- BoE's Bailey To Print Unlimited Money, Tells Short Sellers "Just Stop" Amid Covid-19 Chaos
BoE’s Bailey To Print Unlimited Money, Tells Short Sellers “Just Stop” Amid Covid-19 Chaos
BoE governor Andrew Bailey said on Wednesday that the central bank stands ready to pump unlimited amounts of money into the economy.
Speaking to journalists on a conference call, quoted by Financial Times, Bailey said the central bank is prepared to pump liquidity into markets via its new commercial paper facility. He said this would limit economic damage produced by the virus crisis.
BREAKING: Bank of England governor, Andrew Bailey, just said he’s willing to print unlimited quantities of money and pump in into the economy.
Ironic coming from a man that last month said those holding bitcoin should “be prepared to lose all of your money” pic.twitter.com/JDQpQ2HBVE
— Vis (@Vis_in_numeris) March 18, 2020
https://platform.twitter.com/widgets.js
He told members of the financial community that they must stop ‘exploiting’ vulnerable business by betting against them:
“Anybody who says, ‘I can make a load of money by shorting’ [aggressively betting on the value of specific companies continuing to fall] which might not be frankly in the interest of the economy, the interest of the people, just stop doing what you’re doing.”
Bailey made it clear that financial markets will remain open as a sign of confidence. He said firms who are thinking of reducing staff must reconsider because support from the central bank and government can lessen the shock.
He urged firms to “stop, look at what’s available, come and talk to us [or] the government before you take that position,” adding that support will be supplied to citizens as well.
The hardest-hit UK industries have so far been airliners, retailers, restaurants, movie theaters, and much of the services industry, as it has completely ground to a halt as the government enforces social distancing measures to flatten the curve to slowdown infections. As of 2018, the services sector accounted for at least 80% of the UK economy.
Baily said emergency loans have been available by the central bank to companies that have already fired employees. He told BBC News:
“I would emphasise the point that it’s critical that we support the needs of the people in the country.”
Baily took the reins from Mark Carney at midnight on Monday and has already faced an economic crisis on par to a decade ago as helicopter money is now needed to save the economy from crashing.
“This is a crisis we’re all in. It’s an emergency situation,” Bailey said.
The BoE is expected to cut interest rates from .25% to .10% and resume quantitative easing when it meets next week. Bailey isn’t a supporter of NIRP and has pushed measures to shield businesses and workers from virus impacts.
Tyler Durden
Thu, 03/19/2020 – 02:45 - Covid-19 Comes For Europe
Covid-19 Comes For Europe
Authored by Guy Milliere via The Gatestone Institute,
Italy’s healthcare system is in a state of almost total collapse. As of today, 31,506 people in Italy have been infected with the coronavirus; of which 2,503 people have died. The numbers continue to grow. Hospitals are overwhelmed. Doctors have to choose which sick person to save and which sick person not to save.
The country has almost completely shut down. Many businesses are running in slow motion or have stopped. Prisoners are staging uprisings. Millions of people have been ordered to stay home and are allowed out only briefly to buy food. Most shops are shut. All public gatherings are prohibited, even funerals. Big cities look like ghost towns.
No other Western country has been so severely affected by the pandemic as Italy. Why?
First, Italy has an aging population. The median age of Italians is 47.3 years; one in four Italians is over 65. In addition, the country’s birth rate is extremely low: 1.29 children per woman. Even before the coronavirus pandemic, Italy was a dying country. Sadly, the virus has accelerated the process.
Second, the authorities and medical personnel apparently underestimated the danger. Although the Italian government had suspended flights for days from China and Hong Kong from January 31, Italian doctors were saying that the illness was just a “bad flu“. On March 9, an epidemiologist, Silvia Stringhini, wrote: “The media are reassuring, the politicians are reassuring, while there’s little to be reassured of”.
Third, the Italian health system is in appallingly bad condition. There are not enough intensive care units and, as everywhere, the possibility of a major crisis simply was not anticipated. In Italy there are 2.62 acute-care hospital beds per 1,000 residents (by comparison, the number in Germany is 6.06 per 1,000 residents). The Italian health system is entirely run by the government. A public health care service (SSN, Servizio Sanitario Nazionale) pays the doctors directly, limits their number, and sets the maximum number of patients they can treat per year (1,500).
Government-run healthcare always ends up being about the government trying to cut its costs rather than to help its citizens. Private clinics do exist, but represent only a small part of the care offered (the public system represents 77% of total health-care spending. (The only country in Europe where the figure is higher is the United Kingdom, where the figure is 79%.) Public hospitals must manage shortages, and when an exceptional situation occurs, rationing care leads to horrific choices. A recent report by Siaarti (Società Italiana di Anestesia Analgesia Rianimazione e Terapia Intensiva) bureaucratically offers “ethical recommendations for admission and intensive treatment in exceptional conditions of imbalance” and speaks of “consensual criteria of distributive justice” to justify not treating certain patients and leaving them to die.
Fourth, and rarely mentioned, is that Italy today is evidently home to a large Chinese community (more than 300,000), made up of people who arrived in the past two decades and who work in the textile and leather sector. Many of the Chinese living in Italy are from Wuhan and Wenzhou, and some had just been in Wuhan and Wenzhou for the Chinese New Year on January 25, when the Chinese authorities could not hide the epidemic any longer. These Chinese had returned to Italy from China before the Italian government suspended flights from there. The epidemic emerged in Lombardy; Bergamo, one of the capitals of the Italian textile industry, was one of the first cities affected.
Before the pandemic, the Italian economy was already in a state of stagnation; now, as people stay home and shops shut, it will probably plunge into a recession. Italian banks, since mid-February, have lost 40% of their market value. Major financial upheavals seem on the way.
The Italian government was hoping for help from the European Union, but neither the other member states nor the European Union itself has given any at all. Maurizio Massari, Italy’s ambassador to the European Union, said at a recent European summit on the pandemic, that Brussels should go beyond “engagement and consultations”, and that Italy needed “quick, concrete and effective actions”. He got nothing.
Christine Lagarde, president of the European Central Bank, refused to lower interest rates to help Italy; it was a statement Italian leaders took as a demonstration of contempt. Italian President Sergio Mattarella said that Italy expected “solidarity from the EU institutions,” not “moves that could hinder Italy’s actions”. “Italy,” said Matteo Salvini, leader of the Lega party, “has been given a slap in the face”.
The dismissive attitude of the EU and the other members states seems to have been dictated by the fear of sliding into a situation as calamitous as that of Italy.
All European countries have an aging population, even if less than Italy’s (the median age in Germany is 46.8; in France it is 41.2; in Spain it is 42.3). No country in the European Union has taken a clear, hard look at the danger Europe is facing.
“The coronavirus is very contagious,” France’s minister of health, Agnes Buzyn, said on January 26, “but much less serious than we thought”.
The borders between France and Italy were not closed in time (only Austria and Slovenia closed their borders with Italy early), and Italians who wished to go to France were not stopped. The health systems of other European countries are not better prepared than the Italian one was. In Spain, Insalud (Instituto Nacional de Gestion Sanitaria), an organization equivalent to the Italian system, exists, and shortages and rationed care are the rule. The German (Krankenkassen) and the French (Sécurité Sociale) health insurance systems also operate on the same principles as those in Italy and Spain, and produce similar results. The economies of the main countries of the European Union were in a state of stagnation before the pandemic, and, like the Italian economy, are likely to plunge into a recession soon, too.
At the time of publication, 11,826 people were infected in Spain, 7,695 in France, and 9,360 in Germany. In Spain, 533 people have died; in France, 148 people, and in Germany only 26. As in Italy, the numbers escalate fast.
On March 11, German Chancellor Angela Merkel said to journalists who were accusing her of doing nothing, “60 to 70% of Germans will be infected with the coronavirus”. Lothar Wieler, President of the Robert Koch Institute, the German government agency in charge of disease prevention and control, added that it was necessary to “avoid overloading hospitals” and to let the epidemic gain ground slowly over time.
An adviser to French President Emmanuel Macron told a journalist at Le Figaro that the strategy of France was the same as in Germany: the decision was made to “let the epidemic run its course and not try brutally to stop it”. He suggested that the official will was to create “herd immunity“, a term first used in the United Kingdom by Sir Patrick Vallance, the UK government’s chief science adviser. He had said that the aim of the British government was to accept that a significant number of the citizens of a country would be infected, recover, and therefore be immunized. The French and German authorities evidently found inspiration in Sir Patrick’s remarks.
The British government, faced with criticism from the World Health Organization, replied that “herd immunity” was not a stated policy, but no statement by the German or French governments said that “herd immunity” was not the policy they chose.
Umair Haque, the British Director of the Havas Media Lab, wrote:
“Herd immunity describes how a population is protected from a disease after vaccination by stopping the germ responsible for the infection being transmitted between people. Letting an entire nation be rampaged by a lethal virus for which there’s no vaccine? How much death and mayhem would that cause, by the way?”
“Europe has now become the epicentre of the pandemic, with more reported cases and deaths than the rest of the world combined, apart from China,” noted Tedros Adhanom Ghebreyesus, director general of the World Health Organization. “More cases are now being reported every day than were reported in China at the height of its epidemic.” Sadly, all available data show that he is right.
