues related to Covid by the CDC. 

  “It’s a science-communications problem,” Brooks said, making sure to reiterate that the agency was still following “the science”. 

  “We said, based on our experience with other diseases, that when you get up to 70% to 80%, you often get herd immunity,” he said about Covid. “It has a lot of tricks up its sleeve, and it’s repeatedly challenged us. It’s impossible to predict what herd immunity will be in a new pathogen until you reach herd immunity.”

  He concluded: “We want clean, easy answers, and sometimes they exist. But on this one, we’re still learning.”

  Kathleen Hall Jamieson, director of the Annenberg Public Policy Center at the University of Pennsylvania, added that herd immunity was “never as simple as many Americans made it out to be”.

  Sure, Kathleen. Even Americans like Dr. Fauci?

  “Humans are not a herd,” Jamieson told the LA Times. 

  Raj Bhopal, a retired public health professor at the University of Edinburgh, added: “It’s very hard to convey uncertainty and remain authoritative. It’s a pity we can’t take the public along with us on that road of uncertainty.”

  Tell that to everyone that’s been listening to “the science” and the “official” narrative for the last 18 months. 

  Tyler Durden
  Sun, 11/14/2021 – 19:30

• Hedge Fund CIO: Here's Why Trading Often Destroys People, Slowly Devouring Them From Within
  Hedge Fund CIO: Here’s Why Trading Often Destroys People, Slowly Devouring Them From Within

  By Eric Peters, CIO of One River Asset Management

  Losing money sucks. Lots of other things do too. Most of us hate being wrong. We go to extraordinary lengths to protect our egos. Which is absurd of course, but we are curious little creatures, taught as children to aim for 100% on each test, to win every ball game.

  At some point in a trading career, we either learn to deal with the humiliation of making mistakes or we fail. And the way karma works, the harder we deny our errors the more public the ultimate humiliation.

  

  Lots of investors target longer time horizons so that they make infrequent predictions, which means fewer possible mistakes to confront. Traders on the other hand, make lots of smaller bets, which guarantees frequent winners and losers. But for some odd reason, victories are less pleasurable than defeats are painful, so on balance, trading depletes us. Which is why it often destroys people, slowly devouring them from within.

  Survivors develop ways to inoculate themselves from the pain, humiliation, defeats, losses. Some train their minds to reverse decisions in an instant. They can appear confused, confusing, contradicting themselves in the same sentence. Such people are masters at self-preservation.

  The greatest traders and investors eventually build firms around themselves. Team efforts yield psychic benefits that help restore balance to the emotionally drained. Being surrounded by a group of fellow risk takers and business builders allows you to refocus your efforts when you feel you’re probably wrong. Uncertain. Or when you simply lack conviction.

  

  And a team gives you leverage to press hard when you feel you’re right and the risk reward is compelling. Because after years of focused effort, introspection, you gain a good feel for when you’re likely right or wrong.

  And you begin to see the same in others. Better yet, you can sometimes sense when others are wrong and stubbornly unwilling to yet admit it. Large groups of such people present the greatest trading opportunities. And as awful as it all sounds, the truth is, there is nobility in this struggle. Joy in the pursuit.

  Tyler Durden
  Sun, 11/14/2021 – 19:00

• Gold 10x Upside: A Trade Idea From Goldman
  Gold 10x Upside: A Trade Idea From Goldman

  With gold having been left long ago at the station, abandoned by the “hard money” crowd which together with today’s youth has found a new fascination with “digital gold” i.e., cryptos, in a dynamic profiled recently by JPMorgan which said that “Institutions Are Rotating Out Of Gold Into Bitcoin As A Better Inflation Hedge“, even as inflation is soaring to levels not seen since the days of Paul Volcker’s hyperinflation, is gold about to have a new chance to shine? According to a recent burst of pro-gold articles, golden sentiment may be about to shift.

  As Bloomebrg writes today, “gold may outperform the S&P 500 Index about 20% as the threat of stagflation becomes real.” It elaborates:

  Concerns over peak economic growth are coinciding with rising inflation, which pushed the real yield on Treasuries to record lows. The high correlation between the real yield and gold suggests bullion is undervalued. Trading signals based on 20-week moving averages imply a potential breakout rally over the next year.

