- How Huxley's X-Club Created Nature Magazine & Sabotaged Science For 150 Years
How Huxley’s X-Club Created Nature Magazine & Sabotaged Science For 150 Years
Tyler Durden
Sat, 05/16/2020 – 23:30Authored by Matthew Ehret via The Strategic Culture Foundation,
Amidst the storm of controversy raised by the lab-origin theory of COVID-19 extolled by such figures as Nobel prize winning virologist Luc Montagnier, bioweapons expert Francis Boyle, Sri Lankan Cardinal Malcolm Ranjith and the head of Iran’s Revolutionary Guard, an elaborate project was undertaken under the nominal helm of NATURE Magazine in order to refute the claim once and for all under the report ‘The proximal origin of SARS-CoV-2’.
This project was led by a team of evolutionary virologists using a line of reasoning that “random mutation can account for anything” and was parroted loudly and repeatedly by Fauci, WHO officials and Bill Gates in order to shut down all uncomfortable discussion of the possible laboratory origins of COVID-19 while also pushing for a global vaccine campaign. On April 18, Dr. Fauci (whose close ties with Bill Gates, and Big Pharma have much to do with his control of hundreds of billions of dollars of research money), stated:
“There was a study recently that we can make available to you, where a group of highly qualified evolutionary virologists looked at the sequences there and the sequences in bats as they evolve. And the mutations that it took to get to the point where it is now is totally consistent with a jump of a species from an animal to a human.”
I think at this moment, rife as it is with speculative arguments, confusion and under-defined data, it is useful to remove oneself from the present and look for higher reference points from which we can re-evaluate events now unfolding on the world stage.
In order to do this, let us begin by asking a new series of questions:
What is Nature Magazine exactly? Is it truly an “objective” platform for pure scientific research untainted by the filth of political agendas? Is this standard-bearer of “proper method”, which can make or break the career of any scientist, truly the scientific journal it claims to be or is there something darker to be discovered?
As I presented a part of this story in my previous installment in this series The Rise of Optical Biophysics and Clash of the Two Sciences, a very old battle has been waged around political systems but also what sort of scientific paradigms will shape our future.
A Bit of Historical Context
In 1865, a group of 12 scientists under the leadership of Thomas Huxley, Matthew Arnold, Joseph Hooker, and Herbert Spencer (founder of social Darwinism) was created under the name “X Club” with the mandate to reform global British Imperial strategy.
At the time of this group’s formation, Lincoln’s north was on the cusp of putting down the secessionist rebellion which the British Intelligence establishment had work decades to nurture guided by Anglo-American operatives in America itself as well as operations in British Canada.
Having far over-extended itself during the 2nd Chinese Opium War (1856-1860) to the Crimean War (1853-1856) to putting down Indian uprisings (1857-1858) and sponsoring the Southern Confederacy (1861-1865), the British Empire knew that it was on the verge of collapse. The world was quickly waking up to its evil nature, and a new paradigm of win-win cooperation was being exported from Lincoln’s America to nations across the world (American was a very different nation from the Anglo-American dumb giant the world has known since JFK’s 1963 murder -MEK).
Lincoln’s system had been known as ‘American System of National Economy’, a name created by the father of Germany’s Zollverein Friedrich List years earlier. Unlike British Free Trade, this ‘American System’ was premised on protectionism, national banking, long term infrastructure and most importantly placed the source of value on the human mind’s capacity to make discoveries and inventions as outlined by Lincoln’s 1858 speech by the same name. In this system, the Constitutional concept of the General Welfare was not mere ink on parchment but rather the governing principle of monetary value and national policy.
Lincoln’s chief economic advisor and coordinator of the export of the American system internationally after the Civil War was named Henry C. Carey. As early as 1851, Carey wrote his Harmony of Interests which stating:
“Two systems are before the world;
the one looks to increasing the proportion of persons and of capital engaged in trade and transportation, and therefore to diminishing the proportion engaged in producing commodities with which to trade, with necessarily diminished return to the labour of all;
while the other looks to increasing the proportion engaged in the work of production, and diminishing that engaged in trade and transportation, with increased return to all, giving to the labourer good wages, and to the owner of capital good profits…
One looks to pauperism, ignorance, depopulation, and barbarism; the other in increasing wealth, comfort, intelligence, combination of action, and civilization.
One looks towards universal war; the other towards universal peace.
One is the English system; the other we may be proud to call the American system, for it is the only one ever devised the tendency of which was that of elevating while equalizing the condition of man throughout the world.”
In Germany, the American System inspired Zollverein (custom’s union) had not only unified a divided nation, but elevated it to a level of productive power and sovereignty which had outpaced the monopoly power of the British East India Company. In Japan, American engineers helped assemble trains funded by a national banking system, and protective tariff during the Meiji Restoration.
In Russia, American System follower Sergei Witte, Transport Minister and close advisor to Czar Alexander III, revolutionized the Russian economy with the American-made trains that rolled across the Trans-Siberian Railway. Not even the Ottoman Empire remained untouched by the inspiration for progress, as the Berlin to Baghdad Railway was begun with the intention of unleashing a bold program of modernization of southwest Asia.
The construction of continental railroads, and industrial powers of nations internationally was quickly bringing the world land bridge concept first elaborated by Colorado’s Governor William Gilpin quickly into being. For those who are unaware, Gilpin (who was also Lincoln’s body guard and loudest advocate of America’s transcontinental railroad) spent decades championing the international system of win-win cooperation which he outlined in his 1890 Cosmopolitan Railroad stating:
“The weapons of mutual slaughter are hurled away; the sanguinary passions find a check, a majority of the human family is found to accept the essential teachings of Christianity IN PRACTICE… Room is discovered for industrial virtue and industrial power. The civilized masses of the world meet; they are mutually enlightened, and fraternize to reconstitute human relations in harmony with nature and with God. The world ceases to be a military camp, incubated only by the military principles of arbitrary force and abject submission. A new and grand order in human affairs inaugurates itself out of these immense concurrent discoveries and events”.
Reorganize or Perish
The British Empire knew that this emerging new paradigm would render both its maritime control of international trade as obsolete as its international program of usury and cash cropping.
It was clear that something had to change dramatically, for if the empire could not adapt in response to this new paradigm, it surely would soon perish. The task of re-shaping imperial policy from a “material force” approach of control to a more “mental force” of control, was assigned to T. H. Huxley and the X Club. This group established the guiding scientific principles of empire that were soon put into practice by two new think tanks known as the Fabian Society and Rhodes Scholar Trust which I outlined in my 3-part series ‘Origins of the Deep State in North America’.
Huxley, who is famously known as ‘Darwin’s bulldog’ for relentlessly promoting Darwin’s theory of Natural Selection (a theory in whose scientific merits he didn’t even believe) soon decided that the group should establish a magazine to promote their propaganda.
Founded in 1869, the magazine was called Nature and featured articles by Huxley and several X Club members. The deeper purpose of the X Club and its magazine as outlined in a 2013 report entitled ‘Hideous Revolution: The X Club’s Malthusian Revolution in Science’, was geared towards the redefinition of all branches of science around a statistical-empiricist interpretation of the universe which denied the existence of creative reason in mankind or nature. Science was converted from the unbounded study and perfectibility of truth to a mathematically sealed “science of limits”.
Darwin, Malthus and the Political Use of a ‘Science of Limits’
The science of “limits” became the foundation of an oligarchical economic science for the elite and naturally had to be kept hidden from the minds of the general population since it followed Thomas Malthus’ mathematical principle of population growth. Malthus’ “principle” of population supposed that unthinking humans reproduce geometrically while nature’s bounty only grows arithmetically and as such periodic population collapses were an unavoidable law of nature which could at best be managed by an oligarchical scientific priesthood who were obliged to periodically cull the herd.
Malthus and the X Club leaders believed that nature bestowed upon the ruling class certain tools to accomplish this important task (namely war, famine and disease) and Malthus stated so cold-bloodedly in his 1799 Essay on Population:
“We should facilitate, instead of foolishly and vainly endeavoring to impede, the operations of nature in producing this mortality; and if we dread the too frequent visitation of the horrid form of famine, we should sedulously encourage the other forms of destruction, which we compel nature to use. In our towns we should make the streets narrower, crowd more people into the houses, and court the return of the plague.”
The X Club’s support of the Darwinian theory of Natural Selection was less a scientific decision in this respect and more of a political one, as Darwin later admitted in his autobiography that his own theory arose directly from his study of Malthus:
“In October 1838, fifteen months after I had begun my systematic inquiry, I happened to read for amusement Malthus on Population, and being prepared to appreciate the struggle for existence which everywhere goes on, from long-continued observation of the habits of animals and plants, it at once struck me that under these circumstances favourable variations would tend to be preserved, and unfavourable ones to be destroyed. The result would be the formation of a new species. Here then, I had at last got a theory by which to work”.
By universalizing Malthus onto all living creation, the X Club obscured the qualitative difference between humans and monkeys which was advantageous for an empire that can only control humans when they adopt the law of the jungle as standards of moral practice and identity formation rather than anything actually moral.
It was thus no accident that Henry C. Carey targeted Darwinism, Malthus and the X Club relentlessly in his Unity of Law: An Exhibition on the Relations of Physical, Social, Mental and Moral Science (1872). In this important book, Carey attacked all systems founded upon master-slave relations saying:
“Hence it is that it has given rise to the doctrine e of over-population, which is simply that of slavery, anarchy and societary ruin, as the ultimate condition of mankind; that, too, coming as a consequence of laws emanating from an all-wise and all powerful Being who could, if He would, have instituted laws in virtue of which freedom, order, peace and happiness would have been the lot of man. That these latter have been instituted- that the scheme of creation is not a failure; that is marred by no such errors as those assumed by Mr. Malthus; is proved by all the facts presented for consideration by the advancing communities of the world- the habit of peace, among both individuals and nations, growing with growth of numbers, and increase in power for self-direction.”
Anti-Darwinian Approaches to Evolution
Although we are told too often today that no alternative system ever existed outside of Darwin’s theory of evolution, a closer inspection of science history during the 19th century proves that to be far from true.
During this period, an anti-Darwinian scientific revolution was blossoming in the life sciences under the guiding leadership of figures like James Dwight Dana, Jean-Baptiste Lamarck, Alexander von Humboldt, Georges Cuvier, Karl-Ernst von Baer, and Benjamin Silliman. These scientists not only began questioning the static theory of nature as derived from a literal reading of the Bible, but made huge strides in realizing the higher causal mechanisms defining the flow of evolution. This process was outlined in a 2010 lecture delivered by the author of this report entitled “the Matter Over Darwin’s Missing Mind”.
Unlike many of our modern scientists, these figures never saw a dichotomy separating science from religion, as “science” was understood as nothing less than the investigation and participation in God’s Creation, and as such the biosphere and all “units” within it were implicitly defined as more than the sum of its parts and all fast approaching theories of evolution that were driven by intention, harmony and directionality.
This outlook was showcased brilliantly by the great naturalist and embryologists Karl Ernst von Baer who wrote in his On the Purpose of Nature (1876):
“The reciprocal interconnections of organisms with one another and their relationship to the universal materials that offer them the means for sustaining life, is what has been called the harmony of nature, that is a relationship of mutual regulation. Just as tones only give rise to a harmony when they are bound together in accordance with certain rules so can the individual processes in the wholeness of nature only exist and endure if they stand in certain relationships to one another. Chance is unable to create anything enduring, rather it is only capable of destruction.”
Huxley and the Darwinians on the other hand, promoted an opposing “bottom up” interpretation of evolution by starting with the imagined ‘random mutations’ in the immeasurably small which supposedly added up to the collective sum of all species and biosphere. This biosphere was thus defined as little more than the sum of its parts.
The imperial school of Huxley’s X Club denied not only creativity’s existence from this higher metaphysical standpoint, but also denied the fact that humanity can uniquely translate the fruits of those creative discoveries into new forms of scientific and technological progress which had the effect of increasing our species’ ability to transcend our “limits to growth” (or as modern neo-Malthusians have termed our “carrying capacity”).