On March 11, President Donald Trump announced that the US was suspending all flights between the United States and Europe, a decision fully justifiable to save American lives. The next day, nevertheless, the heads of the European Union could not resist trying to maul the president: “The EU disapproves of the fact that the U.S. decision to impose a travel ban was taken unilaterally and without consultation,” they said.
It is to be hoped that by now notions of ”herd immunity” have been abandoned, and that the EU gets back to salvaging for Europe whatever it can.
Tyler Durden
Thu, 03/19/2020 – 02:00 - China Takes Axe To Alternative Energy Funding, Slashing Subsidies For Solar And Wind
China Takes Axe To Alternative Energy Funding, Slashing Subsidies For Solar And Wind
Things might be going from bad to worse for Elon Musk and his merry band of alternative energy cultists in China. While Musk is currently in the midst of criticism from the Chinese government related to a bait and switch he is pulling on vehicle hardware (while blaming the coronavirus), the Chinese government appears to be set on slashing additional alternative energy subsidies in 2020.
China is going to cut its budget for new solar power plants in half this year and plans on completely ending handouts for offshore wind farms, according to Caixin.
It is the latest in a string of moves by the Chinese government to cut support for renewable energy. The attitude has shifted in recent years as manufacturing costs have dropped. The government now seems focused on getting renewable energy to stand on its own.
On Tuesday, China’s National Energy Administration (NEA) announced it had cut this year’s subsidies for new solar power projects by 50% to 1.5 billion yuan ($215.8 million). “Of the total, it has earmarked 1 billion yuan for large solar projects, which will be divvied out through auctions. The remainder will be used for residential solar systems,” Caixin reports.
China is also doing away with subsidies for new offshore wind farms this year and is ending subsidies for new onshore projects in 20201.
Shi Jingli, a professor at a research institute under China’s top economic planner said: “Cutting subsidies for new renewable energy projects is a reasonable measure to allocate funds more wisely. The generous subsidies given to offshore wind farms over the past few years have weighed on the central government’s finances and caused severe deficits in subsidy funding.”
Jingli continued: “Considering the damage that the coronavirus outbreak has done to businesses, the NEA has extended the application period for the auctions until mid-June. It has also given solar and wind farm operators an additional month to apply to connect their projects to the country’s power grid, which is necessary for a power plant to start selling electricity.”
Meanwhile, new installations of solar power capacity plunged 40% last year after the country installed 26.81 gigawatts of new capacity. Numerous other projects underway have already hit major delays due to the coronavirus outbreak and supply chain disruptions.
Could EVs be next?
Tyler Durden
Thu, 03/19/2020 – 00:50 - Standing At The Precipice Of A Financial Collapse: Time For A 21st Century Pecora Commission
Standing At The Precipice Of A Financial Collapse: Time For A 21st Century Pecora Commission
Authored by Matthew Ehret via The Strategic Culture Foundation,
As Republican and democrat politicians hold emergency meetings to decide how to avoid a meltdown of Wall Street, the smell of hyperinflation looms in the air as much today as it did in Germany during the opening months of 1922. This week, markets were propped up by a record breaking offering of $1.5 Trillion in liquidity injections over the coming months (added to the $9 trillion already injected over the past six months), and rather than deal with the real reasons for this oncoming financial collapse, the media has brainwashed the west that everything would have been just fine, “if only coronavirus had not become a pandemic”.
But what is really being bailed out here exactly and why? Is this money actually making it to the real economy? Is it being invested to rebuild America’s farms, businesses and industry?
The reality is that the only thing being saved are the “Too Big to Fail” banks that are sitting atop a $1.5 quadrillion of derivatives bomb. Of the most bankrupt of America’s speculators are JPMorgan Chase, Citigroup and Goldman Sachs, whose derivatives exposure hit $48 trillion, $47 trillion and $42 trillion respectively in recent years.
It is my contention that Trump is genuine in his desire to “drain the swamp” and rebuild America’s lost industrial base. I also genuinely believe that Trump wishes to establish positive relations with Russia, China and other sovereign nation states which has drawn the ire of the international deep state. However Trump’s potentially fatal blind spot appears to be his tendency to believe the lie that Wall Street’s wellbeing is somehow indicative of America’s wellbeing.
If Trump is intelligent, (and his previous calls for Glass-Steagall’s restoration, and American System practices imply that he knows a thing or two), then rather than bailing out Wall Street by unleashing more gasoline onto the fire, it were better that he took the lessons of 1933 and established a new Pecora Commission for 2020.
What was the Pecora Commission?
Many are aware of the economic meltdown of October 24,1929 that ushered in four years of depression onto America (and much of the western world). However not many people are aware of the intense fight that was launched by patriots in both parties against the Wall Street/deep state parasite of that age which prevented both a fascist coup against the newly elected Franklin Roosevelt while also crippling Wall Street’s command of American life. In spite of whitewashing revisionist history books that contaminated the past 70 years, America’s recovery from the depression never occurred without a life or death struggle and this struggle was made possible, in large measure by the courageous work of an Italian lawyer from New York. This man’s name was Ferdinand Pecora.
By 1932, when Senators Peter Norbeck (R-SD) and George Norris (R-NB) spearheaded the establishment of the U.S. Committee on Banking and Currency, the American economy was on life support and the people were so desperate that a fascist dictatorship in America would have been welcomed with open arms if only bread could be put on the table. Unemployment had reached 25%, while over 40% of banks had gone bankrupt and 25% of the population had lost their savings. Thousands of tent cities called ‘Hoovervilles’ were spread across the USA and over 50% of America’s industrial capacity had shut down. Thousands of farms had been foreclosed and the engines of American industry had grinded to a screeching halt.
Across the ocean, the fascist regimes of Germany, Italy and Spain were growing more powerful by the day fed by injections of hundreds of millions of dollars of capital by London and Wall Street bankers. Notable among these pro-fascist financiers was none other than Bush family patriarch Prescott, who provided millions in loans to Hitler’s bankrupt Nazi party in 1932 (and continued doing business with the party through 1942- having only stopped after being found guilty for “trading with the enemy”).
The Committee on Banking and Currency was a relatively impotent body when it began in 1932, but when Senator Norbeck called in Ferdinand Pecora to lead it in April 1932, everything began to change. A first generation Italian-American, Pecora was forced to quit high school after his father was injured in order to support his family. Years later, the young man found work as a clerk in a law firm, and managed to work his way through law school, passing the bar in 1911. His unimpeachable reputation earned him the animosity of powerful NY financiers who ensured that his successes in prosecuting brokers never resulted in attaining Attorney General, where he made a name for himself shutting down over 100 illegal brokerage houses that speculated on fraudulent securities during the depression.
Within days of accepting the Washington job as Chief Council of Norbeck’s committee (for the meager salary of $250/month), Pecora was granted broad subpoena powers to audit banks and drag the most powerful men in America to testify in the committee’s hearings.
In his first two weeks, Pecora made headlines by auditing the books of major Wall Street banks and pulled in pro-fascist National City President Charles Mitchell (then preparing to advise Benito Mussolini) to testify. Within days, Mitchell’s team of expensive defense attorneys could do nothing but watch in despair as the powerful financier admitted to short selling his own bank’s stocks during the depression, scamming depositors with purchases of Cuban junk debt and avoiding taxes for years. Mitchell was forced to resign in shame followed days later by NY Stock Exchange Chair Dick Whitney- who left the court in handcuffs.
This crackdown on Wall Street’s abuses were highly publicized and put the spotlight on the criminal schemes used to gamble with savings and commercial bank deposits on securities and futures markets which led to the orchestrated collapse of the bubble economy in 1929 (ironically much of the bubble built up during the “easy-money days” of the “roaring 20s” was centered in the housing market). Pecora’s crackdown also set the tone for the incoming Roosevelt administration.
Unlike the previous 1911 Pujo Commission led by Senator Charles Lindberg Sr. which also exposed Wall Street’s abuses of power, the Pecora Commission was supported by a President who actually cared about the Constitution and amplified Pecora’s powers even further. When FDR was told that supporting Pecora’s exposures of financial crimes would hurt the economy, the President famously responded with “they should have thought of that when they did the things that are being exposed now.” FDR followed up that warning by encouraging the attorney to take on John Pierpont Morgan Jr.
Rather than controlling an American institution as many believed 70 years ago and today, J.P. Morgan Jr. was actually running an operation that had earlier been created in the mid-19th century as part of a British infiltration of America. As historian John Hoefle pointed out in a 2009 EIR study:
“The House of Morgan was, in truth, a British operation from its inception. It began life as George Peabody & Co., a bank founded in London in 1851 by American George Peabody. A few years later, another American, Junius S. Morgan, joined the firm, and upon Peabody’s death the firm became J.S. Morgan & Co. Junius Morgan brought in his son, J. Pierpont Morgan, to head the New York office of J.S. Morgan, and the New York office became J.P. Morgan & Co. From its original role in helping the British gain control of American railroads, the Morgan bank became a leading force in the oligarchy’s war against the American System, using the deep pockets of its imperial masters to become a powerhouse in not only finance but steel, automobiles, railroads, electricity generation, and other industries.”
By 1933, the House of Morgan grew into a multi-headed hydra controlling utilities, holding companies, banks and countless other subsidiaries.