  One of the factors cited by Bloomberg is that gold has a strong inverse relationship with the U.S. real interest rate, which has resumed its slide into negative territory since March. Gold prices and the real yield have an r*square of 0.91 on the regression model over the last five years and the red asterisk below the red line signals gold prices are undervalued for the current level of yield.

  Separatley, Bloomberg takes us on a quick tour of Bollinger Band studies, which plot lines above and below a simple moving average at a specified number of standard deviations to identify periods of high and low volatility. The first chart shows the weekly candle is breaking out of the upper trading band.

  

  The next chart shows the bandwidth is about to widen from its lowest point since 2019 which created a so-called volatility squeeze. It suggests a significant increase in volatility ahead, potentially in favor of gold. And, as Bloomberg further notes, a trading strategy that follows the weekly crossover with a volatility squeeze has helped gold to beat S&P 500.

  

  There have been five cases where gold crossed above its 20-week moving average with bandwidth below 6 over the past two decades. On average, bullion outperformed S&P 500 by 19% over the next 52 weeks with no losing record. The sixth signal is still counting. As Bloomberg concludes, “if this pattern repeats, gold is well primed to outshine S&P 500 next year.”

  In addition to Bloomberg, in a Friday note, UBS strategist Wayne Gordon looked at the recent surge in the price of gold, which jumped $50/oz after the release of US inflation data, which helped it break above the barrier of $1,835. Looking ahead, UBS sees “risks for further strength in CPI in early 2022, which could stoke even stronger demand for gold” while “recent hawkish comments by some Fed officials caused a flattening of the US yield curve, only adding to gold’s shine.” As a result, UBS raised its end-March pricate target modestly from $1,700 to $1,800 while acknowledging that risks are “skewed to the upside in the short run, and moves above $1,900 should not be ruled out.”

  

  So, gold above $1,900, hardly a shocker since the yellow metal is already trading just $35 away.

  A far more convincing pitch for gold also on Friday came from none other than Goldman’s head of energy research Damien Courvalin who repeated the bank’s recent optimistic talking points on the yellow metal in an interview with Bloomberg in which he said that “gold is set to boom” far higher from its current price.

  Which actually brings us to the punchline: a trade idea for gold, also from Goldman, courtesy of the bank’s European strategist Bernhard Rzymelka who urges clients to “consider levered gold upside” which while attractive exposure in its own right is also cheap optionality on even  lower real yields.

  The trade idea is as follows: Buy Gold 6m expiry  $2130 binary call @ 10% offered

  • 10x maximum payout
  • Ref. $1830 spot, 26 Apr 22 expiry date
  • Risks to the downside limited to premium spent

  His four investment highlights:

  • The yellow metal looks ready to break higher on chart & follow the rally in US real yields
  • Our -1.10% target for 30y real yields equates to $2300 in Gold
  • Positioning in gold is light and looks ready to build higher
  • Implied volatility remains close to the 2 year lows  & has started to break higher today

  Charts below:

  Gold with upside to $2300 if real yields hit their -1.10% target. Options markets offer attractive upside over the next 3-6 months.

  

  Implied 6m volatility has started to break higher, suggesting it is an attractive buy if the downside momentum in real yields extends as expected… and gold starts catching up.

  

  Gold positioning by non-commercials has consolidated & looks ready to make new highs. At this point feel free to make fun of applying Elliott waves to CFTC positioning… but it should arguably reflect human psychology as much as the price chart itself. For the latter see below from the MarketStrats chart guru MacNeil Curry.

  

  What if… flows into inflation-protected bonds start extending into gold? At 0% real yield the yellow metal looks increasingly attractive versus TIPS at -0.60% and falling.

  

  Gold chart: On the brink of a breakout. A break of 1833 targets 1930, potentially 1947. Real yields are supportive of higher gold prices

  • On a medium term (multi-month) basis we have been bullish. The series of impulsive advances from the March/April lows and more recently from the Aug-08 and Sep-29 lows point to higher prices.
  • While the lack of  upside acceleration has been increasingly frustrating price and pattern still point higher.
  • Further supportive of higher gold prices is the strong inverse correlation btwn 10yr Real Yields and Gold (see chart 2) and the increasing likelihood that fact that 10yr Real Yields are set to make new all time lows (and resume their bull trend – see above)
  • Indeed, a move above 1833 (14m channel top in brown and almost 4m ascending triangle resistance in royal blue) would confirm the bullish potential, targeting 1930 (swing target) ahead of 1974 (measured moves)
  • Back through the Nov-03 low of 1760 warns of stalling, while a move below 1744 (Ascending Triangle support royal blue) would say that our bullish view is misplaced

  

  * * *

  Post scriptum 1: How will investors feel about an equity risk premium at 5.5% once real yields trade -1% all else equal?