Nature Magazine Continues its Dismal Legacy
Throughout the 20th century Nature Magazine has won an ugly reputation as an enforcer of deductive/inductive models of thinking which have destroyed the careers and lives of many creative scientists.
One of these scientists was the preeminent immunologist Jacques Benveniste (1935-2004) who suffered a 15 year witch hunt led by Nature Magazine as punishment for his discoveries on “water memory and life” (ie: how organic molecules configure the geometry of H2O molecules and imprint their “information” into said water).
This defamation campaign began in 1988 when Nature Magazine conducted an “official” attempt to duplicate the results of Benveniste’s discoveries on water’s power to retain the information of allergenic substances within its structure which continued to cause allergic reactions upon living tissues and organs long after all traces of the substances were filtered from various solutions.
As outlined in the 2014 documentary Water Memory, Nature Magazine went so far as to hire a stage magician named James Randy to co-lead an investigative team which intentionally botched Benveniste’s results, lied about the data and condemned Benveniste as a fraudster. This operation ruined the scientist’s reputation, dried up his funding and kept biology locked into the materialist cage for another three decades. Nature Magazine’s slander campaigns were described by Benveniste as a “mockery” which used “McCarthy-like methods and public defamation campaigns” to crush him.
Today’s Fight for a Science of Causes
Whether or not COVID-19 arose naturally as Nature Magazine attests or whether it arose in a laboratory as Dr. Luc Montagnier believes, what is certain is that science can be temporarily retarded, but its course of evolution cannot be held back forever.
Today, the legacy of Alexander von Humboldt, Karl Erst von Baer and Cuvier, Dana, Vernadsky and Benveniste is alive and well with Dr. Montagnier and teams of international researchers who have taken the theoretical, experimental and clinical work on water memory to a revolutionary new level with the opening up of a new school of quantum optical biophysics as I outlined in my recent paper Big Pharma Beware: Dr. Montagnier Shines New Light on COVID-19 and The Future of Medicine.
Describing the coming revolutions in biology, Montagnier said:
“The day that we admit that signals can have tangible effects, we will use them. From that moment on we will be able to treat patients with waves. Therefore it’s a new domain of medicine that people fear of course. Especially the pharmaceutical industry… one day we will be able to treat cancers using frequency waves.”
With Montagnier’s bold call for an international scientific crash program into wave harmonics therapy to deal with COVID-19, and with the new alignment of nationalist systems amidst the multi-polar alliance led by Russia and China, there is a serious chance that the new paradigm of win-win cooperation championed by Henry C. Carey, Lincoln and other international patriots in the wake of America’s Civil War, may actually be blossoming once more.
- "Everybody Is A Believer" – COVID Sparks Apocalypse Bunker Boom
“Everybody Is A Believer” – COVID Sparks Apocalypse Bunker Boom
Tyler Durden
Sat, 05/16/2020 – 23:00“People thought we were crazy because they never believed anything like this could happen,” Vivos CEO Robert Vicino, who operates an international doomsday bunker company, recently told The Verge, referring to the COVID-19 pandemic, resulting in a global economic collapse. “Now, they see it. Everybody is a believer.”
Vicino operates several apocalypse bunker communities, in particular, The Verge visited xPoint, an abandoned military facility-turned-survivalist town at the base of the Black Hills in Fall River County, South Dakota. He said, “demand for doomsday bunkers is at an all-time high,” due mostly to the virus pandemic.
Apocalypse bunkers were once for fringe preppers, now have become mainstream, and to some bunker buyers, it has become their vacation home. Vicino said sales are booming:
“We’re selling almost one a day right now,” he said, adding that his company recently brought in a million dollars in sales one day, and following that day, another $500,000.
xPoint’s website says there are “575 private military-built, concrete and steel, all-risk bunkers, is now repurposed and affordably priced – ready to provide life-saving shelter for your entire family or group.”
xPoint map
The history behind the site is that it was originally constructed by the Army Corps of Engineers as a bomb storing facility, from the 1940s through late 1960, when the base was retired. The Army then sold the property to the City of Edgemont, which in turn sold it to local farmers. Since then, Vivos bought the land with reporupose in mind.
xPoint community
The website goes on to say that each bunker “provides enough floor area, with attic potential, to comfortably accommodate 10 to 24 people and their needed supplies, for a year or more, of autonomous shelterization without needing to emerge outside. The compressive elliptical-shaped concrete bunker includes a massive front bulkhead wall, with a solid concrete and steel blast door entrance.”
xPoint bunker
Each bunker is priced at a “one-time upfront payment of $35,000, plus an ongoing annual ground rent of $1,000 per bunker,” the site said.
Bunker floor plan
Competely outfitted bunker
For the low-cost, bottom barrel bunker setup, mainly for paranoid hipsters. The company offers “bunker glamping” that can be outfitted in the space for an additional $25,000.
Low-cost bunker setup
The Verge spoke Tom and Mary, a pair of full-time residents at xPoint, who moved into their apocalypse bunker after the virus pandemic consumed the US earlier this year. The bunker was going to be their home base after retirement, but after they saw food shortages at supermarkets and the economy plunged — they decided it was the right time to move.
“We recognized that if we did have a full-on collapse of society as we know it, that we would be very vulnerable in our home west of Atlanta,” Tom said.
Both were inspired to purchase the bunker last year after they read Patriots: A Novel of Survival in the Coming Collapse, which is a best-seller among prepper communities. In short, the book is about the economic collapse of the US. Tom said, “It opened my eyes to the level of vulnerability that most people have if something happens and food can’t be delivered to the store for whatever reason.”
xPoint residents Tom & Mary Here’s their setup, including a camper and bunker at xPoint.
Tom & Mary’s bunker For those seeking “luxury doomsday bunkers” — we noted in April, New Zealand has become the mecca of pandemic escape in the world.
- Watch Live: Massive Fire After Explosion In Downtown LA, Multiple Firefighters "Down"
Watch Live: Massive Fire After Explosion In Downtown LA, Multiple Firefighters “Down”
Tyler Durden
Sat, 05/16/2020 – 22:52At least 10 firefighters were injured as multiple buildings were on fire in downtown Los Angeles Saturday, according to the Los Angeles Fire Department.
BREAKING: At least 10 firefighters “down,” multiple buildings on fire after explosion in downtown Los Angeles pic.twitter.com/C23f6ausYq
— BNO News (@BNONews) May 17, 2020
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The condition of the firefighters was not immediately known Saturday evening.
Downtown is on fire! #lafire #BreakingNews #losangeles pic.twitter.com/NaggHhvIme
— Star (@StarLee404) May 17, 2020
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The LA fire department issued a “mayday” call and characterized the incident as a “major emergency.”
Breaking: Multiple buildings are now on fire in Downtown Los Angeles, California. The LAFD says that approximately 10 firefighters are ‘down’ and has declared the fire as a major emergency. 230 firefighters are on the scene. pic.twitter.com/0lKsfyC2QD
— PM Breaking News (@PMBreakingNews) May 17, 2020
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The fire, located in the 300 block of East Boyd Street, was upgraded to a “major emergency” around 6:36 p.m., with an explosion reported on scene, according to the LAFD.
Massive fire Little Tokyo Los Angeles pic.twitter.com/PEWNOquzvI
— Paul G (@PAGalloway) May 17, 2020
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NBC Los Angeles reports that as of 7:05 p.m., more than 230 firefighters were responding to the fire and firefighters had moved to a defensive posture for fire attack, the LAFD said.
Live Feed:
Watch Live: At least 10 firefighters injured in explosion, fire in dtla. https://t.co/d0yyTqBJIw https://t.co/Ozxgd58n9v
— NBC Los Angeles (@NBCLA) May 17, 2020
- Obamagate Is Not A Conspiracy Theory
Obamagate Is Not A Conspiracy Theory
Tyler Durden
Sat, 05/16/2020 – 22:30Authored by David Harsanyi via The National Review,
Those sharing #Obamagate hashtags on Twitter would do best to avoid the hysterics we saw from Russian-collusion believers, but they have no reason to ignore the mounting evidence that suggests the Obama administration engaged in serious corruption.
Democrats and their allies, who like to pretend that President Obama’s only scandalous act was wearing a tan suit, are going spend the next few months gaslighting the public by focusing on the most feverish accusations against Obama. But the fact is that we already have more compelling evidence that the Obama administration engaged in misconduct than we ever did for opening the Russian-collusion investigation.
It is not conspiracy-mongering to note that the investigation into Trump was predicated on an opposition-research document filled with fabulism and, most likely, Russian disinformation. We know the DOJ withheld contradictory evidence when it began spying on those in Trump’s orbit. We have proof that many of the relevant FISA-warrant applications — almost every one of them, actually — were based on “fabricated” evidence or riddled with errors. We know that members of the Obama administration, who had no genuine role in counterintelligence operations, repeatedly unmasked Trump’s allies. And we now know that, despite a dearth of evidence, the FBI railroaded Michael Flynn into a guilty plea so it could keep the investigation going.
What’s more, the larger context only makes all of these facts more damning. By 2016, the Obama administration’s intelligence community had normalized domestic spying. Obama’s director of national intelligence, James Clapper, famously lied about snooping on American citizens to Congress. His CIA director, John Brennan, oversaw an agency that felt comfortable spying on the Senate, with at least five of his underlings breaking into congressional computer files. His attorney general, Eric Holder, invoked the Espionage Act to spy on a Fox News journalist, shopping his case to three judges until he found one who let him name the reporter as a co-conspirator. The Obama administration also spied on Associated Press reporters, which the news organization called a “massive and unprecedented intrusion.” And though it’s been long forgotten, Obama officials were caught monitoring the conversations of members of Congress who opposed the Iran nuclear deal.
What makes anyone believe these people wouldn’t create a pretext to spy on the opposition party?
If anyone does, they shouldn’t, because on top of everything else, we know that Barack Obama was keenly interested in the Russian-collusion investigation’s progress.
In her very last hour in office, national-security adviser Susan Rice wrote a self-preserving email to herself, noting that she’d attended a meeting with the president, Deputy Attorney General Sally Yates, FBI director James Comey, and Vice President Joe Biden in which Obama stressed that everything in the investigation should proceed “by the book.”
Did high-ranking Obama-administration officials not always conduct such investigations “by the book”? It is curious that they would need to be specifically instructed to do so. It is also curious that the outgoing national-security adviser, 15 minutes after Trump had been sworn in as president, would need to mention this meeting.
None of this means that Obama committed some specific crime; he almost assuredly did not. In a healthy media environment, though, the mounting evidence of wrongdoing would spark an outpouring of journalistic curiosity.
“But,” you might ask, “why does it matter, anymore?”
Well, for one thing, many of the same characters central to all this apparent malfeasance now want to retake power in Washington. Biden is the Democratic Party’s presumptive presidential nominee, he’s running as the heir to Obama’s legacy, and he was at that meeting with Rice. He had denied even knowing anything about the FBI investigation into Flynn before being forced to correct himself after ABC’s George Stephanopoulos pointed out that he was mentioned in Rice’s email. It’s completely legitimate to wonder what he knew about the investigation.
Skeptics like to point out that the Obama administration had no motive to engage in abuse, because Democrats were sure they were going to win. Richard Nixon won 49 states in 1972. His cronies had no need to break into the DNC’s offices and touch off Watergate. But as the FBI agents involved in the case noted, they wanted to have an “insurance policy” if the unthinkable happened.
In 2016, the unthinkable did happen, and we’re still dealing with the fallout four years later. We don’t know where this scandal will end up, but one doesn’t have to be a conspiracy theorist to wonder.
- California Denies SpaceX Subsidy Request – Is Musk's Government Gravy Train Coming To An End?
California Denies SpaceX Subsidy Request – Is Musk’s Government Gravy Train Coming To An End?
Tyler Durden
Sat, 05/16/2020 – 22:00California is taking a swipe back at Elon Musk.
A state panel voted on Friday to reject Musk’s request for $655,000 in job and training funds for SpaceX, citing the CEO’s recent bizarre behavior and threats to move Tesla out of state.