Senator George Norris showcasing a chart of Wall Street power
When J.P. Morgan jr. was called to testify, the banker carried a midget on his lap in mockery of the “circus of the commission”. As the questions began however, the arrogant banker was caught off guard by Pecora’s proof of Morgan’s secret “preferred clients lists” of politicians whom the banker owned and who received stock offerings at discount rates. Named among the thousands of traitors on this list, Pecora revealed former president Calvin Coolidge, Coolidge’s Treasury Secretary Andrew Mellon (a Schacht-Hitler supporter from the start), financier Bernard Baruch, Supreme Court Justice Owen Roberts and Democratic Party controller John Jacob Raskob. Raskob was not only a major speculator but was also the leader of the American Liberty League which tried repeatedly to overthrow FDR between 1933-1939 and worked to ally America with axis powers from 1939-1941.
Morgan’s god-like ego was brought down to the level of mortals when the flustered banker was only able to answer “I can’t remember” repeatedly when asked if he had paid taxes over the past 5 years. As it turned out, by the end of the trial, it was revealed that NONE of the subsidiaries of the House of Morgan paid any taxes during the entire period of the depression, and were caught gambling with depositors assets from commercial accounts. These revelations didn’t sit well with a population dying of starvation across the streets of America.
Similar displays of corruption were made of the heads of Kohn Loeb, Chase Bank, Brown Brothers Harriman and others.
Faced with these revelations, The Nation magazine famously reported “If you steel $25, you’re a thief. If you steal $250 000, you’re an embezzler. If you steal $2.5 million, you’re a financier.”
Pecora’s ally Sen. Burton Wheeler said “the best way to restore confidence in our banks is to take these crooked presidents out of the banks and treat them the same as we treated Al Capone.”
FDR Drains the Swamp
With the light cast firmly upon the dark shadows where vile creatures like J.P. Morgan and other financial gremlins reside, the population was finally able to start making sense of what injustices befell them during the years of post-1929 despair. While not every banker went to prison as Wheeler or Pecora would have liked, examples were made of dozens who did and many more whose careers were shamefully ended. Most importantly however, this exposure gave Franklin Roosevelt the support needed to drain the swamp and impose sweeping reforms upon the banks.
In the first hundred days, FDR was able to:
1) Impose Glass-Steagall banking separation (forcing Wall Street banks to break up their functions and preventing speculators from gambling with productive assets)
2) Create the Federal Deposit Insurance Corporation (FDIC) that protected citizens’ savings from future crises
3) Create the Securities Exchange Commission to provide oversight to Wall Street’s activities and on whose body Pecora was appointed commissioner in 1934.
4) Unleash broad credit through the Reconstruction Finance Corporation (RFC) which acted as a national bank bypassing the private Federal Reserve, channeling $33 billion to the real economy by 1945 (more than all private commercial banks combined)
5) Impose protective tariffs on agriculture, metals and industrial goods to stop dumping of cheap products in America and rebuild America’s physical economy
6) Create vast public works, like the Tennessee Valley Authority, Grand Coulee dams, Hoover dams, St Laurence development and countless other projects, hospitals, schools, bridges, roads and rail under the New Deal that acted in many ways then as China’s Belt and Road Initiative has in our modern age. Unfortunately, Roosevelt died before this new form of political economy could be internationalized abroad in the post-war years as an anti-colonial program.
A beautiful outline of FDR’s struggle is showcased in the 2008 film ‘1932: Speak not of Parties but of Universal Principles’.
Subverting a Fascist Coup Then and Now
Ferdinand Pecora’s Commission shaped the dynamics of America so intensely by its simple power of speaking the truth, that efforts to run a fascist coup against FDR using a general named Smedley Butler also came undone before it could succeed. Butler played along with Wall Street’s plans for some months before deciding to publicly blow the whistle in congress. Butler exposed the intension to use him as a “puppet dictator” leading thousands of American legionnaires in a storming of the White House displacing FDR.
It is often forgotten today, but in the early days of the 1920s-1930s, the Legion was modeled on Mussolini’s fascist squadristi and even its leader Alvin Owsley made explicit in 1921 saying:
“If need be the American Legion is ready to protect the institutions of this country and its ideals, in the same way as the Fascists have treated the destructive forces threatening Italy. Don’t forget that the Fascists are for today’s Italy what the American Legion is for the United States.”
Butler’s startling revelations amplified FDR’s popular support and inoculated much of the population from the fake news pouring out of Wall Street propaganda agencies spread across the media.
In 1939, Pecora wrote a book called ‘Wall Street Under Oath: The Story of our Modern Money Changers’ where the attorney prophetically said:
“Under the surface of the governmental regulation of the securities market, the same forces that produced the riotous speculative excesses of the ‘wild bull market’ of 1929 still give evidence of their existence and influence. Though repressed for the present, it cannot be doubted that, given a suitable opportunity, they would spring back to their pernicious activity.”
Pecora went onto deliver one more warning which current generations should take seriously “Had there been full disclosure of what has been done in furtherance of these schemes, they could not long have survived the fierce light of publicity and criticism. Legal chicanery and pitch darkness were the bankers’ stoutest allies.”
Today’s oncoming economic meltdown can only be prevented if the lessons of 1933 are taken seriously and patriots who actually care about their nations and people stop legitimizing the casino economy of fictitious capital, derivatives, debt slavery and anti-humanism that has become so commonplace across the governing strata of the technocratic and banking elite today trying to control the world. This elite, just like the financiers of the 1920s, doesn’t care ultimately for money as an end but sees it merely as a means for imposing fascist forms of governance onto the world population. In the same way that FDR’s Wall Street/London enemies sought a world government under Nazi enforcers then, today’s heirs to that anti-human legacy are driven by a religious-like commitment to “manage” a new collapse of world civilization under a Green New Deal and World Government.
So why accept that dystopic future when a brighter one is offered us by the Multipolar alliance today led by Russia and China?
Tyler Durden
Wed, 03/18/2020 – 23:40 - 100 Iranians Die By Alcohol Poisoning After Ethanol Consumption For Virus "Cure"
100 Iranians Die By Alcohol Poisoning After Ethanol Consumption For Virus “Cure”
As the world grapples with this once in a century pandemic, bizarre stories and sometimes extremely dangerous examples of people’s ‘home remedy’ attempts at combating the virus are popping up more and more.
Yesterday we detailed the story of the South Korean church which infected 46 people by the strange “remedy” of spraying salt water into their mouths thinking it would “kill” the virus; however, they used the same spray bottle, not bothering to disinfect it.
And now a new one from hard-hit Iran, which Tuesday saw state TV issue an alarming prediction that “millions” of its citizens could die: some Iranians are turning to ingesting industrial-grade ethanol and methanol thinking this can disinfect them and mitigate exposure. This has led to mass alcohol poisoning, state media has reported.
Methyl Alcohol file image “More than a hundred Iranians have died from alcohol poisoning in recent weeks in the mistaken belief that industrial-grade ethanol and methanol will help ward off the coronavirus ravaging the country, according to local media reports,” writes Bloomberg.
The reports note that nationwide over 1,000 have been treated for alcohol poisoning related to ‘home remedy’ attempts to disinfect themselves. The ‘treatment’ reportedly began as a rumor, which authorities have lately sought to combat.
And the semi-official Iranian Students News Agency has reported 61 deaths in Fars province alone by this method, which adds up to five times more fatalities than official confirmed coronavirus deaths in that area.
Other deaths from consumption of the potentially fatal substances were also reported throughout the country. Bloomberg tallies it at 100 or more, citing state sources.
Iran on Wednesday reported a huge single-day jump in fatalities, reportedly the biggest within a single 24-hour period thus far in the country as another 147 people died.
This brings the official death toll in Iran to 1,135 and a total of 17,361 confirmed cases, amid dire reports that “millions” are expected to be infected before the pandemic dissipates.
Tyler Durden
Wed, 03/18/2020 – 23:20 - Dow Futures Crash Near Limit-Down As Global Dollar Buying Panic Sparks AsiaPac FX Collapse
Dow Futures Crash Near Limit-Down As Global Dollar Buying Panic Sparks AsiaPac FX Collapse
Update (2305ET): Dow futures losses have accelerated, plunging over 1000 points limit-down…
S&P and Nasdaq futures are also crashing…
Additionally, South Korea’s KOSPI is halted after triggered circuit-breakers down 8% on the day.
And Copper has succumbed to the liquidation…
* * *
The global scramble for dollars amid a massive shortage has rolled around the AsiaPac time-zone and is leaving a bloody trail across every asset-class.
FX is in freefall with Aussie collapsing at the fastest rate since Lehman…
Source: Bloomberg
Kiwi is back to its weakest since 2009…
Source: Bloomberg
Yen is tumbling once again…
Source: Bloomberg
Won is getting whacked…
Source: Bloomberg
And Aussie has crashed to its weakest against the offshore yuan ever and weakest against onshore yuan since Dec 1993…
Source: Bloomberg
And overall, AsiaPac FX is crashing to its weakest against the USDollar since 2004…
Source: Bloomberg
And the liquidation continues in US equity markets with Dow futures down over 800 points, erasing the after ramp in stocks…
And losses in AsiaPac stocks are accelerating…down 27% from January highs
Source: Bloomberg
And JPY Basis-Swaps are signaling extreme dollar shortage continues…
Source: Bloomberg
This all has the smell of a massive global macro fund liquidation and the contagious impact of that leveraged unwind across the global risk markets.