  

  Post scriptum 2 from Rzymelka: “You are crazy. 30y bond yields can never rally if inflation (term) premium reprices this much higher.” Well.. in normal times that probably is true. But not after a major shock & policy response that jointly turbo charge BOTH the structural “savings glut” AND the cyclical “catch up recovery”. In fact, the former puts the latter on steroids^2. Sounds crazy. Is crazy. So lever up. This will probably be the best (and possibly final) party of our generation.”

  Tyler Durden
  Sun, 11/14/2021 – 18:30

• Morgan Stanley's 2022 Outlook: The Training Wheels Come Off
  Morgan Stanley’s 2022 Outlook: The Training Wheels Come Off

  By Andrew Sheets, Chief Cross-Asset Strategist for Morgan Stanley

  The 2022 Outlook: Normalizing but Not Normal, as the Training Wheels Come Off

  

  We’ll publish our year-ahead outlook later today. This is the 18th outlook I’ve had the pleasure to be a part of in Morgan Stanley Research. Each one is the result of a highly collaborative process across strategy and economics, and each has felt uniquely difficult at the time. 2022 is no different.

  In the global economy, my colleague Seth Carpenter and our global economics team think it is a story of ‘normalizing, but not normal’. Normalizing, because we think global growth continues to improve, led by strong consumer spending and capital investment. We forecast growth of 4.6%Y in both the US and euro area next year, and think China will also top expectations, albeit with improvement that may not be apparent for several more months. A robust capex cycle, driven by strong demand, rising labor costs and cheap capital, is an important way this recovery differs from the last.

  Another difference is inflation. We forecast DM inflation to peak in the coming months, then decline throughout 2022 as supply chains normalize and commodity price gains slow. Importantly, we see major regional differences to this story; one reason we like equities in Europe and Japan is that we think inflationary challenges there are much less daunting than elsewhere.

  As the recovery continues, monetary policy shifts. The Fed ends asset purchases by mid-2022, and the Bank of England and Bank of Canada start raising rates. EM policy continues to normalize, with ~70% of EM central banks tightening. We think moderating inflation and a sustained rise in labor force participation mean the first Fed hike is in early 2023, but these trends might not be immediately apparent.

  For markets, shifting policy means the training wheels are off, so to speak. After 20 months of unprecedented support from governments and central banks, this aid is winding down. Asset classes will need to rise and fall under their own power.

  In some places, this should be fine. From a strategy perspective, we continue to believe this is a (surprisingly) ‘normal’ cycle, albeit hotter and faster given the scale of the recession and the subsequent response. Our cycle indicator, a key part of our framework, is back above trend. And we think markets are facing many ‘normal’ mid-cycle problems: better growth colliding with higher inflation, shifting policy and more expensive valuations.

  Overall, we think that valuations and this stage of the cycle support equity over credit and duration. The equity case is significantly stronger in Europe and Japan than EM or the US, where the former enjoy more reasonable valuations, limited central bank tightening and less risk from higher taxes. Those same issues drive a below-consensus forecast for the S&P 500 (4,400 by end-2022). That ‘bearish’ forecast is still a historically high multiple (18x) on an optimistic 2023 EPS number (US$245).

  The ‘equity over spread’ theme extends to credit, where we attempt to re-run much of the 2004-05 playbook. Better growth and good corporate liquidity should keep default rates low. Along with rising rates, this supports loans over high yield over investment grade credit (the same hierarchy that reigned in 2004-05). Also in line with that period, we prefer securitized to corporate credit, and think the best risk/reward is down the capital structure (CMBX BBBs, CLO equity).

  For macro markets, my strategy colleagues see a year of two parts. As we forecast that the Fed will wait until 2023 to make its first hike, it may not be in a rush to signal this action right away. We remain positive on USD and expect US real yields to rise to start the year, factors that mean we suggest patience before buying EM assets. We forecast the US 10-year at 2.10% by end-2022.