We have been documenting Musk’s threats to move out of California and the CEO’s supposed plans to take his operation to Texas or Nevada instead.
Five members of the panel voted against the proposal and two voted for it. The California’s Employment Training Panel openly discussed the CEOs Tweets and media reports about layoffs at SpaceX’s Hawthorne headquarters, according to Reuters.
Gretchen Newsom, a panel member and the political director of an IBEW electrical workers union local, said: “In my opinion, given the recent threats of the CEO to leave the state of California, and everything else we’ve discussed today, this proposal does not rise to the level for me to feel secure in supporting it.”
“SpaceX is a different company, but they have the same CEO,” she concluded.
Tesla and SpaceX remain non-union shops. Funding from the state was supposed to help SpaceX train 900 new employees for its Starlink satellite project and hire an additional 300 to work on its Starship program. It’s unclear whether or not SpaceX will move forward with the hiring without the state aid.
Recall, this past week, longtime Tesla fans turned against the company as many accused Musk of placing Tesla’s share price – not to mention his own personal gain – above the safety of his workers.
After President Trump spoke out in Musk’s defense, Alameda County folded and Musk mostly got his way about re-opening his plant.
But apparently, the bad taste that the incident left in Musk’s mouth prompted him to leak a story about Tesla picking Austin, Texas as the site of its next Gigafactory. Tesla has four gigafactories – Sparks, Nevada, Buffalo, New York, Shanghai, China and one under construction in Berlin.
Hopefully other U.S. states follow California’s lead and decide to cut Musk’s gravy train off. It sure would be tough for Tesla to operate with demand and production at coronavirus lockdown-levels – and without the help of ZEV credits or government subsidies…
- Nothing Changes As Long As You Obey
Nothing Changes As Long As You Obey
Tyler Durden
Sat, 05/16/2020 – 21:30Authored by Paul Rosenberg via Free-Man’s Perspective blog,
I hear the same complaints about politicians that you do. And while I understand them, the fact is that complaining accomplishes almost nothing. And there is a very simple reason why complaining has no real effect:
Because the complainers keep right on obeying.
As long as you obey, the things you complain about will keep on happening.
The Proof
This idea that “nothing changes as long as you obey” has a modern proof – that of American blacks in the southern United States. Specifically, between the civil war and Martin Luther King Jr.
King is badly misunderstood. His legacy has become a tool for garnering of political power. He has been turned into a semi-mystical symbol and used by power grabbers of many types.
The real Martin King, however, was a minister who exposed the truth that obedience keeps us in chains. His crucial synthesis was to combine disobedience with goodness. His crucial work (and this is greatly under-appreciated) was to hold disobedience and goodness together.
Blacks suffered for many decades in the American south. They complained endlessly, but the laws were against them and remained against them. A significant number of white people were sympathetic, but everyone obeyed the law and little changed.
Until King came along, of course, with his new strategy of goodness plus disobedience.
King, for whatever his shortcomings, was a serious minister, and had a clear vision of what goodness entailed. And, he became very good at communicating it. King added disobedience to goodness, and combined them with teachings on courage and self-control.
Within a decade or so of using this strategy, things changed in the American south. First, individuals changed. And, after a while, laws followed.
There is far too much to tell of this decade, so I will give you some quotes from Dr. King:
Non-cooperation with evil is as much a moral obligation as is cooperation with good.
We will not obey unjust laws or submit to unjust practices. We will do this peacefully, openly, cheerfully because our aim is to persuade. We adopt the means of nonviolence because our end is a community at peace with itself.
Most people can’t stand up for their convictions, because the majority of people might not be doing it. See, everybody’s not doing it, so it must be wrong. And since everybody is doing it, it must be right.
Cowardice asks the question: is it safe? Expediency asks the question: is it politic? Vanity asks the question: is it popular? But conscience asks the question: is it right? And there comes a time when one must take a position that is neither safe, nor politic, nor popular – but one must take it simply because it is right.
Human salvation lies in the hands of the creatively maladjusted.
How to Stop Obeying
First of all, understand that how to do this must be YOUR decision. If you follow the “blueprint” of anyone but yourself, you’ll be falling right back into the same trap of obeying an authority. Yes, we’ve been trained in that all our lives, but it remains a fundamental error.
You must decide for yourself what path to take, and you must – inside of yourself – summon the courage to act upon it, without anyone else telling you what to do.
You must choose and you must act. Until then, your suffering will remain. But when you do choose and act, you make yourself a free man or woman.
So choose a good path, then break the inertia of compliance and step out on your own. Make yourself into someone you’ll be proud of.
- FDA Halts Bill Gates-Backed COVID-19 Testing Program
FDA Halts Bill Gates-Backed COVID-19 Testing Program
Tyler Durden
Sat, 05/16/2020 – 21:00About a month after Bill Gates criticized President Trump’s decision to suspend funding to the World Health Organization (WHO), the federal government has just halted a Seattle-based COVID-19 testing program backed by Gates.
What are the odds, right?
“Please discontinue patient testing and return of diagnostic results to patients until proper authorization is obtained,” the Food & Drug Administration (FDA) wrote in a memo, addressed to the Seattle Coronavirus Assessment Network (SCAN), according to The New York Times.
SCAN posted an update on its website on Thursday (May 14) describing how the FDA had asked it to “pause” testing while it receives further guidance on new procedures for its COVID-19 test kits that collect samples at home.
The FDA “recently clarified its guidance for home-based, self-collected samples to test for COVID-19. We have been notified that a separate federal emergency use authorization (EUA) is required to return results for self-collected tests,” the post read.
“The FDA has not raised any concerns regarding the safety and accuracy of SCAN’s test, but we have been asked to pause testing until we receive that additional authorization.”
An FDA spokesperson told The Times, the home collection test kits raised some concerns about “safety and accuracy that required the agency’s review.”
The issue in the Seattle case appears to be that the test results are being used not only by researchers for surveillance of the virus in the community but that the results are also being returned to patients to inform them.
The two kinds of testing — surveillance and diagnostic — fall under different F.D.A. standards. In a pure surveillance study, the researchers may keep the results just for themselves. But coronavirus testing has largely revolved around getting results returned to doctors who can share the results with patients.
“We had previously understood that SCAN was being conducted as a surveillance study,” the spokesperson said.
SCAN is backed by The Bill and Melinda Gates Foundation and the University of Washington Medicine. The testing program was sending free test kits to participants’ homes in the Seattle Metropolitan Area, with the goal of testing people in the region to get a sense of how the virus was spreading through the community.
“As SCAN gathers more test results in the weeks ahead, researchers expect the new data to provide a better sense of the number of infections and serve as one source to help answer other questions, like when physical distancing measures can be relaxed,” Gates wrote on his blog, several days before the FDA halted the testing program.
New concerns emerged last week when the accuracy of Abbott Laboratories’ COVID-19 antibody test was questioned by the FDA. SCAN tests do not use antibodies for testing, and SCAN said it is working with health officials to restore the program.
Abbott’s COVID-19 test has been widely pumped by the Trump administration as a key factor in winning the fight against the virus, along with its use for daily testing in the White House.
Is it just a coincidence that after Gates bashed President Trump on WHO defunding and the president’s favorite COVID-19 test now has accuracy issues — that the federal government would, out of the blue, halt Gates’ SCAN test?
These are things that make you go hmmm..
- Goldman Spots A Huge Problem For The Fed
Goldman Spots A Huge Problem For The Fed
Tyler Durden
Sat, 05/16/2020 – 20:44Last week, the Treasury shocked the world when it announced that in the current quarter (the 3rd of the fiscal year), the US will need to sell a mindblowing, record $3 trillion (pardon, $2.999 trillion) in Treasurys to finance the US money helicopter.
This, after selling $807 billion in the first half of the fiscal year, and another $677 billion in the quarter ending Sept 30.
And since it is just a matter of time before Congress has to pass yet another fiscal package which will be at least another trillion dollars, and up to $3 trillion if the Democrats get their wish, one can say that Guggenheim’s projection of over $5 trillion in debt issuance this calendar year will be wildly conservative.
Now here’s the thing: as Deutsche Bank recently showed, so far this new debt avalanche was entire monetized exclusively by the Fed, whose debt purchasing operations have been far greater than the net Treasury issuance.
But this was only the case when the Fed was buying a massive $75 billion in TSYs per day in the late March crash, when Powell dumped a monetary nuclear bomb on the market to stabilize the biggest panic selling an entire generation of traders had ever seen, and nearly doubling the Fed’s balance – which is now just shy of $7 trillion, in a few months:
Since then, however, the Fed’s daily and weekly POMO has shrunk substantially, and as discussed earlier, it is down to just $30BN in Treasury purchases per week as of next week, which amounts to around $1.5 trillion per year.
There’s just one problem: $30BN per week in TSY monetization is nowhere near enough to consume the trillions in Treasury issuance that is about to hit. In fact, all else equal, the Fed will very soon have to find a pretext to aggressively ramp up its treasury purchases.
As Goldman writes overnight, putting the problem in its proper context, “Central banks have been purchasing sovereign bonds at a rapid pace (Exhibit 1), faster than past QE programs in most cases. These purchases are occurring against a backdrop of a surge in fiscal deficits, which will require enormous amounts of additional sovereign supply to finance them.”
Which makes sense, of course: after all helicopter money, which is what we have now that MMT (Magic Money Theory) has been shoved down everyone’s throat without any debate, only works when there is coordination between the Treasury and the central bank. And while until now Fed purchases have generally offset Treasury issuance, that coordination is about to end. As Goldman puts it, “Central bank buying should absorb a substantial amount of upcoming issuance, though we expect increases in “free float” across most markets, most notably in the US, which adds to the medium-term case for higher yields and steeper curves there.”
Next, Goldman estimates this so-called free float, defined as the amount of sovereign debt outstanding less central bank and foreign official holdings, across major DM markets, and shows it in the chart below. Through the end of last year, free float was on a downward trend in Germany and Japan, as ECB and BoJ purchases absorbed the bulk of new supply. In contrast, free float had been trending higher for much of the year in the US and UK.
So with record fiscal deficits and resumption of asset purchases in several markets, where is free float headed this year? In Exhibit 3, Goldman lays out its expectations for total purchase amounts on a net basis along with net supply. It finds the largest increase in free float in the US, as Fed purchases continue to slow; in fact according to Goldman calculations the US public (now that foreign investors have hit the breaks on US TSY purchases), will be on the hook to fund the $1.6 trillion needed to bridge the full amount of US funding needs.
A similar picture emerges in the Euro area, where supply is also expected outpace ECB purchases, particularly in Italy, Spain and France (absent further increases in ECB purchases). Bizarrely, a similar picture emerges in Japan where even the always ravenous BoJ is expected to absorb a large portion (about ¥25tn) of incoming supply in the upcoming year as Japan is boosting its debt sales by 18.2 trillion yen ($170 billion) to fund a spending package equivalent to a fifth of its annual economic output; but according to Goldman, the scale of supply is likely to exceed even the BOJ’s QE purchases.
It continues: foreign-ownership of New Zealand sovereign debt has fallen to 50% from 70% just five years ago as central bankers in Wellington snap up bonds as part of a quantitative-easing program.
In short, even with central banks unleashing $7.9 trillion in QE so far in 2020 (according to Bank of America calculations) of which the Fed accounts for over $2.8 trillion in debt purchases alone, this won’t be enough to monetize the tsunami of debt that is coming to fund the biggest global rescue operation in history, and if investors find that suddenly the bond market has to clear without the only true backstop – the central bank – willing and able to mop up all the supply, a critical precondition for the continuation of “helicopter money”, the outcome could be disastrous.
Incidentally, we first warned about the urgent need for the Fed to aggressively step up and boost its QE (instead of continuing to taper it by $1 billion week after week as it did again today) on Wednesday when we quoted Curvature Securities’ rates strategist and repo expert Scott Skyrm, who calculated that “there are $689 billion net new Treasurys settling during the month of May and $992 billion net new Treasurys settling between now and June 15. Yes, almost one trillion new Treasury securities hitting the market within the next month!”