As Bloomberg’s Stephen Spratt details, desks continue to speak of the “sell everything” mentality in markets with huge liquidations and de-leveraging taking place everywhere.
The data stacks up. Looking at the three-day change in open interest across major June bond futures as of close of play Tuesday, the reduction in positions is the equivalent to $150 billion in 10-year cash Treasury bonds ($140m/dv01*). Here’s 3-day open interest change:
-
Schatz: -135,295
-
Bobl: -45,931
-
Bund: -178,221
-
Buxl: -17,566
-
OATs: -41,475
-
BTPs: -41,176
-
Gilts: -28,055
-
US 2y: -158,991
-
US 5y: -44,059
-
US 10y: -129,381
-
US 20y: -60,865
-
US 30y: -26,798
-
JGBs: -36,534
As one veteran Aussie trader exclaimed (who happened to be on the right side of the collapse in the currency):
“I love the smell of global macro fund liquidations in the morning…”
With currencies flash crashing across Asia on Thursday, central bankers may be looking back at the remedies used then.
As Bloomberg’s Mike Wilson suggests, the tear the U.S. dollar was on back in 1985 was brought to an end when five central banks gathered in New York’s Plaza Hotel and came up with what became known as The Plaza Accord.
Source: Bloomberg
That sent the dollar into a steep slide that lasted until about the end of 1987.
With the Aussie, kiwi and won just free-falling, it looks like a similar sort of coordinated intervention may be needed to stop the dollar now, especially until the world is deemed free of coronavirus impacts.
Tyler Durden
Wed, 03/18/2020 – 23:14 -
- The Journey To Monetary Gold And Silver
The Journey To Monetary Gold And Silver
Authored by Alasdair Macleod via GoldMoney.com,
Markets are just beginning to latch on to the economic consequences of the coronavirus. Central banks are slashing interest rates and beginning to throw new money into the mix and governments are increasing deficit spending.
Few analysts have yet to understand the enormous consequences of the coronavirus for missed payments and accumulating current debt, which is and will rapidly drain liquidity from wholesale money markets. It is increasingly certain that the eurozone’s banking system will require rescuing from insolvency with knock-on consequences for the global monetary system. Concern over the consequences for the $640 trillion OTC notional derivative market, particularly for $26 trillion of fx swaps, is so far absent.
Continuing on our theme that the fates of the dollar and US Treasury values are closely bound, the extraordinary overvaluation of the bond market will translate into a collapse for both. This article charts how the collapse of the dollar and financial asset values is likely to progress and concludes that we are witnessing the end of the neo-Keynesian fiat currency fantasy, which will be done and dusted with surprising rapidity.
Only then will sound money, after varying time periods for different nations, return.
Setting the scene…
This week we got into the red meat of Scene One of the final Act of the financial tragedy currently staged in global markets. It is a drama that has run on the air of hope for a hundred years, with an ending that now appears to be unexpectedly sudden. We face no less than the destruction of a financial system whose twin pillars are fiat currencies and financial assets, built on the sands of monetary expansion and debt financing. The evidence of its commencement is best encapsulated in Figure 1, of the world’s reserve currency. This is where everyone was meant to seek sanctuary from lesser currencies, in order to have the liquidity to pay the coupons on their dollar debts.
It is turning out not to be so, with the dollar suddenly appearing to enter a new bear market. Meanwhile, this week saw the entire US Treasury yield curve briefly submerged under 1%, an event bifurcated from the collapsing dollar.
There is no doubt that the coronavirus is having a serious economic impact. Much has been written about the disruption of supply chains, and clearly people are staying at home and stockpiling necessities. Sales of automobiles and other durable goods have crashed. Now the politicians are falling ill. Investors have reacted by dumping equities and buying government bonds, a flight to safety by Keynesian investment managers seeking the comfort of Nurse for fear of something worse. Consequently, government bond prices have become even more detached from the true reality of where financial risk resides.
Amazingly, almost no investment manager has bought physical gold for his or her clients: gold-backed ETFs and derivatives are only paper claims on gold, so by having counterparty risk and the lack of true possession don’t count as true safety. Physical gold has been effectively banned from managed portfolios, being classified as unregulated, deterring investment managers from having to justify buying gold to their compliance officers. The related asset class is so downgraded that gold and silver mining shares remain unfashionable, with the Amex gold bugs index (HUI) standing at about one third of its 2011 peak while the gold price is in new high ground against nearly all fiat currencies.
Monetary debasement will really accelerate from here…
Monetary and market distortions could have persisted for longer if it were not for the fact that the coronavirus disruption is accompanied by considerable payment dislocation. Companies still have fixed costs when they have no sales, either because customers are not turning up or their supply chains have stopped delivering products. Where companies have cash at their banks, they will draw it down, forcing their banks to go into the money markets, either through LIBOR or repos to make up the balance, sell government bonds, or foreclose on borrowers. Where companies do not have cash, they will test their working capital facilities, likely to force their banks to cover increased lending in wholesale money markets. Where banks experience drawdowns on both sides of their balance sheets, outstanding bank credit contracts, sending the sort of signal that terrifies central bankers.
The situation will be increasingly reflected by central banks having to back-stop both liquidity and bank reserves through repos and new rounds of quantitative easing. In an interesting paper, Zoltan Pozsar of Credit Suisse describes the process that leads to what he terms deficit agents in supply chains (businesses experiencing payment failures) turning their banks into deficit agents as well.
Pozsar demonstrates that a reluctant Fed will have to backstop not just escalating domestic dollar deficits but global ones as well, and he assumes for the purpose of clarity that foreign central banks will manage the payment crises in their own currencies. Being a money market technician, he does not address the debasement issue because that is not his brief. But clearly, he describes a process where the dollar will have to be debased if financial asset values, particularly of government bonds, are to be maintained.
We see unfolding the process whereby both the dollar and financial assets are losing value, with the dollar losing it first. And while a weakening dollar may from time to time lend support to financial asset prices, measured in sound money their combined values will decline.
The second scene in the final act of our financial tragedy will be wholesale liquidation of US Treasury holdings by banks in New York and also by foreign governments to obtain dollars to satisfy their liquidity demands. The Fed will have to supply as much liquidity as it takes to accommodate the American banks and will reduce the Fed funds rate to discourage them from selling Treasury bills and bonds. As for foreigners, they are not the Fed’s first priority.
Let us assume liquidity problems should not become acute for the few foreign central banks with existing USD liquidity swap lines with the Fed. Under the existing 2013 agreement, these are only the ECB, Bank of England, Swiss National Bank, Bank of Canada and Bank of Japan. While additional temporary swap agreements might be arranged with others, it is only likely to happen in a response to liquidity stresses rather than in anticipation.
China, Korea and Taiwan as well as other nations with dollar-centric supply chains in their domains will probably have to unwind their long-dollar fx swap positions and sell T-bills and Treasuries in order to release the necessary liquidity. The end result is that in funding the US deficit, the Fed will have to not only absorb significant new debt through quantitative easing, but it will have to buy up existing debt sold by foreign holders if it is to maintain US Treasury yields at anything like current levels.
In this, mainstream opinion has been wrongfooted: foreigners certainly have dollar obligations to satisfy in an economic slump, but they already own the dollars. The thirst of foreigners for dollar liquidity will not be satisfied by the purchase of more dollars, but by the liquidation of their existing dollar assets. And to the extent that this leads to a contraction in bank credit the Fed will have no alternative but to sacrifice the dollar by increasing the base money quantity in order to absorb it all.
Furthermore, there is an unknown quantity of fx swaps taken out by US hedge funds to strip out interest rate differentials between euros and yen on one side, and the dollar on the other. It is a trade that will have built in quantity but deteriorating in quality since April 2018, when it first became clear to American based investors and speculators that the euro and yen were seemingly stuck with negative interest rates in perpetuity, while the Trump stimulus would likely lead to higher dollar rates. Now that the Fed is closing down the rate differential by cutting its funds rate these arbitrages need to be unwound, leading to substantial liquidation of T-bills, USTs and dollars to repay obligations in euros and yen. No wonder the chart of the dollar’s trade weighted index is so bearish.
Hopefully, the hedge fund problem will not replicate the crisis in September 1998, when the Long-Term Capital Management hedge fund failed. But even if that risk is contained, there will be a significant contraction of outstanding bank credit in dollar markets. Being sold on Irving Fisher’s description of how contracting bank credit led to the 1930s depression, the Fed is likely to respond by turning its liquidity taps full on.
The fiscal position is not good either. The current year US budget deficit, estimated by the CBO to be over a trillion dollars, will begin to look like running at an annualised rate of nearly twice that. The Fed could also find itself monetising not only the bulk of new Treasury flows but absorbing sales by foreigners of UST bonds, T-bills and agency debt as well. If so, it will end up increasing its balance sheet by many trillions, unless, that is, the Fed adjusts its priorities to protect the dollar. But the cost of doing so would be the inevitable destruction of US Government finances when the Fed refuses to monetise its debt. That simply won’t happen.