  As a delay of the first hike becomes more likely, these factors should all shift. To generate alpha, we like owning CAD/CHF, which should benefit from policy divergence and our expectation of higher oil prices in 1H22.

  If that’s the story, what are the risks? A better version of our 2022 narrative is more aggressive stimulus by China, a quicker repair of supply chains and a faster jump in labor participation. This would lead markets to price our ‘no Fed hikes in 2022’ view sooner, and mean a stronger rally, especially in EM, than we forecast.

  To the downside, it’s all about inflation and real rates. The biggest surprise of 2021 was global real rates hitting new all-data lows as growth recovered, a boon to asset prices. Markets could reasonably assume these are the wrong financial conditions relative to the level of inflation, and that terminal rates should be higher. Our rate strategists like several trades that hedge such a risk: steepeners in US 2s5s and GBP 2s10s and short EUR 10y10y.

  Best wishes for the year ahead, and enjoy your Sunday.

  Tyler Durden
  Sun, 11/14/2021 – 18:00

• In Lightning-Fast Real Estate Market, Buyers Forced To Risk Fallout From Snap Decisions
  In Lightning-Fast Real Estate Market, Buyers Forced To Risk Fallout From Snap Decisions

  With the average home sold between July 2020 and June 2021 sitting on the market for a median period of just one week before going under contract, American home buyers are being forced to make snap decisions in order to compete with the likes of Blackrock and (at least during this time period), robo-Zillow, if they hoped to land the home of their dreams – or simply profit from the red-hot real estate market.

  According to new data released Thursday by the National Association of Realtors, the one-week figure is the shortest ever going back to 1989, down from three weeks a year earlier, the Wall Street Journal reports.

  

  The combination of rapid turnover during a surge in pandemic-related home buying as people sought more space to hunker down, low mortgage-interest rates, and a constrained supply thanks to caution over showing homes during Covid-19, helps to explain how home prices also rose to multiyear highs. For sellers who did throw their homes on the market, online tools allowing for remote house tours and scheduling showings helped speed up the process, according to real-estate agents. A large proportion of cash buyers – including corporate investors, has also sped up the process.

  And despite the housing market having cooled slightly in recent months, buyers who want to participate still have a much shorter window of time to mull what, for most Americans, is possibly the largest purchase of their lives. What’s more, many buyers are waiving their rights to terminate a contract over low appraisals or unfavorable inspections, in order to present themselves as a more favorable buyer in a bidding war.

  “There’s no plotting of where the Christmas tree will be and measuring for a couch in that scenario,” said NAR VP of demographics and behavioral insights, Jessica Lautz. “You really are making that decision very fast.”

  

  Leah and Ian Evison moved from St. Paul, Minn., to Seattle in January to be closer to their daughter and her family. When they started house hunting in Seattle, they learned that houses typically went off the market within days of being listed, and showings were often limited to 30 minutes each.

  “It felt awful,” Ms. Evison said. “We wanted to move here so much that we were willing to do it, but it felt really ridiculous.”

  After two unsuccessful offers, the Evisons bought a three-bedroom house in March following a bidding war. -WSJ

  In the year ended in June, the median sales price of $305,000 (up from $272,500 the year prior) was the full asking price – the highest since NAR began tracking the data in 2002, per the report.

  Meanwhile in September, the hottest markets in terms of how fast homes sold were Indianapolis; Denver; Grand Rapids, Mich.; Seattle and Tacoma, Wash, according to Redfin.

  According to a September survey from the National Association of Home Builders, around 2/3 of prospective home buyers have been house-hunting for at least three months. Around 45% of those say they haven’t been successful because they were outbid by other buyers.

  That said, things are starting to cool down – with active listings in the four weeks ended Oct. 31 having fallen 22% from a year earlier, per Redfin data.

  “Instead of a house lasting three days on the market, it’s lasting seven days,” said Orlando, FL real-estate agent Harold Torres, who says that for buyers, “negotiation and any type of wiggle room is not really there yet.“

  Tyler Durden
  Sun, 11/14/2021 – 17:30

• Clock Just Hours From Midnight For Overwhelmed California Ports
  Clock Just Hours From Midnight For Overwhelmed California Ports

  By Greg Miller of FreightWaves,

  The flood of import containers into Southern California continues unabated — an all-time high 81 container ships were stuck offshore of Los Angeles and Long Beach on Tuesday. Waiting time at anchorage for Los Angeles is surging and is now more than double wait times in early September.