His conclusion: “That means the market needs to come up with about one trillion dollars to pay for those securities over the next month.” Which, of course, is a euphemism because we all know who in the market needs to come up with one trillion dollar – the only one who literally prints money: the Federal Reserve.
Conveniently, Goldman’s argument allows us to recycle our conclusion from two days ago, in which we said that here is the layman’s version of what was just said: “the Fed has flooded the system with liquidity… and it is not enough, because the way helicopter money works, is that liquidity supply (the Fed), and liquidity demand (Treasury via debt issuance) go hand in hand, and periods of too much supply, as was the cash with the Fed’s massive QE in late March and early April, are promptly followed by periods of dramatic liquidity demand, such as the next month when $1 trillion in liquidity will be drained to fund the US government “money helicopter.”
Goldman’s own calculations suggest that the shortfall net of the Fed’s ongoing QE tapering could be as much as $1.6 trillion.
As a result, Powell faces a two-fold problem: since the Fed chair has taken negative rates off the table, Powell has no choice but too boost QE again, and unleash another firehose of debt monetizing liquidity in the financial system. However, any such reversal to the Fed’s current posture of shrinking QE will be met with howls of rage, especially among what’s left of the conservative political establishment. Which means that, just like in March when the Fed used the first pandemic-induced market crash to unleash unlimited QE, the Fed will soon have to go for round 2 and spark a new market crash, one which it then uses as an alibi for the next massive liquidity injection. Failing to do that, watch as the dollar takes off as markets sniff out that another major dollar squeeze is imminent. And since this will accelerate the liquidity crunch, one way or another, the coming $1.6 trillion in Treasury issuance – which has already been generously greenlighted by Congress – will serve as a trigger for the next market shock, one which the Fed will quickly reverse by expanding the already unlimited QE by trillions on very short notice.
The only question we have is whether this will be the market crash that the Fed uses to unveil it will also buy equity ETfs next, or if Powell will save this final bullet in its ammo for whatever comes next.
Finally, it’s not just us reaching this conclusion: yesterday – one day after our dire assessment – Bloomberg reached the same conclusion, and in “An $8 Trillion Spree Sets Clock Ticking for Bonds’ Judgment Day” in which it wrote that “investors are mopping up the sales as long as central banks engage in so-called quantitative easing, buying an unlimited amount of debt to counter the ravages of the pandemic. But at the first whiff of a recovery, or a pullback from policy makers, all bets may be off. Throw in the threat of inflation amid a global fiscal splurge exceeding $8 trillion, and bond investors look set for a toxic cocktail of risks in the not-too-distant future.”
Well, today we got another pullback when the Fed tapered its weekly QE to just $30BN from $35BN last week, and a record $75 billion per day two months ago.
“Given the massive central bank easing, which includes a lot of bond-buying QE in many places, there will be a lot of demand right now to buy government bonds,” said Eric Stein, co-director of global income at Eaton Vance Management, effectively describing what can simply be called “frontrunning” the Fed, a strategy that even BlackRock said is the only one left in this idiotic market.
“However, if it was a year or two from now and the economy was picking up and inflation had started to pick up, the story could be different.”
Actually, the economy doesn’t even have to be picking up: an unexpected – and unexplained – slowdown in the pace of the Fed’s “unlimited QE” purchases would be sufficient to throw the bond market into unprecedented turmoil as all those socialists who pretend that MMT makes sense, realize that the only thing permitting their idiotic “theory” to persist is the Fed’s money printer.
Yet while the Fed’s QE expansion is just a matter of time, whether catalyzed by another market crash or not, the bigger question is what happens after that?
“Can governments continue to borrow at such record levels? No,” said George Boubouras, head of research at hedge fund K2 Asset Management. “Central-bank support is key in the massive bond buying we’ve seen for now. But if they blink then at some point, in the medium term, it will all likely unravel – with unforgiving consequences for some countries.”
Ironically, this also means that an end to the coronavirus crisis is the worst possible thing that could happen to a world that is now habituated to helicopter money and virtually unlimited handouts, which however need a state of perpetual crisis.
“Once there is an end to the crisis in sight, they will be less and less willing to provide support and it will fall more on the street to absorb paper,” said Mediolanum money manager Charles Diebel, who’s adding bond steepeners in anticipation of a coming inflationary supernova.
That, incidentally, would be the endgame for the current monetary regime, which is why anyone hoping that officials, policymakers and the establishment in general, will allow the coronavirus crisis to simply fade away, is in for the shock of a lifetime.
- Here's 5 Reasons Why Gold Miners Have Massive Outperformance In The Tank
Here’s 5 Reasons Why Gold Miners Have Massive Outperformance In The Tank
Tyler Durden
Sat, 05/16/2020 – 20:30Authored by Bryce Coward via Knowledge Leaders Capital blog,
As I write this note on a dreary Friday afternoon from Boulder, CO, I am reminded of my town’s origin. Its first non-native settlers established the town 1858 as a base camp for gold and silver miners. Nestled literally at the foot of the Rockies, its location was ideal for supplying the Colorado mining boom at that time and by 1871 a railroad had been built to connect Denver, Golden, Boulder and the mining operations directly to the West of Boulder. One such mining operation was in what is still known as Gold Hill, which I highly recommend visiting for a live music and BBQ event the next time you are in Colorado (COVID permitting).
Today we may be in the early days of a different kind of gold boom. This time the boom isn’t because there are new gold reserves to be dug out of the ground. Rather, the steady supply of gold compared to the extraordinary growth of new money requires that the dollar value of the former must rise to keep parity with the latter. Indeed, the US money supply has grown by approximately 23% over the last 65 days, or about a 90% annualized rate.
No wonder the price of gold is sitting near a cycle high of $1743/oz as of this writing. But even as the price of gold has risen in recent months, the gold miners themselves may be even larger beneficiaries of the US dollar supply shock.
Below, we’ll list 5 simple reasons the gold miners could be in for a period of massive outperformance.
The price of gold miners relative to the price of gold is basically at a 25 year low.
This implies quite a catch up trade if the price of the commodity produced by the miners remains at elevated levels or even rises from here. The price performance of the miners would have to outperform the price of gold by 500% to reach the old 2011 highs in relative performance.
The relative performance of gold miners relative to the S&P 500 remains at near a 25 year low.
Gold miners would have to outperform the S&P 500 by 400% to get back to the 2011 highs in relative performance.
Valuation.
Based on the price to EBITDA ratio (and about all the other valuation ratios), gold miners are cheaper than the overall market. From 2005-2016 gold miners pretty much always traded at a premium to the S&P 500, but now the miners are trading at a 15% discount.
Liquidity.
In the age of COVID, stocks with the ability to service their debt obligations should arguably trade at a premium to the market. The gold miners have a current ratio (current assets/current liabilities) nearly twice that of the S&P 500 as a whioe (2.06 vs 1.28).
Solvency.
In the age of COVID, stocks with balance sheets in line with their income statements should arguably trade at a premium to the market. The gold miners have debt to EBITDA about 75% lower than the overall market (1.16 vs 4.69).
Bonus chart. The global aggregate market value of gold miners is $260bn.
This compares to the aggregate market value of the FAAMG (Facebook, Amazon, Apple, Microsoft, Google) stocks of $5.4tn and the market value of US Treasury debt outstanding of $25tn. So the gold miners, in aggregate, are worth about 5% of the value of just those 5 FAAMG stocks and 1% of the value of all the Treasury debt outstanding.
What do you think would happen to the price of the gold miners if some of that capital left the FAAMGs or Treasury bonds and flowed into the gold miners?
- Joe Rogan 'Might Move To Texas' Over California's Oppressive COVID-19 Lockdown And 'Ridiculous Taxes'
Joe Rogan ‘Might Move To Texas’ Over California’s Oppressive COVID-19 Lockdown And ‘Ridiculous Taxes’
Tyler Durden
Sat, 05/16/2020 – 20:00Joe Rogan says he might leave California and move to Texas over what he says are excessive COVID-19 restrictions in a state that’s already “extremely expensive” with “ridiculous” taxes.
In comments following an interview with Elon Musk, the 52-year-old Rogan – who The Hill reports earned an estimated $30 million in revenue in 2019, said “I might move to Texas. … If California continues to be this restrictive I don’t know if this is a good place to live,” adding “First of all, it’s extremely expensive. The taxes are ridiculous.”
“And if they really say that we can’t do stand-up until 2022, or some shit like that, I might jet. I’m not kidding. This is silly. I don’t need to be here,” said Rogan – a popular comic and podcaster with over 190 million downloads per month of the “Joe Rogan Experience.”
Joe Rogan claims he might jet from California because they won’t reopen, and move to Texas where infections are spiking. pic.twitter.com/FAbbMTh2Xv
— Matthew Dimitri (@themattdimitri) May 14, 2020
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Los Angeles Mayor Eric Garcetti received blowback for his comments to ABC’s George Stephanopolous earlier this week after stating the city will never be “fully opened” until “we have a cure.”
“We’ve never been fully closed; we’ll never be completely open until we have cure,” Garcetti said.
Health experts have said a vaccine won’t likely be available until 2021 at the earliest.
“I like Austin a lot, I like Dallas a lot, I like Houston,” Rogan continued, naming possible Texas cities to live in. “I don’t know if I would live in Houston. The summer is a motherf—er.” –The Hill
Musk, meanwhile, opened his Alameda County, CA Tesla plant earlier this month in defiance of the state’s stay-at-home order. The state eventually caved last week, telling him that he can open the plant as long as he only conducts “minimum business operations.”
Tesla is restarting production today against Alameda County rules. I will be on the line with everyone else. If anyone is arrested, I ask that it only be me.
— Elon Musk (@elonmusk) May 11, 2020
- The School Closures Are A Big Threat To The Power Of Public Education
The School Closures Are A Big Threat To The Power Of Public Education
Tyler Durden
Sat, 05/16/2020 – 19:30Authored by Ryan McMaken via The Mises Institute,
Twenty twenty is likely to be a watershed year in the history of public schooling. And things aren’t looking good for the public schools.
For decades, we’ve been fed a near-daily diet of claims that public schooling is one of the most important—if not the most important—institutions in America. We’re also told that there’s not nearly enough of it, and this leads to demands for longer school hours, longer school years, and ever larger amounts of money spent on more facilities and more tech.
And then, all of sudden, with the panic over COVID-19, it was gone.
It turns out that public schooling wasn’t actually all that important after all, and that extending the lives of the over-seventy demographic takes precedence.
Yes, the schools have tried to keep up the ruse that students are all diligently doing their school work at home, but by late April it was already apparent that the old model of “doing public school” via internet isn’t working. In some places, class participation has collapsed by 60 percent, as students simply aren’t showing up for the virtual lessons.
The political repercussions of all this will be sizable.
Changing Attitudes among the Middle Classes
Ironically, public schools have essentially ditched lower-income families almost completely even though school district bureaucrats have long based the political legitimacy of public schools on the idea that they are an essential resource for low-income students. So as long as the physical schools remain closed, this claim will become increasingly unconvincing. After all, “virtual” public schooling simply doesn’t work for these families, since lower-income households are more likely to depend on both parents’ incomes and parents may have less flexible job schedules. This means less time for parents to make sure little Sally logs on to her virtual classes. Many lower-income households don’t even have internet access or computing equipment beyond their smartphones. Only 56 percent of households with incomes under $30,000 have access to broadband internet.
Nonetheless, working-class and lower-income parents are likely to return their children to the schools when they open again. Many believe they have no other choice.
Attitudes among the middle classes will be a little different, however, and may be more politically damaging to the future of the public schools.
Like their lower-income counterparts, middle class parents have long been happy to take advantage of the schools as a child-care service. But the non-educational amenities didn’t stop there. Middle-class parents especially have long embraced the idea that billions of dollars spent on school music programs, school sports, and other extracurriculars were all absolutely essential to student success. Sports provided an important social function for both the students and the larger community.