The sacrifice of the dollar as the Fed inevitably fails to maintain financial asset values will truly mark the end of the fiat currency era, since no other fiat currency can exist with the world’s reserve currency thoroughly debased and its financial assets in a state of collapse. This is a simple statement with complex issues behind it, including but not limited to the following:
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The valuations placed on government bonds are so divorced from economic reality that after the initial shock in equity markets has passed, they will be exposed to a seismic downwards adjustment in prices.
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Corporate bond markets will face an even greater collapse as risk premiums widen, leading to a spate of bankruptcies in the private sector and losses on collateralised loan obligations held by the banks on a systemically threatening scale.
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Hedge funds which have taken out fx swaps have already lost the interest rate arbitrage opportunity following the Fed’s recent cut in the funds rate. Furthermore, with T-bills yielding only 0.37%, further cuts in the funds rate are a racing certainty. Unwinding these fx swaps is one factor that will put significant downward pressure on the dollar.
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A reduction in outstanding derivatives will be the consequence of banks desperate to free up liquidity for their own balance sheets. The cost of hedging risk will increase significantly and in many instances become unavailable. Hedge funds and the like will be forced to restrict their activities, raising the possibility of widespread losses and potential failures in financial asset markets.
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A glance at their share prices confirms that major European banks are already in trouble and they have long been at severe risk of failure, a fact which has been concealed by the ECB’s provision of liquidity. If nothing else, a new escalation of non-performing loans brought about by the coronavirus now threatens to collapse Italian, French, German, Spanish and other eurozone nations’ commercial banks despite the ECB’s efforts. A coordinated G-20 global bank rescue scheme involving open-ended monetary expansion by central banks is likely to be instigated in a widespread act of currency inflation.
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A general liquidation of foreign-owned dollar assets and selling of dollars is likely to follow.
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Only then will the wider public begin to realise the full faith and credit in their governments and currencies which they take for granted are worthless.
The confluence of these threats to financial assets and the world’s reserve currency makes it almost certain that this time attempts to rescue the world from another financial crisis will fail. The twin pillars in the Keynesian endgame, whereby the future of financial assets has become tightly bound to the purchasing power of currencies, will both be destroyed by market forces acting like Sampson pushing the pillars apart until the temple’s collapse killed all the Philistines.
Comparing fiat to sound money
Figure 2 shows that since the gold pool failed in the late 1960s the four major currencies (including the euro’s components prior to 1999) have lost substantially all of their purchasing power, compared with that of gold. The most debased is sterling, which retains only 1.19% of its 1969 purchasing power, followed by the euro at 1.56%, the dollar at 2.22% and the yen at 7.4%.
The failure of the gold pool and the subsequent abandonment of the post-war Bretton Woods agreement was the last significant monetary failure. The first in modern times was the 1934 devaluation of the dollar from $20.67 to $35 per ounce of gold, thirty-five years before. On this timeline the next failure appears to be overdue.
The current situation has the makings of leading into an even greater monetary event, as government spending spirals beyond control without the means to fund it, except by monetary inflation. It has already been anticipated by a renewal in the bear market in the major currencies measured in gold terms, dating from late-2015 and is illustrated in Figure 3.
These represent significant losses ahead of the currency debasement which is now becoming increasingly certain in the coming months. It is extraordinary that this marked devaluation of currencies has occurred with very few commentators noticing.
If we refer back to John Law’s Mississippi bubble, which is the best model for what is now unfolding, the loss of all purchasing power for his fiat currency happened in less than a year. Law’s livre began the final phase of its decline in November or December 1719 and by the following September there was no exchange rate against sterling, indicating it was worthless. From November 1719 Law accelerated his purchases of shares in his Mississippi venture ahead of its merger with his bank, the Banque Royale, paid for by issuing unbacked paper livres which began to noticeably undermine its purchasing power.
Sticking with Law’s failure as a template for ours today, we can similarly expect the Fed on behalf of the US Government to issue new money for the purpose of maintaining financial asset values, mainly of US Treasury bonds, but by extension of equity prices as well.
Following the current panic into perceived safety, a second phase will likely evolve, being driven by the collapse of government bond prices. Currently, they are over-valued on a combination of unrecognised price inflation, which based on independent estimates is probably closer to ten per cent than two, and a flight to perceived safety from other financial assets. That process will come to an end, and the condition of government finances, which ultimately depend upon the wealth and health of the productive economy, are bound to be reassessed in the light of the slump in business activity and a more realistic assessment of price inflation.
To sum up, the following developments are likely in the coming months in approximate order, with some running concurrently:
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Base money will be increased substantially to offset a contraction in bank credit and to give banks extra liquidity to compensate for becoming deficit agents as supply chains dislocate and retail sales of non-essentials goods and services collapse. We have already seen daily repos by the Fed increasing from about $40bn in recent weeks to between $130bn to $200bn currently.
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“Helicopter money” in various guises, such as deferral of tax payments and business rates to help provide liquidity, will shift to governments some of the deficits building up in businesses. Mortgage payment holidays are offered in some countries. Helicopter money is already being provided to investors through share support operations, such as the Bank of Japan’s purchases of ETFs, which is likely to be expanded. In Hong Kong, each citizen is being given HK$10,000.
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Within a month or two there will almost certainly have to be bank bailouts in Europe, which will require additional monetary commitments by the ECB and the national central banks. This will likely lead in turn to widespread liquidation of euro commitments for speculation and arbitrage. Loans in the trillions have been taken out in euros as the counterpart in fx swaps to the dollar. As these positions are squared the euro will rise and the dollar will fall, transmitting a eurozone banking crisis into liquidation of UST-bills and short-term US Government coupon debt by US hedge funds. A heightened risk of counterparty failure in fx swaps could spread to other derivative markets, requiring bailouts of non-banks, including major hedge funds. Failure to do so or a bungled operation such as tinkering with mandated bail-ins could hasten the collapse of stocks and other financial assets.
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A declining dollar will increase portfolio liquidation pressures on foreigners, leading to indiscriminate offerings of US Treasuries, agency debt and equities. The Fed will have to take on not only the financing of an increasing budget deficit, but also absorb foreign sales of dollar-denominated securities if it is to retain control of prices.
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At this stage it will become increasingly obvious to domestic bank deposit holders that the dollar’s purchasing power is being destroyed by the Fed’s escalating asset support commitments. In effect, the Fed will be the only significant buyer of financial assets, paid for through quantitative easing on a far greater scale than that which followed the Lehman crisis.
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In the absence of other buyers of US Treasuries and the loss of purchasing power for the dollar, bond prices will sink, which will make it virtually impossible for the US Treasury to fund a ballooning deficit. An election year creates extra difficulties leading to uncertain political outcomes. But by the time President Trump is due to stand for re-election, over a million elderly and poor Americans might have died from the coronavirus, socialist Democrats might be in the ascendant and the dollar could become worthless.
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With the dollar as the world’s reserve currency and nearly all other fiat currencies having taken their cue from it since the Nixon shock in 1971, they also seem doomed to failure with the dollar.
Where will the money go?
In the three months before the collapse of his scheme, sellers of shares in his Mississippi venture required John Law to replace them with new buyers, and when they could not be found he substituted them by buying shares with new livres issued for the purpose. Today’s price support system which rigs government bond prices is exactly the same concept as that deployed by John Law, except it is on a global scale.
Law’s experience showed that in an asset and monetary collapse, apparent wealth simply vanishes, destroyed along with the medium of exchange. Theoretically, if there are no buyers at any price the collapse to zero is immediate and no one extracts any value to be redeployed elsewhere. The Mississippi bubble also showed that the purchasing power of sound money, always gold or silver, is at least retained. For this reason, it is more than likely a rising price for monetary gold will happen without very much gold needing to be purchased.
Being dominated by mathematical economists, current thinking in financial asset markets does not often admit to this. But as the central banks show increasing difficulty in maintaining the combined values of currency and bonds, the price of gold and silver in fiat currency terms will rise significantly. More correctly described, the ratios of fiat currencies to gold will fall, as illustrated in Figures 2 and 3 above.
Gold and silver are reliable money, chosen by the people as economic actors. The journey to their reinstatement will require the destruction of the unsound currency issued by the state, which is simply a distorting monopolist and therefore a distorter and destroyer of economic values. Only then can gold and silver re-emerge as circulating money, or more practically, reliable and trusted paper and electronic substitutes for them. Gold and silver are emblems of economic freedom, and while the transition will only be very reluctantly accepted by the state, a better monetary future will beckon.
It is in this light we should anticipate the money to replace dollars, euros, yen and pounds. In Asia they will be better placed than western nations to return to sound money, with Russia having substantially replaced its reserve dollars with gold, which could easily be legislated into a gold exchange standard for the rouble. China will be in a position to do the same for the yuan. In theory, getting to the point where monetary stability returns will be easier for some governments than for others. The capitalist nations, and China perhaps to a lesser extent, have subsumed Keynesian economics deep into their collective psyche, so deep that it has replaced entirely an understanding of free market economics.
Governments with extensive welfare obligations will find it an enormous challenge to maintain the balanced budgets required to ensure that a new monetary system will endure. They have been socialising wealth for too long to understand the simple fact that if you wish your nation to be prosperous you must allow the people to create and retain it. You must also make them responsible for their own affairs and make it clear to them that no one individual, lobbyist or interest has a right to government intervention. The function of government must be limited to making and administering criminal and contract law and protecting the realm, with strictly limited welfare provision.