  The ports are scheduled to start charging a highly controversial excess dwell-time fee on Monday, a plan that some members of the National Shippers Advisory Council called “catastrophic,” “crazy” and “out of left field.”

  With just hours left until the fee is set to begin, there are still over 51,000 containers on the terminals that are past the plan’s dwell-time limits.

  

  If the fee plan is not delayed or modified, the aggregate cost to carriers — which would largely be passed on to importers — would start next Monday in the millions per day and escalate to tens of millions per day later in the week.

  There is ongoing speculation that the ports will back off and announce a reprieve, given declines in the number of excess-dwell containers in recent weeks and the enormous costs that would be passed along to U.S. importers.

  Asked about the level of fees that are set to start next week, a spokesperson for the Port of Los Angeles told American Shipper: “The Harbor Commission granted the executive director discretion regarding the program. More details and information will be coming on or before the 15th.”

  New anchorage record … again

  According to the Marine Exchange of Southern California, 111 container ships were in the port on Tuesday, a new high. Of those, 30 were at the Los Angeles/Long Beach berths, 32 at anchor and a record 49 “loitering” (in holding patterns).

  

  The offshore tally of 81 does not include an additional six noncontainer ships in the queue carrying boxes. The total capacity of all 87 ships offshore carrying containers was 576,720 twenty-foot equivalent units. Assuming ships are at capacity and an average customs value of $43,899 per import TEU (the average recorded by the Port of Los Angeles in 2020), the value of cargo floating offshore is around $25 billion.

  Meanwhile, the waiting time at anchorage continues to escalate. The Port of Los Angeles said that the average wait for anchorage to berth was an all-time-high 16.6 days as of Thursday. The wait time has trended sharply upward over the past week.

  

  Deadline nears for controversial fee plan

  On Oct. 25, the ports of Los Angeles and Long Beach announced a Biden administration-backed plan for emergency fees on containers dwelling too long at the terminals. Fees were initially set to start Nov. 1. That was delayed to Nov. 15. Fees were initially set to cover containers moving by truck that had dwelled for nine days or more and those moving by rail after three or more days. The ports then pushed the rail timeline back to six or more days.

  Port officials have repeatedly stated that they do not want to charge the fees and would reconsider if sufficient progress were made before Nov. 15. The hope was that the threat alone of the fees would preclude the need to assess them.

  There has indeed been considerable progress.

  At the Port of Long Beach, local (trucking) containers dwelling nine days or more fell from 28,558 on Nov. 1 to 20,534 on Tuesday, a decline of 28%. Intermodal (rail) containers dwelling six days or more fell from 1,643 to 573, a decline of 65%.

  The Port of Los Angeles told American Shipper that its intermodal dwell times were not available. For an estimate of local container dwell times, boxes in Los Angeles terminals for nine days or more fell from 42,277 on Nov. 1 to 30,210 on Nov. 10, a drop of 28%.

  

  If it happens, what might it cost?

  The fee would start at $100 per day and escalate $100 each day. So, for example, on the seventh day after the assessments began, if a container was still at the ports, the fee would be $2,800. Importantly, containers would not be charged for their excess dwell time accruing before Nov. 15. In other words, the charge for a local container that had been dwelling for 15 days as of Nov. 15 would be $100 (the same as one day past the eight-day limit), not $2,800 (seven days past the limit).

  Assuming on a back-of-the-envelope basis that the daily rate of decline for excess dwell-time containers remains the same as the Nov. 1-10 trend, the number of “late” containers in Los Angeles and Long Beach combined would fall to around 42,000 on Monday (not including Los Angeles’ late intermodal rail containers, so the actual number would be higher). The aggregate charge to all carriers combined would be $4.2 million on Monday in this scenario, plus charges for Los Angeles’ late intermodal boxes.

  After that, the fee scenario gets more speculative, because, for example, on day three of the program, there’s no way to predict how many late containers would be charged the one-day-late rate, the two-day-late rate or the three-day-late rate. For simplicity’s sake, assume they’re evenly spread (i.e., on day two, half are two days past deadline, half are one day past deadline).

  In such a scenario, the daily aggregate fee charged to carriers would escalate to $40 million on day seven. The cumulative fees for all ocean carriers at the end of the first week alone would be $144 million. Carriers have explicitly stated they will pass these costs along to shippers to the extent possible, raising the question of how politically sustainable the Biden-backed port fee plan would be even after a matter of days.