But as the list of amenities we once associated with schooling gets shorter and shorter, households at all income levels will start to wonder what exactly they’re paying for.
Stripped of the non-academic side of things, public schools now must sell themselves only as providers of academic skills. Many parents are likely to be left unimpressed, and this will be all the more true for middle class families where the parents are able to readily adopt homeschooling as a real substitute. The households that do have the infrastructure to do this are now far more likely to conclude that they simply don’t need the public schools much of the time. There are now so many resources provided for free outside the schools—such as Khan Academy, to just name one—that those who are already savvy with online informational resources will quickly understand that the schools aren’t essential.
In addition to this, many parents who were on autopilot in terms of assuming they were getting their money’s worth may suddenly be realizing that public schools—even when they were physically open—weren’t that much of a bargain after all. As Gary North recently observed,
For the first time, parents can see exactly what is being taught to their children. They can see the quality of the teachers. They can learn about the content of the educational materials.
Many parents may not like what they see, and as many increasingly take on the job of providing in-person instruction, school teachers won’t look quite like the highly trained heroes they have long claimed to be.
Budget Cuts
With the image of schools as indispensable social institutions quickly fading, the political advantage they have long enjoyed will rapidly disappear as well. It wasn’t long ago that schools could go back to the taxpayers again and again with with demands for more money, more resources, and higher salaries. Teacher unions endlessly lectured the taxpayers about how getting your child into a classroom with one of their teachers was of the utmost importance. Voters, regardless of political ideology or party, were often amendable to the idea.
That narrative is already greatly in danger, and the longer the COVID-19 panic ensures that schools remain closed, the more distant the memory of the old narrative will become. As school budgets contract, school districts from Las Vegas to Denver and across the nation are bracing for furloughs and layoffs.
With smaller staff, fewer teachers, and smaller budgets, expect virtual public learning to become even more bare bones, and less rewarding and engaging for students.
What Will Things Look like This Fall?
Even if schools open this fall, the reforms currently being pushed will ensure that schools continue to lack many of the amenities many have come to expect. If these reforms are adopted, students can forget about social events. They can expect shorter school days, and an ongoing role for online schooling. Team sports will be gone. Old notions of universal mandatory attendance and long days will seem increasingly quaint and old fashioned—or possibly even dangerous.
For many parents, this will just reinforce their growing suspicions that public schools just aren’t worth it anymore. Maybe they never were.
- Global COVID-19 Cases Top 4.5 Million As Italy Sees Deaths Fall To 10-Week Low: Virus Updates
Global COVID-19 Cases Top 4.5 Million As Italy Sees Deaths Fall To 10-Week Low: Virus Updates
Tyler Durden
Sat, 05/16/2020 – 19:07Summary:
- Italy reports lowest death toll in 69 days
- Nepal reports first coronavirus death
- Germany’s Bundesliga re-starts play
- FinMin Scholz mulls rescue package for towns, cities
- Hungary ends Budapest lockdown
- Global case total passes 4.5M, deaths top 300k
- UK death toll nears 35k
- Trump says US will restore some WHO funding
- American soup kitchens see 70% spike in traffic
- Cambodia claims it’s officially “virus free”
- Mexico reports record jump in cases
- Wuhan tests 100k+ during first day of mass-testing drive
* * *
Update (1230ET): Nepal, the mountainous southwest Asian state that borders China-controlled Tibet, just reported its first coronavirus-linked death.
Meanwhile, in Italy, the Civil Protection Service reported just 153 deaths on Saturday – the lowest daily number in 69 days – just as the government announced plans to loosen some travel restrictions early next month.
JUST IN: Italy reports 875 new cases of coronavirus and 153 new deaths.
Total of 224,760 cases and 31,763 deaths.
— Norbert Elekes (@NorbertElekes) May 16, 2020
Italy’s update:
– Number of new cases up
– Number of new people tested up
– Number of new deaths down
– Number of hospitalized down
– Number of ICU patients down— Norbert Elekes (@NorbertElekes) May 16, 2020
NEW: Italy reported its lowest number of new coronavirus deaths in 69 days.
— Norbert Elekes (@NorbertElekes) May 16, 2020
ITALY: Government will allow travel to and from the country from June 3.
— Norbert Elekes (@NorbertElekes) May 16, 2020
* * *
Despite a few close calls, it appears Germany is pushing ahead with its reopening. And in a major symbol of Europe’s “return to normalcy” (as the first stirrings of a second wave of SARS-Cov-2 have emerged in mainland China, South Korea & Singapore), Germany’s Bundesliga, the German Federation’s top-flight soccer league, is holding its first round of games since the outbreak began on Saturday.
Five matches including a derby between Borussia Dortmund and Schalke 04 mark the restart of the league, though they are taking place under strict health and hygiene protocols. Stadiums are empty, coaches are wearing face masks and handshakes are banned.
Here’s the schedule, for any Europeans – or sports-deprived Americans – interested in watching (times all ET):
Additionally, German Finance Minister Olaf Scholz is reportedly working on an aid package worth €57 billion ($61.65 billion) to help towns and cities cope with a plunge in tax revenues caused by the coronavirus crisis. Dems in the US have argued that states need more aid to deal with their own drop in tax revenue, which is part of the reason they’re pushing for another relief bill (though the $3 trillion price tag they’re currently pushing is widely considered DOA).
As more European countries ease their lockdowns, Hungary PM Viktor Orban said Saturday he would gradually lift lockdown restrictions in Budapest beginning Monday, two weeks after it ended the lockdown in the rest of the country.
The biggest news Saturday morning is that the global number of coronavirus cases passed 4.5 million, according to data from Johns Hopkins University.
Unfortunately, as the outbreaks in Russia and Brazil flare out of control and testing ramps up for the first time, the number of new cases reported globally climbed to its highest level since late April, with 97,500 new cases (More than 1/4 were from Russia and Brazil alone).
Meanwhile, the global death toll from the virus has topped 300k.
On Saturday morning, Russia confirmed 9,200 new coronavirus infections, bringing the country’s official number of cases to 272,043.
While many places are unwinding their lockdowns – including countries like Brazil, which has seen the outbreak explode as its president has continued to resist any actions to suppress the outbreak even as health-care systems in the Amazon are overwhelmed – others are tightening restrictions. In Chile, the capital city Santiago is imposing a lockdown to keep people from entering as Brazil’s neighbors increasingly fear the outbreak in that country will make things worse for the entire continent.
Lockdown begins in Chile’s capital city after COVID-19 cases grow. pic.twitter.com/B03duBPwNY
— The Hill (@thehill) May 16, 2020
Moving on to the UK, the Department of Health and Social Care reported the latest batch of new figures Saturday morning. The UK’s confirmed deaths are now just a hair below 35k.
As of 9am 16 May, there have been 2,489,563 tests, with 136,486 tests on 15 May.
1,742,028 people have been tested of which 240,161 tested positive.
As of 5pm on 15 May, of those tested positive for coronavirus, across all settings, 34,466 have sadly died. pic.twitter.com/NUmxLoGRgx
— Department of Health and Social Care (@DHSCgovuk) May 16, 2020
In the US, President Trump announced Saturday morning that he planned to restore 10% of the US’s funding for the WHO, putting the US on an even footing with China.
- Trump Says U.S. Considering Restoring Partial Funding to World Health Organization
- Trump Says U.S. Could Provide 10% of What It Previously Sent to WHO
- Trump: New U.S. Contribution Would Match Amount China Is Giving to The Group
While many younger, single Americans are enjoying the enhanced unemployment benefits (indeed, many American workers are earning more per week via the combination of unemployment and additional relief than they would have working, according to data shared by the Wall Street Journal) others with families to feed are turning to food banks in unprecedented numbers. As the FT reported Saturday, “America’s food banks are being pressed into service as never before” as unemployment surges forcing many working-class and middle-class families to visit food banks for the first time.
Feeding America, the largest organization representing food banks in the US (it represents 200+ individual charities across the country), says it has experienced a 70% increase in the number of people seeking food assistance since the crisis began. Of the newcomers, ~40% say they’re visiting for the first time.
While this all might sound pretty dire for the world’s largest economy, a team of Goldman analysts has stumbled upon another potential complication. After rectifying America’s Treasury issuance with the Fed’s balance-sheet expansion, it appears that individual investors might be left with a $1.6 trillion wad of paper, ready to monkeyhammer interest rates higher. Keeping in mind the market’s reaction to Fed Chairman Powell on Wednesday, we suspect the Fed will be looking for any pretext to further accelerate its already-unprecedented balance sheet expansion.
Cambodia on Saturday reported that all of its confirmed coronavirus patients have now recovered from the disease, and the southeast Asian country hasn’t reported a single new case for weeks. Joining the growing number of European countries that are easing travel restrictions (but typically only for select nations within the Schengen zone), the Italian government passed a new decree to allow travel across the country, as well as to and from other European countries starting on June 3, Al Jazeera reports.
Mexico’s health ministry confirmed 290 additional coronavirus deaths on Saturday and 2,437 new infections, the largest jump in new cases since the start of the pandemic. The new infections brought confirmed coronavirus cases to 45,032 and 4,767 deaths in total, according to the official tally, though many suspect the true number of infections is much higher due to the number of deaths recorded (evidence that the government has deliberately undercounted has also sowed widespread doubt). Mexico’s previous highest daily confirmed cases total was a day earlier on Thursday, when authorities reported 2,409 new infections.
Finally, the city of Wuhan has succeeded in conducting 113,609 nucleic acid tests on May 15, according to local health authorities. That’s approxmiately 1/10th of the number of daily tests they will need to carry out to hit their goal of testing 11 million ppl in 10 days.
As we have reported, Wuhan has launched a city-wide testing campaign after confirming its first cluster of COVID-19 infections since the end of the citywide lockdown that made the city’s residents prisoners inside their own homes.
The number of tests administered on May 15 in the city of 11 million residents marked a new record. But still, officials are nowhere near hitting their unrealistically ambitious targets.
- Trump: "I'm Not Running Against Sleepy Joe Biden…Not Even A Factor"
Trump: “I’m Not Running Against Sleepy Joe Biden…Not Even A Factor”
Tyler Durden
Sat, 05/16/2020 – 19:00The Hill points out that “While polling consistently puts Biden in the lead, Trump maintains a sizeable financial advantage and a sharp digital strategy, while the former vice president remains relegated to his home in Delaware to follow social distancing guidelines amid the coronavirus pandemic.”
But there’s actually a bigger factor: not only a decades-long history of bizarre Biden gaffes, exaggerations, lies and awkward “touching”, as well as moments he’s even caught berating and belittling people within his own party — all caught on video — but the now more immediately pressing problem of the presumptive 2020 Democratic presidential candidate’s ongoing obvious difficulty in communicating simple stances and policies without quickly getting bewildered and confused while shuffling hand-written notes, leading to glaring errors over basic facts, or increasingly frequent momentary inability to articulate coherent sentences for that matter, as we’ve highlighted many times.
I’m not running against Sleepy Joe Biden. He is not even a factor. Never was, remember 1% Joe? I’m running against the Radical Left, Do Nothing Democrats & their partner, the real opposition party, the Lamestream Fake News Media! They are vicious & crazy, but we will WIN! https://t.co/ltdHSmaMYT
— Donald J. Trump (@realDonaldTrump) May 16, 2020
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President Trump again picked up on both themes, tweeting Saturday morning that “Sleepy Joe Biden” is “not even a factor”, posting video of the infamous 1987 interaction where Senator Biden bragged about having three degrees and being at the top of his law school class, all proven false even in reports at the time.
“I’m not running against Sleepy Joe Biden. He is not even a factor. Never was, remember 1% Joe?” Trump tweeted. The reference was to past White House bids which ended in utter failure and barely a blip in terms of national traction.
“I’m running against the Radical Left, Do Nothing Democrats & their partner, the real opposition party, the Lamestream Fake News Media! They are vicious & crazy, but we will WIN!” the president added.