A government that works in a sound money environment absorbs and administers only a minor part of its national economy. The loss of political power is always widely resisted, but the redeployment of national resources from a wealth-destroying state to free-market production has been shown to produce remarkable benefits in surprisingly little time. If, that is, the political class is wisely led by statesmen not in thrall to the common economic fallacies of John Maynard Keynes and John Law.
Tyler Durden
Wed, 03/18/2020 – 23:00 -
- Nearly 20% Of Households Have Already Lost Work Due To Pandemic-Shutdowns
Nearly 20% Of Households Have Already Lost Work Due To Pandemic-Shutdowns
The arrival of helicopter money in the form of two $1,000 checks to most Americans is the government’s acknowledgment that the economy crashed, and upwards of 30 million people could be unemployed due to the Covid-19 outbreak shutting down cities and towns across America.
A new NPR/PBS NewsHour/Marist poll has shown that 1 in 5 households have already experienced a layoff or reduction in work hours thanks to social distancing measures enforced by the government that is grinding local economies to a halt.
People across the country are staying home, avoiding large crowds, and ordering food on Amazon, as the fast-spreading virus is rapidly infecting people in New York, Washington state, and California. Confirmed cases have now been recorded in all 50 states.
The federal government missed containment windows to implement social distancing policies by nearly a month, and this means cases are likely to be exponential in the days or weeks ahead. Deaths have stayed low at this point because ICU treatment capacity at major hospitals has yet to be overwhelmed, but when they do, America could be the next Italy.
Bill Gates said on Wednesday that virus shutdowns could last upwards of ten weeks. The most affected industries have so far been restaurants, bars, hotels, casinos, cruise ships, and airlines, but as we noted last week, the ripple effect has collapsed the entire gig and service economy.
The poll was conducted on March 13-14, shows layoffs and reduced hours had already hit 18% of households. Lower-income households were hit the hardest, at least a quarter of them were making $50,000 per year had the most hours cut or experienced the most significant amount of job losses. It also showed a third of households had at least one person who had a significant change in work routine associated with the virus impact. College students were the most susceptible to job disruption.
Most of the jobs that experienced reduced hours or have been entirely cut have been blue-collar and service or retail jobs, which cannot be conducted remotely.
We noted last week that the virus crisis was expected to crash the gig and service economy. With more than 50 million Americans, or about 44% of all US workers, aged 18-64, are considered low-wage and low-skilled, have insurmountable debts (with limited savings), including auto, student, and credit card debts, are working in the gig-economy via side hustles and are most vulnerable to job losses as Covid-19 has likely triggered the next recession.
What’s about to happen next could be absolutely terrifying, as Treasury Secretary Steve Mnuchin warned the US unemployment rate could spike to a stunning 20% without stimulus directed at businesses and households.
With a total labor force of around 160 million, this would mean virus-related impacts on the gig and service economy could lead to a sudden spike to over 30 million unemployed without policy action.
Those are depression-era levels of job losses… which is prompting the Trump administration to resort to helicopter money.
New York’s unemployment claims website crashed earlier this week, search trends for “unemployment benefits” surged across the country as well, as chief economist of a multi-billion macro hedge fund said that they are now modeling approximately 10 million job losses over the next two to three months.
Maybe the real reason why the National Guard is being deployed across the country is the possibility that a Covid-19 pandemic could lead to social destabilization as millions lose their jobs and supermarkets run out of food. Who would’ve thought America is transforming into the next Venezuela?
Tyler Durden
Wed, 03/18/2020 – 22:40 - Bailout Nation: US Movie Theaters Join Airlines, Hotels And Restaurants In Demanding A Taxpayer Bailout
Bailout Nation: US Movie Theaters Join Airlines, Hotels And Restaurants In Demanding A Taxpayer Bailout
Back in 2008, when the US government bailed out the US banking sector, it became clear that virtually any industry in America’s $18 trillion economy could pass off for “too big to fail.” So fast forward to today when the longest expansion in history has mutated in under a month into the biggest market crash since the Great Depression, and sure enough, virtually any industry is trying to get bailed out.
Consider this – until today, the US government and by implication US taxpayers, had received bailout requests both direct or indirect from:
- The Airline Industry
- The Public transportation industry
- The Hotel and lodging industry
- The Restaurant Industry
- And, of course, Boeing.
And now, demonstrating just how fucked up everything has become once the government has opened the Pandora’s Box of government bailouts, US movie theaters are also demanding a bailout.
That’s right: movie theaters are now somehow a systemically important industry, one which deserves billions in taxpayer funds. And even if it doesn’t, well everyone else is getting bailed out so why not them too.
According to AP, the National Association of Theater Owners (also known as NATO, but definitely not to be confused with that other NATO), the trade group that represents most of the industry’s cinemas, said Wednesday that it’s asking for immediate federal help for its chains and its 150,000 employees. The theaters are requesting loan guarantees for exhibitors, tax benefits for employees and funds to compensate for lost ticket sales and concessions.
Just because that’s how things are done in the US where moral hazard is the name of the game. Every game.
The organization said the movie theater industry is “uniquely vulnerable” to the crisis, and needs assistance to weather a near total shutdown of two to three months. It wasn’t clear how society would collapse if there were no movie theaters after three months, especially with most Americans now having a streaming service pumping non-stop crap into their TV 24/7, but we are confident McKinsey will be hired soon to come up with a pretty slideshow explaining it all.
“This is an unprecedented challenge to the business,” said John Fithian, president and chief executive of NATO. “We’re looking to Congress and White House to understand this is a cultural institution where people gather.”
Ah… so any “cultural institution where people gather” is now eligible for a bailout. At least back in 2008 one could make a case that banks actually are important. After all they hold your money. But now, well, the collapse of theaters threatens to tear society apart.
Fithian didn’t give a specific dollar amount for what the industry is seeking but said theaters could be saved for a fraction of what the airline industry is requesting, because if airlines deserve a bailout, theaters certainly do too. For less than the cost of one airline company, Fithian said, movie theaters could be kept afloat.
In short: just show me the damn money.
“We want our policy makers to know that at the end of this thing, when people have been cooped up in their house for several months, they’ll need a break to go out and do something collectively that’s affordable and fun and away from what they’ve just been through,” he said. “But we still need to be viable.”
In other words, when this is all over, we want to be sitting on a beach, earning 20%, or rather -20% in this day and age, on the money the idiot taxpayers threw at us.
NATO also said it will supply $1 million in aid for out-of-work movie theater employees, the majority of whom are paid hourly. It wasn’t clear if he demanded $1 billion for the privilege of passing on 0.1% to his customers. “Starting tomorrow, most of them won’t be paid anything,” said Fithian, which ironically describes something once upon a time known as capitalism.
Earlier this week, US movie theaters closed nationwide, shuttering nearly all of the country’s cinemas including its largest chains, AMC Theaters and Regal Cinemas. The closures followed federal guidelines against gatherings of more than 10 people. Hollywood has postponed nearly all March and April releases, and many May ones, too.
In the meantime, some studios have moved their new releases to on-demand platforms, a rare breaking of the traditional 90-day theatrical window. Universal earlier announced that “The Hunt,” “Invisible Man” and “Emma” will be released for home viewing on Friday. On Wednesday, Sony Pictures said the Vin Diesel sci-fi thriller “Bloodshot,” which opened in theaters last Friday, will be available for digital purchase Tuesday.
“Sony Pictures is firmly committed to theatrical exhibition and we support windowing,” Sony Pictures chairman Tom Rothman said in a statement. “This is a unique and exceedingly rare circumstance where theaters have been required to close nationwide for the greater good.”
This means that a far bigger risk for theaters – which no taxpayer in their right mind will ever agree to subsidize, let alone bailout – is not that Americans don’t frequent them for the next 2-3 months due to the pandemic, but that studios realize that they stand to make far more money by “collapsing the window” entirely and transitioning to a “Straight to streaming” service across the industry. Because in case NATO (the other NATO) failed to notice, “cultural institutions where people gather” died years ago courtesy of Mark Zuckerberg and other Silicon Valley oligarchs who have made society optional.
Tyler Durden
Wed, 03/18/2020 – 22:20 - Is This The Next Big Headache For Global Economy?
Is This The Next Big Headache For Global Economy?
The events of the last several weeks have ominously demonstrated that dollar shortage has returned with a vengeance, as new headaches for virus-battered emerging markets will find it hard to cope with falling local currencies and demand.
The dollar shortage was confirmed last week in both the Bloomberg Dollar index and the FRA/OIS spread, a closely followed indicator of interbank dollar funding availability that has spiked higher, indicating rising stress.
The Federal Reserve’s massive monetary “bazooka” including trillions of dollars for repo markets and the launch of $700 billion QE5 and return to ZIRP, as well as an emergency six POMO operations last week has failed to boost risk sentiment, and the FRA/OIS has yet to show any signs of relief, as it has surged to the highest level since the financial crisis.
The Fed’s monetary cannon may have solved the corporate liquidity crisis for the time being. Still, the dollar/liquidity shortage in the global financial system continues to worsen as investors are dumping emerging markets in record numbers and scrambling for dollars.
Marrying the supply chain disruption triggered by the Covid-19 crisis in China with the oil price war, this has crippled the petrodollar exchange system by sending the price of oil sharply lower and exacerbating the global dollar funding shock.