  

  Tyler Durden
  Sun, 11/14/2021 – 17:00

• White House Rejects Intel Proposal To Add Semi Production Capacity In China
  White House Rejects Intel Proposal To Add Semi Production Capacity In China

  Days ago we wrote about how VC companies in the U.S. were making significant investments in Chinese semiconductor companies. 

  Shortly thereafter, it was reported that the White House had rejected a plan by Intel to bolster their chip production capacity in China, according to Bloomberg.

  Intel had proposed “using a factory in Chengdu, China, to manufacture silicon wafers,” the report said. It could have been online by 2022, but the White House, “strongly discouraged” the move. Intel likely had to listen since the company is seeking government support in helping expand its capacity for manufacturing semis in the U.S.

  Intel told Bloomberg it was now looking at “other solutions that will also help us meet high demand for the semiconductors essential to innovation and the economy.”

  

  The company continued: “Intel and the Biden administration share a goal to address the ongoing industrywide shortage of microchips, and we have explored a number of approaches with the U.S. government. Our focus is on the significant ongoing expansion of our existing semiconductor manufacturing operations and our plans to invest tens of billions of dollars in new wafer fabrication plants in the U.S. and Europe.”

  Recall, just days ago we wrote how U.S. firms were splurging on Chinese semi deals, drawing scrutiny from the White House.

  U.S. venture capital firms have been “ramping up investments” in Chinese semiconductor companies despite the obvious security conflicts, a report from the Wall Street Journal said. Cumulatively, U.S. firms have helped raise “billions” for Chinese chip startups, we noted. 

  There has been more than 58 deals in China’s semiconductor industry from 2017 to 2020, we wrote. Among the “active investors” was Intel, who had invested in a Chinese company called Primarius Technologies Co., which makes chip-design tools that the U.S. currently holds the lead in making. 

  Tyler Durden
  Sun, 11/14/2021 – 16:30

• Radical Rent Control Measure Blows Up In St. Paul In Less Than A Week
  Radical Rent Control Measure Blows Up In St. Paul In Less Than A Week

  Authored by Mike Shedlock via MishTalk.com,

  Unlike almost every rent control law in the country, the ordinance passed by St. Paul voters includes no exemption for new construction…

  

  A radical rent control measures capping increases at 3% passed in St. Paul Minnesota.

  The payback was immediate. 

  Reason reports Developers Halt Projects, Mayor Demands Reform After St. Paul Voters Approve Radical Rent Control Ballot Initiative.

  In last Tuesday’s municipal election, 52 percent of voters approved Question 1, an ordinance that puts a hard annual 3 percent cap on rent increases. It makes no allowances for inflation or exemptions for vacant apartments and new construction that are typical in other rent control policies.

  The new ordinance doesn’t go into effect until May 2022. Nevertheless, several real estate companies with large projects in the works have already announced that they’re pulling their permit applications.

  That includes Ryan Companies. Local NBC affiliate KARE 11 reports that the company pulled applications for three buildings in its proposed 3,800-unit Highland Bridge project.

  Other developers are singing a similar tune.

  “We, like everybody else, are re-evaluating what—if any—future business activity we’ll be doing in St. Paul,” Jim Stolpestad, founder of development company Exeter, told the Minneapolis Star-Tribune.

  The Star-Tribune reports that developers have also been calling Nicolle Goodman, the city’s director of planning and economic development, to say that they were placing hundreds of new units on hold in response to the passage of rent control.

  All of this could well encourage landlords to just get out of the rental market altogether and sell their properties to owner-occupiers. Rising home values in St. Paul, where prices have increased 12 percent in the last year, only make this option more attractive for landlords.

  This is what happened in San Francisco where an expansion of preexisting rent controls led to a 15 percent reduction in the supply of rental housing, according to one 2018 study. That study found that incumbent tenants benefited handsomely from the limits on rent increases but that their windfall came “at the great expense of welfare losses from future inhabitants.”

  Mayoral Lie

  Despite the insanity of doing something that’s tried and failed everywhere, St. Paul voters upped the ante by passing the most restrictive measure ever.

  Blame Mayor Melvin Carter. He backed the initiative and it only barely passed.