OMG! Looks like Biden fell asleep during Crooked’s rant endorsement. He’s truly the gift that keeps on giving. pic.twitter.com/BE1JZJ9yck
— Donald Trump Jr. (@DonaldJTrumpJr) April 29, 2020
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On Friday Biden’s campaign rolled out its battleground map while announcing key states the former vice president intends to gain upset victories in includes Texas, Arizona, and Georgia.
Between now and November Trump will have what seems an endless supply of embarrassing Biden clips he can rely on for ammo. So grab your popcorn.
- Bipartisan Beijing Bashing: College Dems & Reps Demand Closure Of All Chinese "Propaganda" Centers
Bipartisan Beijing Bashing: College Dems & Reps Demand Closure Of All Chinese “Propaganda” Centers
Tyler Durden
Sat, 05/16/2020 – 18:30Authored by Celine Ryan via Campus Reform,
In a rare cross-party coalition, the National College Republicans and College Democrats came together Monday to demand that American universities take a stand against the Chinese Communist Party’s “long-term campaign” against academic freedom in the U.S. by closing all Confucius Institutes.
In a statement released Wednesday titled “CONCERNING THE THREAT OF AUTHORITARIAN INFLUENCE AND THE DEFENSE OF PUBLIC INSTITUTIONS,” the two national student political organizations united against the presence of the known propaganda centers on campus, calling for American universities to put an end to “the Chinese government’s flagrant attempts to coerce and control discourse at universities in the United States.”
“We are compelled to voice our concerns over the present state of academic freedom, and bring to light the continued exploitation of liberal, democratic academic institutions by authoritarians,” reads the statement.
We are proud to join with the @athenaiinst and @CollegeDems to expose the risk Confucius Institutes pose to academic freedom and to call for immediate action. See our full statement here: https://t.co/yQpfROfpAL#ProtectAcademicFreedom #CloseConfuciusInstitutes pic.twitter.com/QH0m8WzVKg
— College Republicans (@CRNC) May 13, 2020
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“We further recommend that colleges, universities, non-governmental organizations, and representatives of vulnerable groups implement practices and policies to protect academic freedom from authoritarian interference in any form,” the statement continues.
The organizations outline various aspects of the “long-term campaign undeniably aimed at expanding the reach and power of the Chinese state’s apparatus of oppression,” beginning with specifically calling out Confucius Institutes.
“The Chinese Communist Party has established programs at universities, especially Confucius Institutes, which are proprietary outlets of soft power that promote self-censorship, arbitrarily censor discussion of issues “sensitive” to the Chinese Communist Party, utilize discriminatory hiring practices, and propagate blatant disinformation.,” reads the statement.
Campus Reform recently reported that dozens of such centers, deemed “propaganda” cells by intelligence officials still operate on American campuses.
They also agree that the CCP “has undermined the integrity of higher-learning institutions by seeking to bribe and intimidate academics.”
“The Chinese Communist Party’s actions pose an immense threat to academic freedom and to human dignity,” the statement continues, adding that “It is imperative that we distinguish this totalitarian regime from the Chinese people, whom we must steadfastly defend from abhorrent acts of xenophobia, racism, and hatred. We must act to give voice to the long-oppressed, be they Chinese, Hong Konger, Mongolian, Taiwanese, Tibetan or Uyghur.”
The groups also note that although “concerns over these matters have been raised through legitimate means for over two decades,” the CCP “and its proxies” have only responded via propaganda and by “ambiguously using the threat of financial pressure against universities.”
In light of this, the coalition issued a list of demands, beginning with “the immediate and permanent closure of all Confucius Institutes in the United States.”
The groups are also demanding “the revocation of any organizational and/or club status afforded to the Chinese Students and Scholars Association” and a ban of “all funding from all proxies and agencies of the Chinese state or the Chinese Communist Party without explicit university approval.”
The coalition also demands complete public disclosure of any and all ties, “both financial and academic” between American colleges and any Chinese “state agencies and proxies,” and that schools create systems by which students can report violations of these rules and other “general encroachments upon academic freedom.”
“Let this action be the start of a broader, independent effort by academic institutions to counter wherever it arises,” the statement concludes. “In the fight against authoritarianism, universities can continue to benefit from the largesse of an emboldened authoritarian state, or they can stand on the right side of history. They cannot do both. The world is watching, and the fate of liberal democracy–based on the fundamental dignity of the human person–depends on our success.”
- Meet Barbara Ferrer, The Social Justice Warrior With No Medical Background Leading LA's COVID Response
Meet Barbara Ferrer, The Social Justice Warrior With No Medical Background Leading LA’s COVID Response
Tyler Durden
Sat, 05/16/2020 – 18:00At this point, most market participants outside California know LA County Public Health Director Dr. Barbara Ferrer as the public servant whose “miscommunication” Tuesday afternoon about a three-month extension to her county’s stay at home order was blamed for reviving anxieties about the economic reopening in the US that helped hammer stocks lower last week. The good doctor – who, as it so happens, isn’t a medical doctor, but the owner of a Ph.D in “Social Welfare” (whatever the f**k that means) – would like you to know she is truly sorry for the error, and the ensuing public furor she accidentally unleashed.
LA County Public Health Director Dr. Barbara Ferrer
As we have been saying since the beginning of this outbreak, many of the public servants revered as virtually infallible by the “stay home, save lives” crowd (overly Democratic in political orientation) actually have few real qualifications. Dr. Ferrer isn’t a scientist, or a medical doctor, and people who argue that we should simply stay inside forever because science often have little, or no, understanding of the current state of research concerning the virus. Because if they did, they would understand that not even the scientists have a great grasp of how to handle this. Given the far-reaching ramifications for society, it shouldn’t be an extreme opinion to suggest that tackling this requires a multidisciplinary approach, because small oversights can have major consequences.
As for Dr. Ferrer, after apologizing for her “miscommunication” on Wednesday, she went on to reveal that, actually, the order would be expanded (though certain businesses are still being allowed to reopen) offering a seemingly contradictory explanation of the local guidelines and planned path forward that has left the entire county wondering what the hell is going on.
As KABC’s John Phillips shared on his radio show Wednesday, the good doctor’s educational resume, according to a bio published at USC, where she was recently a panelist at a “Safe Schools” symposium, reveals she received her Ph.D. in Social Welfare from Brandeis University, a Master of Arts in Public Health from Boston University, a Master of Arts in Education from the University of Massachusetts, and a Bachelor of Arts in Community Studies from UC Santa Cruz.
None of these disciplines are rooted in the sciences – rather, it appears the good doctor’s “public health” background doesn’t include any specialization in actual medical care, or epidemiology. This woman probably knows about as much as the discipline as the average Californian who has spent the last couple of months on Wikipedia.
However, as the LA Times reports, Ferrer has somehow found her way into a role where she is the top public health officer in a county of 10 million people. Keep in mind, she has no actual medical background, but despite this, she’s found herself in the middle of “every tough conversation about which businesses and institutions have to shut down, whether public and private hospitals are equipped and prepared to handle a possible surge” and what precautions individuals can take to protect their health.
Her role for the county is essentially equivalent to that of Dr. Fauci at the White house. Except Dr. Ferrer isn’t a doctor, she’s a professional social justice warrior.
As Red State points out, when Dr. Ferrer was put in charge of solving the homelessness epidemic in LA County, her game plan 100% focused on “community outreach”. “We need to start this work by speaking directly with those experiencing homelessness to better understand how to align our support,” she said.
That’s right: Dr. Ferrer’s one-size-fits-all plan for solving homelessness started with talking to a demographic group where those with severe mental health disorders and substance-abuse problems represent an overwhelming share of the population. Dr. Ferrer’s approach to help improve the lives of the homeless was to talk to a bunch of schizophrenics and drug addicts about government policy, as Red State pointed out.
Does this woman sound qualified to be one of a handful of people in the room making decisions that will impact the livelihoods and health of millions of people? If we lived in LA County, we certainly wouldn’t be comfortable with that.
- A Look At The Great Depression Through The Sears Catalog
A Look At The Great Depression Through The Sears Catalog
Tyler Durden
Sat, 05/16/2020 – 17:30Submitted by Nicholas Colas of DataTrek Research
The slide, and recovery, from the depths of the Great Depression is on full display in the once iconic Sears catalog. But what really stands out is the increasing presence of modern appliances like blenders, vacuums and washing machines. Rural electrification was one of the Depression’s big infrastructure projects, a good reminder of what is possible even in hard times.
Stay at home life in New York City is getting pretty old and dull after 8 weeks confined to an apartment. My wife Misty and I took a walk around the block this morning and stopped in at CVS to buy a few things. It felt like a big outing…
At least the mail still brings some novelty, and yesterday I received fresh from an eBay seller an original 1938 Sears Roebuck catalog. It adds to the small collection of Great Depression ephemera we have discussed with you in prior Story Time Thursdays. Last week we compared the 1929 and 1932 editions of these time capsules of the American consumer experience to show you how much things changed from the top of the Roaring 20s to the depths of the Great Depression.
With the 1938 catalog we can now examine the changes that occurred from the bottom of the Depression in 1932 through the recovery as the decade progressed. We’ll take a few detours to highlight notable shifts in merchandising/ consumer behavior.
#1: Page count as a proxy for US economic growth. Sears, like so many large companies, did much better in the Great Depression than smaller operations. Yes, exactly like Amazon today… But printing and mailing large catalogs to a third of American households (Sears’ market share at the time) still cost real money so page count mattered to the bottom line. Here is the history of total Sears catalog pages from high to low to high again:
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1929: 1,104
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1932: 974
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1938: 1,172
Takeaway: it took 10 years for the Sears catalog to bulk back up to its 1929 heft, just as it took the American economy the same time to recover back to its old levels of GDP.
#2: Demand for different sorts of merchandise shows where consumer attention shifted between 1932 and 1938; here is the change in category page count over those 6 years:
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Women’s/children’s apparel & fabric: +58%
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Shoes: +39%
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Men’s apparel: -18%
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Household: +26%
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Automotive: +4%
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Radio: +70%
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Watches/jewelry: -7%
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Furniture: +38%
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Heaters, stoves and home appliances: +62%
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Farm supply/Home repairs & maintenance: -10%
Takeaway: put aside the obvious cyclicality of categories like household durable goods, and the 1930s technological disruption of mass electrification is the other notable if hidden force behind these page category variations. During the decade of the 1930s the percent of American households with electricity went from barely half (58%) to a large majority (80%). That not only explains the 62% increase in home appliance page count, but also the first category, which includes fabric. Electric sewing machines dramatically decreased the time required to make one’s own garments. The Greatest Generation was famously parsimonious, but they still adopted new technologies just as we do today.
#3: As far as how prices changed from 1932 to 1938, let’s look at the apparel featured in each catalog:
Here are women’s day wear dresses, from the first page of each catalog’s selection. Note that every dress in 1938 has an elaborate story around it while 1932 offers more affordable options and less flowery descriptions:
1932 and 1938:
In men’s suits, Sears’ approach to merchandising changed dramatically from 1932 to 1938. In the depths of the Depression they started the catalog’s section with a price-leading product. In 1938, the first page of the section showed a suit costing 2x as much, even though there were more affordable options listed on subsequent pages.
1932 and 1938:
Takeaway: the Great Depression is synonymous with deflation, but the examples here are a good reminder of how difficult it is to measure inflation when spending patterns shift dramatically. Consumers substitute quite readily between options as they manage expenses. Did men’s apparel really see 100% inflation in 6 years? No… It’s just that Sears was confident enough in the economy to lead with a more expensive offering in 1938. That’s “sort of” inflation, but does it count? To an economist doing hedonic adjustments the answer is “No”. To a consumer, it feels more like “Maybe”.
#4: The coolest thing about the 1938 catalog is that it features “Version 1.0” of many now-ubiquitous household appliances. The reason they appear at this time: the combination of electrification (the Great Depression’s biggest infrastructure program) and rising personal incomes after the 1932 lows for the US economy.
Three examples:
A washing machine ($60 is about $1,100 today)
A vacuum cleaner ($32 is $581 today)
And a kitchen mixer with the most explicit substitution of capital for labor pitch you’ll ever see.