We’ve pointed out, the world is facing an unprecedented dollar margin call, as a result of the $12 trillion synthetic dollar short, some 60% of US GDP. With the dollar rising, the cost of servicing dollar debt for businesses and governments becomes more expensive as their local currencies plunge amid the barrage of rate cuts by global central banks.
“The surge in the dollar is another blow to emerging markets,” said Mitul Kotecha, senior emerging markets strategist at TD Securities in Singapore.
“The demand for the dollar has outweighed any hit to the US currency from sharply lower Fed rates. EM assets will continue to struggle as investors steer clear of relatively risky assets and maintain a bias for safe havens.”
The Fed’s panic rate cuts on Sunday, welcoming the US back to ZIRP, has led to South Korea, Chile, Vietnam, Sri Lanka, Turkey, and Pakistan to cut rates as well. South Africa, Brazil, and Indonesia are expected to slash short-term interest rates later this week.
On top of dollar funding pressures, world trade growth is collapsing, and the tighter financial conditions on emerging markets have triggered a $30 billion outflow in 45 days since the virus crisis started, Bloomberg notes. The dollar reigns supreme in a crashing global economy and pandemic. For instance, the Mexican peso and Russian ruble have dropped by 20%.
Khoon Goh, the Singapore-based head of Asia research at Australia & New Zealand Banking Group Ltd., says emerging market economies are deploying rate cuts to cushion a hard landing but are using FX reserves for currency stabilization.
“They will continue to utilize their FX reserves to smooth currency volatility but will not seek to stem the trend or defend any particular levels,” said Goh.
“In the current environment, when external demand is very weak, allowing some currency weakness alongside lowering interest rates is the best way to try and ease overall financial conditions.”
The Australian dollar has tumbled to its weakest levels since 2003, a move that will increase import costs. Norway’s krone has fallen 15% this year, plunging to an all-time low as Brent tags the 27-handle this week.
Central bankers are making sure dollars continue to flow around the world. The Fed’s Sunday announcement called for reduced rates on its dollar-swap lines with five other central banks, a similar policy seen during the 2008 financial crisis.
“A strong dollar is typically a headwind for emerging-market currencies and even more so for countries that are reliant on offshore dollar funding and have floating exchange-rate regimes,” said Todd Schubert, head of fixed-income research at Bank of Singapore Ltd.
As the dollar shortage continues, tightening financial conditions in emerging markets, it’s only a matter of time before something breaks.
Tyler Durden
Wed, 03/18/2020 – 22:00 - BOJ Admits It Has Lost 3 Trillion Yen On Its Equity Purchases Despite Literally Printing Money Out Of Thin Air
BOJ Admits It Has Lost 3 Trillion Yen On Its Equity Purchases Despite Literally Printing Money Out Of Thin Air
Long gone are the days when central banks pretended they aren’t in the business of propping up the stock market.
A week after we reported that the BOJ had bought a record amount of ETFs in a desperate attempt to stabilize its illiquid stock market, where the central bank now owns over 73% of all ETFs, Kuroda bought a whopping 121.6BN yen of ETFs on Tuesday, the most on record, and just one day after the BOJ doubled the upper limit of ETFs it can purchase to 12 trillion yen, without however answering where it will get all those ETFs from.
The purchases in its core ETF program jumped by 20% to 120.4BN yen from the previous record of 100.2BN yen; while ETFs bought in the BOJ’s “physical and human capital” program – whereby the BOJ directly admits it is rewarding companies for pursuing policies that it finds appealing such as higher jobs – remain at 1.2b yen. Finally, the BOJ’s J-REIT purchases rose to 1.5BN yen from 1.2BN yen.
The unprecedented creeping nationalization of Japan’s stock market – which has made even the USSR spin in its grave – can be seen in the chart below:
Of course, none of the above is a problem as long as the market keeps levitating higher and higher, however once the crash arrives, people are bound to start asking question.
And as we noted last week, the crash did arrive…
… and the questions emerged. Like for example now that the Nikkei has plunged below the BOJ’s cost basis on its ETF purchases, how big are the losses for all taxpayers.
Answering just this question on Wednesday, Kuroda said that the amount of losses on exchange-traded funds held by the central bank is estimated at 2 trillion to 3 trillion yen as a result of the current crash.
The estimate is based on the current levels of Nikkei225, Kuroda said at a meeting of the Financial Affairs Committee of the House of Councillors, the upper chamber of the Diet, the country’s parliament.
And as noted above, the BOJ decided to double down, literally, on its market propping activities, and earlier this week it announced it would double its annual purchases of ETFs to 12 trillion yen as part of its additional monetary easing measures adopted Monday.
Kuroda also stressed that stepped-up ETF buying by the central bank has “certain effects as a monetary easing step”, which in addition to more gibberish by the 75-year-old, simply meant that the BOJ is doubling down on its purchases because it is now underwater on all of its purchases to date!
It gets better: unwilling to admit the truth until the bitter end of what the BOJ really does , which for the BOJ would mean that moment when its paper losses surpass its capital bases, Kuroda said that ETF purchases aren’t designed to buoy stock prices – something they most clearly are designed to do – but instead to prevent “risk premiums from rising”, whatever that means: perhaps as part of her daily discussions with out daytraders, inbetween discussions of K-Pop, what bread is especially stale today, and whether Fukushima’s gamma radiation will kill off the coronavirus before the coronavirus kills all the participants at the 2020 Olympics, Mrs Watanabe also wants to know the daily risk premium level is.
Somehow we doubt it, and for a good reason: this is just Kuroda’s typical way evading a question by answering some totally non-sequitur gibberish which nobody dares to question afraid to look dumb, when in fact the dumbest person in the room is that one who now has a 3 trillion yen paper loss despite literally being about to print money out of thin air at a moment’s notice and buying whatever he wants.
Tyler Durden
Wed, 03/18/2020 – 21:40 - 'Please Stop Shooting Each Other': Baltimore Mayor Begs Residents To Keep Hospital Beds Clear For Coronavirus Patients
‘Please Stop Shooting Each Other’: Baltimore Mayor Begs Residents To Keep Hospital Beds Clear For Coronavirus Patients
The mayor of Baltimore has asked residents to please stop shooting each other so that local hospital beds are free for coronavirus patients, according to WJZ 13 Baltimore.
“I want to reiterate how completely unacceptable the level of violence is that we have seen recently,” said Mayor Jack Young after seven people were shot Tuesday night in the Madison Park neighborhood. “We will not stand for mass shootings and an increase in crime.”
“For those of you who want to continue to shoot and kill people of this city, we’re not going to tolerate it, Young added. “We’re going to come after you and we’re going to get you.”
He urged people to put down their guns because “we cannot clog up our hospitals and their beds with people that are being shot senselessly because we’re going to need those beds for people infected with the coronavirus. And it could be your mother, your grandmother or one of your relatives. So take that into consideration.”
Commissioner Michael Harrison said the city has seen an uptick in violent crimes since Friday, including a mass shooting Tuesday night — where seven people were shot. Five people were transported to area hospitals via medics and two took private cars to the hospitals for treatment. All seven are in serious but stable condition. –WJZ 13
A local officer who was on patrol at the time traded fire with one of the shooting suspects as the man was fleeing the scene, but he was not able to match the man’s “deadly firepower” according to the report. The officer sustained minor injuries, and the incident “remains open and under investigation,” according to Commissioner Harrison.
Tyler Durden
Wed, 03/18/2020 – 21:20 - JPMorgan Now Expects A Global Depression In The Second Quarter
JPMorgan Now Expects A Global Depression In The Second Quarter
Earlier we reported that in a report titled “the lamps are going out all across the economy”, JPMorgan’s chief US economist, Michael Feroli slashed his Q2 US GDP forecast to a staggering -14%, which he optimistically expects to form the bottom of a V-shaped recovery that then lifts the US economy by +8% and +4% in Q3 and Q4, respectively (at least until the next downward revision in his forecast).
We doubt the V-shaped recovery will take place, in fact if there is any “recovery” it will be L-shaped especially if medical experts are correct that the pandemic will take 12-18 months to full clear out. That said, the Q2 prediction alone is catastrophic, and if that slowdown persists the US is facing not only a recession, but probably a second Great Depression.
However, if JPM’s forecast revision for the US was catastrophic, than its latest global outlook is downright apocalyptic.
In a separate note by JPM’s Bruce Kasman, has also taken a flamethrower to his global economic forecasts, and the bank’s head of economic policy now anticipates Europe to implode an unprecedented 22%, the UK to crater by a depressionary and with the US plunging 14%, he sees the global economy ex China contracting by a whopping -13.7%. In short, JPM now expects no less than a global depression in the second quarter. This will follow a Q1 quarter in which China is expected to collapse by -40.8%, which however will somehow surge by 57.4% in the second quarter.
This is how Kasman lays out his latest forecast:
Last week we concluded that the COVID-19 shock would produce a global recession as nearly all of the world contracts over the three months between February and April. This week’s reports, which show a collapse in China’s activity in February and in survey readings for March elsewhere in the world, validate this view. There is no longer doubt that the longest global expansion on record will end this quarter. The key outlook issue now is gauging the depth and the duration of the 2020 recession.