  Carter’s not so brilliant idea (lie) was he could amend the law after it passed.

  Whatever the outcome of this ballot question, our work will continue. Bold action on our housing and equity goals cannot wait. (2/2)

  — Melvin Carter (@melvincarter3) October 12, 2021

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

  But he can’t materially change the bill nor can the city council. 

  The problem for Carter, which he knew in advance, is the council cannot by law make “substantive” changes to the law. 

  The city council president admitted what Carter now wants to do is “substantive”.

  Rent Control Advocates Celebrate 

  Despite the clear housing disaster that awaits, Rent Control Advocates Celebrate. 

  “We didn’t wait for policymakers or funders. We leveraged the power of the people and direct democracy to do this for ourselves,” said Danielle Swift, an organizer with the Frogtown Neighborhood Association. “Text banking, phone banking, door-to-door, 100 percent grassroots organizing got it done.”

  Alarmed by overnight rent hikes for low-income tenants, organizations such as the Housing Justice Center, TakeAction Minnesota, the Alliance and the West Side Community Organization gathered signatures to get their own rent-control proposal on the Nov. 2 ballot by petition.

  Swift blamed “generations of economic exploitation and exclusion from homeownership” for marginalizing communities of color — some 82 percent of the city’s Black households rent, compared to 39 percent of white households. 

  “This policy will have a dramatic and immediate impact in advancing housing and racial justice in our city,” she said.

  Shortages Loom

  Judging from rent prices, there is already a severe shortage of housing in St. Paul.

  The most likely reason is fear of something like this or insurance and maintenance hikes in the wake of George Floyd riots.

  And now that the bill has passed many new development projects, some for thousands of units, were cancelled. 

  Small landlords will sell to live-in owners further reducing supply. 

  Finally, with 3% caps regardless of tax hikes, inflation or any other issues, landlords will not make capital improvements to their property.

  The overall quality of remaining rental units is sure to decline.

  *  *  *

  Like these reports? If so, please Subscribe to MishTalk Email Alerts.

  Tyler Durden
  Sun, 11/14/2021 – 16:00

• Peloton Blocks Users From Using #LetsGoBrandon Hashtag
  Peloton Blocks Users From Using #LetsGoBrandon Hashtag

  “Let’s Go Brandon!” has become a political rallying cry among conservative-Trump-loving Americans to show their defiance against President Biden. The phrase has gone viral since Oct. 2’s NASCAR race at the Talladega Superspeedway in Alabama, after a reporter interviewing racecar driver Brandon Brown quickly spoke over the crowd who was chanting “F@ck Joe Biden!” She said, “You can hear the chants from the crowd. Let’s go Brandon!”

  The “Let’s Go, Brandon” movement is a unique public response that shows their discontent for the Biden administration. Billboards, bumper stickers, yard signs, rap songs, guns, memes, and trending hashtags continue to go viral. But one place that has banned the phrase is fitness equipment company Peloton. 

  According to PJ Media, Peloton members used the tag “#LetsGoBrandon” in their profile to connect with other like-minded users. Not too long after they tagged their profiles, Peloton immediately banned the use of it. 

  One user shared a screenshot of an alert from the fitness equipment company that said, “this tag does not meet our guidelines. Please contact Support if you believe this is an error.” 

  

  Peloton also banned the #StopTheSteal and #TrumpWon hashtags. The company did allow #ImpeachBiden, #WomenForTrump, and others. However, #BlackLivesMatter has almost 270,000 members, while #AllLivesMatter has been banned. 

  Peloton added profile tags during the virus pandemic to “provide a more robust way for our Members to connect through shared interests or identity,” according to Peloton, adding that tags will make “the in and out of class experience feel more personal and relevant.

  Peloton told the Washington Examiner that it has “a zero-tolerance policy against divisive, explicit, or other content that violates our policies.”

  “We welcome Members from all walks of life to represent themselves through their Tags or by having thoughtful conversations in our groups.”

  Users of the fitness bike told PJ Media they are tired of liberal left-wing propaganda being forced down their throats. “We can’t have a ‘Let’s Go Brandon’?” said one user. 

  “For a company who claims to be so inclusive, they sure do alienate a big portion of its members,” another user said. “Attempting to silence our voices will not silence us. It will only grow our will to speak louder.”

  Tyler Durden
  Sun, 11/14/2021 – 15:30

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