#5: We’ll wrap up with a look at the back cover of the 1938 catalog, the most prime piece of real estate in any mailer. The 1932 edition featured just one item: a plain white wood-fueled kitchen stove for $62 ($1,200 today), with ad copy that literally said, “The price is down to where you can afford it”.
By 1938 Sears had lowered their ambitions, putting a variety of stylish women’s shoes on the back cover at the low, low price of $1.60/pair ($30 today), but they also changed the tenor of their messaging as well. A product could be affordable, but also fun and even playful. A good reminder that whatever comes next for the US economy, business can adapt and even thrive.
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- Here's What Would Happen If The Fed Launched Negative Rates
Here’s What Would Happen If The Fed Launched Negative Rates
Tyler Durden
Sat, 05/16/2020 – 17:00On Thursday, May 7, an unprecedented event took place: after a violent repricing in Eurodollar contracts as near as November 2020, for the first time ever the market was pricing in that negative interest rates are not only coming to the US, but would arrive sometime around the presidential election.
This move prompted a barrage of Fed speakers, including the Fed chair, to remind the public that the Fed really, really, really does not believe in negative rates (but never say never), even though one could say the same thing for the BOJ, the ECB and the SNB… and look at them now. In fact, in a world where growth is only possible with trillions in new debt injections – and with debt already at crushing levels, interest rates have to be as close to zero if not below it – the Fed has emerged as the “rational” outlier that refuses to take rates negative.
And yet, in a world where the economy was already sinking ahead of the catastrophic collapse spawned by the coronavirus, there is only so much the Fed can do before it took is dragged into the NIRP vortex.
To be sure, in many ways the market’s expectation for negative rates is rational. As we pointed out overnight, even Goldman is concerned that the Fed is simply not doing enough QE to monetize the massive upcoming treasury flood let along stimulate a global reflationary wave, which leaves it with just one other option: negative rates. Nordea’s Andreas Steno Larsen looked at this dynamic and reached a similar conclusion: “the Fed is still not buying enough to fully re-ignite the global credit cycle. We find that the Fed needs to buy a lot of bonds compared to issuance before USD scarcity is finally fully eased in the system, leading to easier financial conditions in EM and ultimately global growth prospects being repriced positively” In other words, “the Fed will have to buy more than currently. This speaks in favour of even LOWER long USD bond yields, not higher.”
The market may also be taking hints from former Minneapolis Fed president, Narayana Kocherlakota who argued in an op-ed that the Fed should take interest rates below zero for the first time ever. To use his words, “unprecedented situations require unprecedented actions”.
On the other hand, there may simply be something in the Minneapolis water that makes local Fed president raving monetary lunatics (here we envision not only Kocherlakota but his successor, former Goldman banker and TARP author, Neel Kashkari), because while it is quite simple to extrapolate the catastrophic experience the Japanese and European financial sectors have had with NIRP to the US, the truth is that the Fed has rarely this unified in any view, and as former Fed staffer and current BofA rates strategist, Mark Cabana writes, “US negative rates are not an attractive monetary policy tool” and Powell was very clear in this view during his videoconference last Wednesday.
As an alternative to negative rates Chair Powell has indicated the Fed can ease through forward guidance, UST & agency MBS asset purchases, or “13-3” extraordinary market programs, although here again we run into the “huge problem” we observed yesterday facing the Fed, that the most likely alternative to NIRP would be a massive expansion in QE (one which Deutsche Bank calculated at over $3 trillion in more QE), yet such a dramatic move would also require – most likely – some sort of market event to give the Fed the cover to take Unlimited QE to a truly unprecedented level. It remains unclear how the Fed will square those two constraints.
And while Cabana expects Fed official to “overweight” the abovementioned tools in support of expansive fiscal policies “but not shift their thinking on negative interest rates in the near term.” As an aside, for those who have missed the recent “Fed talk”, below is a summary of the uniform and widespread opposition to negative rates from a range of Fed officials.
Of the above, the most striking rebuke of negative rates came from the October 2019 FOMC meeting minutes when “all participants judged that negative interest rates currently did not appear to be an attractive monetary policy tool in the United States”. It is very unusual to see this type of broad based agreement on any potential policy stance, and as BofA concludes, “in order to see a material change in thinking on negative rates it would likely require a leadership change and large scale Fed turnover.” While neither of these is likely in the near term, Trump recent endorsement of negative rates leaves open the door that the president may appoint an even more dovish Fed president in his second term (we are confident that Kashkari would be delighted to be considered for the post of the man who destroys the dollar as the world’s reserve currency).
Operational hurdles: IOER Legality
To be sure, in addition to the Fed’s own preference – which as events in the past two years have shown can change on a dime, especially once a “shock” triggers a violent market meltdown – there are countless operational hurdles, starting with the question of whether negative rates are even legal.
Consider, that in the Federal Reserve Act, it is specifically stated that banks can “receive” interest on reserves. There is no specification for banks paying interest or how negative rates could be implemented in this context.
In her 2016 Semiannual Monetary Policy Report to the House, former Fed Chair Yellen noted that the legality of negative rates “remains a question that we still would need to investigate more thoroughly.” This question has not been definitively answered and it is not clear whether the Fed would actually charge negative interest or implement a fee for holding reserves. Indeed, the fact that the Fed has not ruled out negative rates suggests the Fed likely has adequate legal cover to implement such a regime. Furthermore, while just two months ago one would have argued that it is illegal for the Fed to buy corporate bonds, a quick meeting between Powell and Mnuchin which led to a bizarre joint venture between the Fed and the Treasury changed all that in the blink of an eye. In short, as Cabana writes, “if the Fed wanted to implement negative rates they could find a way to do so but could face pushback. We see this as an important but surmountable hurdle for the Fed to clear before implementing negative rates.”
Treasury auction obstacles
NIRP legality aside, treasury auctions provide another obstacle for bills & nominal coupons.
Treasury nominal coupons and bills: Treasury auction regulations via the “Uniform Offering Circular” state that nominal coupons & bills are permitted only to have a bid rate that is “a positive number or zero”. This is striking since in August 2012 Treasury announced it was in the process of building the operational capabilities to allow for negative rate bidding in Treasury bill auctions. It is thus safe to assume that the Treasury has subsequently built the operational capacity to auction bills and nominal coupons with negative rate bidding but is unwilling to take this capacity live. It is unclear why Treasury might be reluctant to take this step but it could be (1) Treasury is worried about sending a signal about the economic or monetary policy outlook (2) there may be legal or accounting hurdles that need to be cleared up.
Treasury’s inability to auction bills or nominal coupon securities with negative rates results in an inefficient primary issuance process when secondary market rates are negative. Treasury offers securities at par but bidders can then sell these securities into the secondary market at a premium. This essentially results in a subsidy to the primary dealer or Treasury bidder community that should be captured by the Treasury (we described this in “Here Is The Treasury’s (Not So) Secret Trade Printing Millions In Guaranteed, Risk-Free Profits Every Day“) . Treasury auction rules suggest that when a security is auctioned at par the bidders have their allocations determined on a proportional basis to their auction offers. This is why bid-to-covers spike when secondary market levels are below zero at auction.
TIPS & floating rate notes: Treasury rules state that among fixed rate debt only TIPS can have a negative bid rate. Treasury floating rate debt can be auctioned with a discount margin that may be positive, negative, or zero but there is a 0% minimum on interest accrual. Treasury rules ensure that an investor is never required to pay the US Treasury during a period of CPI deflation or during any future period in which bills might be auctioned at negative rates.
That said, just like the legality issue, BofA does not see Treasury auction limitations as a material constraint to adopting negative rates “since we assume operational hurdles can easily be overcome. However, allowing negative UST bidding for bills and nominal coupons is another important operational hurdle that will need to be addressed before negative rates can be more widely adopted.”
Money Market Funds in a negative rate environment
Ass Cabana continues, a key concern around negative rates in the US is the viability of money market funds (MMFs). MMF AUM total $4.8tn with the vast majority in government funds. MMFs also play an important role in funding, making up ~25% of all cash lending in repo markets.
Negative rates are particularly problematic for stable NAV MMF. Recall, 2a-7 MMF reform requires institutional prime & municipal have floating NAV while government and retail prime + muni funds have $1 stable NAVs. Negative rates are an issue for stable NAV funds because the fund value will decline by virtue of investing in negative yielding assets. To address this NAV stability in a negative rate environment MMFs in the US would need to move to a floating NAV regime, potentially increase customer fees, or use a share cancellation regime. The latter two options as more likely given that changes in the stable NAV structure could potentially cause sudden changes in fund allocation as we saw during the 2016 MMF reform
Increased MMF customer fees or a share cancellation regime are more likely in a negative rate environment vs a shift to floating NAV for all funds. In a regime with higher MMF customer fees the stable $1 NAV could still be retained but the principal invested in the fund would gradually be reduced by the fees charges to compensate the fund for the negative yielding securities. In a share cancellation regime a MMF would retain the $1 stable NAV but gradually reduce the number of shares an investor is entitled to at redemption. For example, an investor that deposits $100 and receives 100 MMF shares in a -1% negative rate environment would see their shares gradually cancelled; 1Y later they would receive $99 in cash at redemption.
Depending on the implementation of negative rates in the US, MMFs may also face competition with deposits. If the Fed sets IOER negative this will immediately impact market rates, but may not be passed onto consumers. Banks may charge fees or other service costs in order to offset their negative IOER rate. This could prompt outflows from MMFs into deposits, which are often considered close alternatives. As a result, tetail MMF investors would be the most likely to shift to bank deposits given reluctance in the banking industry to charge negative deposit rates for retail consumers.
BofA’s bottom line is that the US MMF industry would likely be able to adapt to a regime of negative yielding interest rates if given enough time to prepare. That said, MMFs and front end investors would likely need at least 6m to 1Y worth of notification from the Fed that negative rates should be prepared for so that they could properly adjust their systems. Ominously, Cabana says that his “sense is that several MMF are already preparing for the possibility of negative rates.”
Other issues: systems & repo
The take home from the above, is that if the Fed were to take rates negative, Cabana is confident that it would need to provide ample lead time to the market to prepare financial systems for such a change. Market participants would also need to adjust trading, settlement, accounting, tax, and legal systems or procedures to prepare for negative rate trading. While some of these operational hurdles have already been cleared for large global firms given the periodic negative rate trading of US Treasuries and other developed market sovereign bonds, more time would be needed to prepare for domestically oriented firms. Furthermore, the Fed would likely prefer that firms focus their operational resources on preparing for the transition away from LIBOR rather than on negative rates, which may further limit the Fed’s willingness to take rates negative in the near term.
One area where Cabana does have serious questions on the operational readiness for negative rates is in the repo market. This is not an issue for specific issue UST collateral, which has frequently traded at negative rates post UST fails charge in 2009, but rather is a question centered on the tri-party repo market where it is unclear if there is operational capacity for rates to trade at negative levels. Questions emerged given that in late March the 1st percentile of the SOFR rates traded in negative territory while the 1st percentile of tri-party general collateral repo rate (TGCR) remained at zero. This was the first time this segment of low-rate TGCR trades exceeded SOFR
If this is correct, and there are operational issues with taking tri-party GC repo into negative territory, then this is a material operational impediment, and as Cabana writes, “we cannot envision the Fed moving into negative territory until the tri-party repo market can easily follow suit.”
Negative rates can hamper financial intermediation
The biggest problem, however, is that the scope of negative rates is ultimately limited. As a reminder, in a 2010 Federal Reserve memo, it was noted that setting IOER lower than about -35bps would likely cause banks to reduce their reserve holdings and hold currency instead. However, other central banks such as the SNB and ECB have taken rates more deeply negative, suggesting that -35bp is not a firm floor.
Meanwhile, as rates become negative there are also other behavioral shifts that could arise, according to BofA, which notes that if banks begin to charge depositors, it is possible that cash vault holdings would increase or that special banks could be formed to store physical currency. Consumers and businesses might also seek to pre-pay credit card, account payable, or tax bills in order to reduce their cash holdings. Similarly, those who are expecting payments from creditworthy entities might prefer to defer them while those receiving checks might wait longer periods before depositing them. It is unlikely that the Fed would find such behavioral shifts productive and might view them as an additional cost to negative interest rates.
On top of all that, negative rates would serve to impede key financial intermediation functions for banks, pensions, & insurers. As we have observed in Europe and Japan, negative interest rates would hurt bank profitability and potentially make them less willing lenders due to lower capital cushions.
Virtually every strategist has warned of significant downside to bank earnings in a negative rate environment and noted lower margins result in reduced capacity for a bank to absorb losses. Pensions & insurers would also struggle with larger liabilities to manage. Financial intermediation complications likely reduce the attractiveness of negative US rates for the Fed.
Overall, Fed officials have suggested that financial intermediation issues are a meaningful constraint on their willingness to consider negative rates. Financial intermediation + operational challenges likely reinforce the Fed’s poor cost/benefit assessment of negative rates.
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Aside from Bank of America’s near universal panning of negative rates, JPMorgan’s Nick Panigirtzoglou is similarly damning of what the financial system would look like if the Fed shifts to a negative rate.
Starting with the negative impacts first, JPMorgan’s strategist has “little doubt” that US interbank markets and repo markets would suffer if the Fed cuts its policy rate to negative. Given money market funds are important participants in repo markets, overall repo market activity could decline. This is also because narrowing spreads in the repo market are likely to induce some lenders of collateral to pull back from the market, on the grounds that returns from securities lending are no longer adequate. That would impair bond market liquidity, by making it more difficult to cover short positions in repo.
Incentives to cover shorts are also reduced at zero rates, which can result in higher fail volumes than seen before, hampering liquidity and volumes even further. Finally, and echoing Cabana’s concerns above, some US counterparties (mainly US real money investors) may not be able to trade repo at negative levels (operational, legal, economic reasons etc.) which will again likely reduce repo market volume/activity.
Separately, similar to what happened after the ECB depo rate cut in June 2014, mildly negative US rates coupled with a natural aversion to negative rates will likely reduce the incentive of healthier banks to trade with each other and increase their incentive to trade with less healthy banks including US subsidiaries of foreign banks. That is, even if US interbank market volumes decline, a greater portion of the interbank volume is likely to involve less healthy banks. Similarly a greater portion of US repo markets should involve higher yielding non-government collateral. That is, interbank markets, both unsecured and secured, will likely become less fragmented as it happened in the euro area post June 2014.
The search for yield will likely also spread from money markets to bond markets. As the US money market fund industry gets hurt, the main beneficiary would be US bond funds, i.e. investors would replace money funds with bond funds as savings vehicles. And as, following a Fed policy rate cut to negative, the short end of the US government bond market collapses towards zero, this would force bond investors towards higher maturity and lower-quality debt instruments.
Negative rates would also result in an even bigger bond bubble, as corporate and mortgage bonds would be the biggest beneficiaries of this intense search for yield given their relatively low risk weighting and given that banks with large reserve deposits at the Fed would likely face intense pressure to avoid the capital erosion from negative deposit rates.
While negative interest rates on deposits would incentivize banks to “get rid” of their excess deposits rather than suffer an erosion of capital, the amount of reserves in the system can only be reduced if the Fed starts reducing its bond holdings, something unthinkable in the current conjuncture. If a commercial bank makes a loan or buys a bond to avoid negative rates, they simply pass reserves on to another bank, which ultimately end up back at the Fed. As such, excess reserves would become something of a ‘hot potato’, with no bank wanting to hold lots of them at the end of the day. And this “hot potato” effect would be even more intense in the current backdrop of central bank balance sheet expansion and higher liquidity.
The likely damage to the profitability of banks and the risk that banks could actually increase lending rates to protect their interest rate margins. That is, assuming that banks will be reluctant to pass negative rates to retail or corporate depositors, they might increase lending rates to offset the decline in their profitability. Effectively, a decline in the deposit rate to negative could actually cause a tightening in financial conditions in the real economy and a contraction in bank lending rather than easing.
- 3 Trillion Reasons Why Pelosi Just Sparked The Nationwide Battle For The 'Tax Producers'
3 Trillion Reasons Why Pelosi Just Sparked The Nationwide Battle For The ‘Tax Producers’
Tyler Durden
Sat, 05/16/2020 – 16:30Authored by Tom Luongo via Gold, Goats, ‘n Guns blog,
The great Murray Rothbard cut through the fog of modern class warfare with his observation that in a place with governments issuing edicts the citizenry breaks down into two classes – tax producers and tax consumers.
And if you want to know which group you belong to just ask yourself two simple questions, “Where’s the gun? And is it pointed at you?”
Most of us don’t even think to ask those questions because it’s the world we live in. Government jobs are safe jobs. They’re part of the landscape and dominant economic theory holds that the government can be a source of stability when the free market fails, whatever the hell that’s supposed to mean.
The truth is most of us hate to ask these questions because it forces us to be honest about where we earn our living. No one likes looking in the mirror and asking hard questions about whether the job they perform is truly useful to someone else.
No one wants to believe they’re a leech upon the riches conferred to society through voluntary exchange between the truly productive and its transformative ability to better people’s lives.
With governments in control of the production of money and so deeply intertwined with our lives, the lines between tax consumers and producers has blurred a bit. But, as I said at the outset of this, in the end, if your salary depends on you or someone else acting on your behalf pointing a gun at someone else then you’re one of the bad guys.
When times are good the private sector can afford to outsource some basic functions of society to the government because it may feel like it’s worth the loss due to the inefficiency. But when times are bad, like now, I think it’s important to get back to basics and remind us where civilization comes from and why government handouts are not the cure for what ails us.
We’re looking at 35 million people out of work. And …
Outside of education, only 332,000 jobs have been cut around the country. That number needs to rise by a factor of 10 to alleviate the burden on what’s left of the private sector. When more than 25% of GDP — pre-crisis — was government spending and the economy is shrinking by a projected 20% or more in Q2, how is it even reasonable in anyone’s mind that governments have cut so little?
The smart ones are facing up to this reality now. They have bills to pay and services not being used.
The fundamental problem now is that the pols in D.C. are now positioning themselves to be the saviors, even though they could truly care less about any of us in the real world unless we’re willing to vote for them this fall.
The House, under the baleful eye of Chief Witch Nancy Pelosi, just passed a $3 trillion ‘support’ bill which is the height of the worst kind of pandering and virtue signaling.
Because she knows the Republicans in the Senate will vote it down as a matter of principle.
Forget the fact that the government doesn’t have $3 trillion dollars. The Federal government doesn’t have $1 at this point. The budget deficit for 2020 will be north of 20% of GDP.
Pelosi only put this bill together to make it unpalatable to even the odious Republicans so her people will have something to campaign against them on this fall.
This isn’t the basis for a new negotiation. Pelosi et.al. are arguing at the state level and lower to extend the lock downs into the fall to ensure maximal damage is done to the domestic economy.
This is all about how many tax producers can they turn against Trump before November.
That’s it. Power, votes, money from the future till from the Magic Money Tree that is the lifeblood of all political vampires, of whom desiccated Nancy is the Queen of the Damned.
What’s worse is that Pelosi couldn’t even whip all her people to back this thing, because some of them actually believe they can do some good by just printing money. They don’t understand that they are forestalling the reorganization of capital away from the tax consumers and back towards the tax producers which is what contractions in output do when free from their greedy hands.
But, the reality is that Pelosi isn’t the problem, she’s just its most apropos symbol. The Republicans are no better, President Trump included. They’ve already pushed through the CARES Act which was an abomination, with almost zero actual help for the engine of the country, small businesses.
He wants negative interest rates because he thinks like a real estate developer and that floating infrastructure loans at -1% is getting a rebate on the money like points on a credit card for pity’s sake.
Now it isn’t all terrible news because Trump’s Chief Economic Adviser Larry Kudlow was out making the rounds offering up a 50% cut in the corporate tax rate for companies that onshore production back here at home.
This is grist for Pelosi’s ‘eat the rich’ rhetoric but it is actually perfectly reasonable suggestion because we pay corporate taxes anyway, folks. You can shift which ledger the money is accounted on but the costs are still there.
Taxes are terrible. They are always net capital destructive. Some taxes are worse than others but all taxes are terrible. All taxes are theft.
Kudlow is simply the conduit for adding to Trump’s New Cold War with China. Trump wants the U.S. decoupled from China economically as much as possible. This economic nationalism sounds good in an election year where 35 million people have lost their jobs.
It’s a good start but it will be the first thing horse-traded away with The Stretched One.
But Trump isn’t stupid either.
Trump has demanded a payroll tax cut for workers, although that idea has received a chilly reception from congressional Republicans. White House officials are also pushing cuts to capital gains taxes paid by investors; expanding a deduction for meals and expenses; and extending a deduction for new investments as part of their demands for the next stimulus package.
See what I mean about the Republicans being just as bad as the Democrats? The one single thing that would be of the most use to what’s left of the middle class, lowering payroll taxes, is the one thing they will not countenance.
Payroll taxes lowered, corporate taxes lowered, useless regulations cut, these are all good starts. But the real problem is the multi-trillion dollar elephant in the room, the cost of all levels of government that are a net drain on the real economy.
But, like all insolvable problems, there is no easy solution when the tax consumers can vote themselves a job and their representatives can print the money at will to pay for it all.
The irony is that Pelosi just wants to spend money and repeal the SALT deduction cap, even though guess who’s helped the most by that? Big earners in big blue states. It’s a direct sop to the rich that’s far bigger than lowering the corporate tax rate would be.
The reality is the real second wave we’re about to fight is the collapse of state and local governments because they don’t have Magic Money Trees. They only have local tax revenues and the, now anachronistic, municipal bond market.
And while they may be responding quicker than in depressions past, it won’t be fast enough because of the dysfunction in D.C. and because we refuse to look in the mirror and be honest with ourselves.
So, the battle lines are drawn between Trump and the Democrats for this fall. The prize, as always, is the majority of the middle class tax producer.
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Trump has to make the argument that he believes in them and will get out of their way while they rebuild their lives.
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Pelosi has to sell those same people, whom she has done nothing but berate, belittle and blaspheme, that she’s now got their backs with a few thousand bucks worth of fake money.
I know who I’m betting on to win that fight.
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- United Airlines Only Needs 3,000 Of Its 25,000 Flight Attendants
United Airlines Only Needs 3,000 Of Its 25,000 Flight Attendants
Tyler Durden
Sat, 05/16/2020 – 16:00Nothing paints a better picture of how bad things have gotten for the airline industry – and for its working class – than the fact that United Airlines is barely using over 10% of its flight attendant staff.
The airline said this week it only has work for 3,000 of its 25,000 flight attendants in June and said that job losses could be next if demand doesn’t recover by the time the government ends its payroll aid, according to Reuters.
United still intends to pay its flight attendants until September 30 thanks to $5 billion in aid the airline got from the
taxpayer’s purchasing powergovernment. The CARES Act prohibits layoffs or pay cuts before October.United is just one of many airlines feeling the pain of the coronavirus lockdown. Its flight schedule is down by an astonishing 90% and it has – along with other airlines – significantly cut the number of flights it is making on a daily basis. Major airlines are burning about $10 billion in cash per month.
United’s managing director of inflight crew resourcing, Michael Sasse, said: “If you just look at a way in which our network is flying we’d need about 3,000 flight attendants to fly our schedule for June.”
United says they will keep their flying schedule at about 10% of normal until demand starts to tick back up.
United President Scott Kirby said: “But if demand remains significantly diminished on Oct. 1, we simply won’t be able to endure this crisis … without implementing some of the more difficult and painful actions.”
United is burning about $40 million in cash per day and executives have said they want to be up front with employees about potential cuts. The airline has warned that its administrative staff will be about 30% smaller by the time Fall comes around.
Delta, meanwhile, has said that it has 7,000 more pilots than it expects to need in the fall. All major airlines have asked employees to volunteer for temporary unpaid leave or early retirement.
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