Here are some more details on the timing of the upcoming depressionary collapse:
As the virus spreads rapidly across the globe, we have also been rapidly adjusting our estimates of the impact on 1H20 growth. This week we have again lowered forecasts. For China this quarter and the rest of the world next quarter, these GDP declines represent the biggest quarterly contractions recorded over the past 50 years at least. These contractions will be sufficient to tip 2020 global GDP growth down 1.1% on a year average basis (0.5% 4Q/4Q). Of particular note (Table 1):
- China collapses this quarter. We have reduced 1Q20 China GDP growth to -40%q/q, saar. Economies closely tied to the China supply-chain (such as Korea and Taiwan) will directionally follow China’s growth path. Forecasts there have also been lowered.
- The US and Europe follows next. For the US and Western Europe, the COVID-19 shock will likely straddle the first two quarters of the year. The stall in activity in March is likely sufficient to tip both economies into contraction this quarter but the shock’s impact is expected to be concentrated next quarter, where both regions are expected to contract at a double-digit annualized pace. These outcomes are worse than were recorded during the global financial crisis or the European sovereign crisis.
- The EM is not immune. While the COVID-19 shock is moving more slowly through EM countries outside Asia, their vulnerability is increasing along a number of fronts. In addition to their heightened sensitivity to falling DM demand for manufactured goods and commodities, they are experiencing a significant tightening in financial conditions. Oil producers are experiencing concentrated terms-of-trade losses. Finally, their relatively weak public health
With these outcomes representing an unprecedented seizing up in activity across a wide range of sectors, JPM warns to brace for a “disturbing” set of economic releases in March and April, arguably as soon as tomorrow’s jobless claims report which according to some, may surge by over a million newly unemployed workers (!). Commensurate with the projected sharp decline in GDP, February-March global industrial production is now expected plunge by more than 10% and US and Euro area PMIs may test their global financial crisis lows.
Yet while JPM expects the crash in industrial production to normalize swiftly, it anticipates a much more extended hit to the unemployment rates, as a result of what it now sees as a much deeper downturn: for the DM as a whole the bank now forecasts the unemployment rate to rise 1.6%-pts in the next two quarters. As was the case during 2008-9, this move reflects a much sharper rise in the US than in the Euro area, even if smaller in magnitude (Figure 3). Most immediately, US initial jobless claims should spike above 400,000 in the coming weeks (Figure 4).
And so with every Wall Street bank having given up on the first half, and certainly on Q2, the only hope is that the coming massive depression will also be the shortest on record. That may be an overly aggressive assumption.
For his part, this is how Kasman does his best to put an optimistic twist on depressionary data:
As this disturbing news rolls in, it will be natural to extrapolate that the global recession will extend well into 2H20. However, our baseline forecast continues to see the dynamics of the March-April dive laying the foundation for a strong rebound in 2H20 global growth. This outcome, which projects 9% ar global GDP growth over the final two quarters of the year, does not ignore the likely lasting damage from the COVID-19 shock.
And yet, in the very next sentence the JPM economist refutes his own optimistic take: “With the income shock from lost first-half growth revenue unlikely to be reversed and tighter financial conditions expected to linger, our forecasts see the level of global GDP growth ending 2020 2.1%-pts below the baseline path before the outbreak.”
More importantly, JPMorgan admits that its V-shaped recovery is contingent on three catalysts all playing out as expected:
- The relaxation of social distancing policies before mid-year. Implicit in the forecast is the view that the imposition of aggressive containment measures will cause the number of active infections to peak around 10 weeks after the confirmation of cases in individual countries. The fading of the virus threat, alongside a growing recognition that the economic costs of maintaining aggressive containment policies are very large, should then begin a process of selective removal of containment measures.
- The success of targeted, coordinated policies. One of the consequences of the global financial crisis is that policymakers have experience in dealing with acute financial sector stress. As such, they are moving rapidly to attempt to ameliorate the threat to financial market functioning and are working to cushion the blow to corporates and households most impacted by the shock. Ensuring that credit will be provided by banks, deferring (or cancelling) tax payments, and subsidies for short-time work have been key areas of focus.
- Fiscal and monetary policy stimulus is building. Usually it is monetary easing that provides the initial line of defense in responding to an economic slowdown. However, the constraints facing central banks and the flexibility provided to fiscal authorities in an extremely low interest rate environment suggest that fiscal easing will be delivered earlier in this episode.
JPMorgan’s summary:
“If a normalization in activity from depressed levels takes hold midyear alongside building policy stimulus, the depth of the current downturn can be seen as a springboard for a strong snapback in growth. However, there is a significant risk that the virus outbreak persists and activity remains restricted for a longer time. In this environment, risks rise that the depth of the initial shock unleashes negative forces that magnify the hit to activity into 2H20. Notably, firms that had been hovering on the margins of viability pre-crisis may not have sufficient equity to justify even a subsidized extension of credit and may close. The longer the duration of the interruption to activity, the deeper into the population of firms likely closures will occur, and the greater the feedback into consumer incomes and expectations.”
In short, the world is facing an assured economic depression in Q2, and the only question is whether this depression persists into the second half and 2021 or reverses in Q3. The answer will depend on a combination of “price to perfection” events all turning out just as hoped for. Which, in a world of record political polarization, ascendant nationalism, and a torn social fabric, is recipe for not only disappointment but also disaster.
Tyler Durden
Wed, 03/18/2020 – 21:00 - Second US Congressman Tests Positive For Covid-19: Live Updates
Second US Congressman Tests Positive For Covid-19: Live Updates
Summary:
- US deaths hit 114
- Senate to vote on 2nd economic rescue bill
- Iran reports another 147 deaths
- Hong Kong reported 14 new confirmed cases
- Brazil Senate Chief tests postiive
- France case total nears 2,000, death toll passes 250
- NYSE to close floor trading
- McConnell promises vote on 2nd economic bailout package by Friday
- Two Congresswomen tests positive
- Conn. reports first fatality
- Kudlow says US might capitalize troubled companies by buying stock
- WHO declares virus “enemy of humanity”
- State Department suspends visa services
- Germany sees 1k new cases as total nears 10k
- Kudlow says stimulus package should be $1.3 trillion
- Merkel warns country facing biggest challenge since WWII
- European Union seals borders
- PM Johnson prepares ‘London Lockdown’ plan
- Trump says China hasn’t asked the US to suspend tariffs
- UAW succeeds in pushing Detroit automakers to shut down factories
- UK reportedly about to close schools as Boris scrambles to catch up with policy U-turn
- ECB holding emergency call over virus response
- Facebook launches coronavirus website information center
- France follows Germany by eliminating bank capital buffers
- HUD suspends evictions
- Cuomo bars NY companies from having more than 50%
- Wal-Mart shares hit record high
- US, Canada agree to close border
- Cuomo says state “looking into” reports of Covid-19 cluster in Borough Park
- White House now pushing to send 2 $1,000 checks to every American
- Spanish Olympic Committee head says Tokyo Games should be postponed
* * *
Update (2040ET): Utah Congressman Ben McAdams has become the second member of the House of Representatives to test positive.
“Today I learned that I tested positive,” he said in a statement.
Please read my statement on contracting #COVID19. I have self-quarantined since first having symptoms and consulted with my doctor. #utpol pic.twitter.com/upx4NcTvF8
— Rep. Ben McAdams (@RepBenMcAdams) March 19, 2020
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Both Congressmen are Republicans.
* * *
Update (1845ET): In another alarming development, Connecticut Gov. Ned Lamont on Wednesday confirmed the state’s first death linked to Covid-19: An 88 year old man who was recently admitted to a hospital in Danbury.
It is with sadness today that we are confirming the first death of a person in Connecticut due to severe complications from COVID-19. The patient, a man in his 80s, had recently been admitted to Danbury Hospital, where he was receiving treatment. (1/4)
— Governor Ned Lamont (@GovNedLamont) March 18, 2020
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The first fatality “really brings it home”, Lamont said during an interview on MSNBC. “We don’t want Italy to happen in Connecticut,” Lamont said, explaining that this is why he moved early to close schools, restaurants, gyms and other public areas.
WATCH: Conn. Gov. Ned Lamont (D) says his state’s first coronavirus death “really brings it home.” #MTPDaily@GovNedLamont: “You don’t want Italy to happen in Connecticut.” pic.twitter.com/UFFLkEo8kQ
— Meet the Press (@MeetThePress) March 18, 2020
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If the state doesn’t move quickly, it could be faced with its own Kirkland-style crisis, as WTNH reports that a patient in a nursing home in Stafford Springs, the town that hosts Connecticut’s only major airport, Bradley, has also tested positive. The rest of the residents in the facility are in the process of being tested.
After more than half a dozen lawmakers self-quarantined over the past few weeks, Florida Rep. Mario Diaz-Balart has become the first member of the US Congress to test positive for the coronavirus. Diaz-Balart announced the diagnosis in a tweeted statement, where he explained that he had decided to self-quarantine in Washington after votes on March 13 because his wife had conditions that made her a high-risk patient. Diaz-Balart presumably met with one of the many Brazilian officials who has now tested positive for the virus (or maybe one of those defiant spring breakers putting the health of the nation at risk to party on the beach, as is their god-given right as Americans). The problem of political officials catching the virus has been a problem from Iran, to Italy to many other countries the virus has traveled.
I’m feeling much better. However, it’s important that everyone take this seriously and follow @CDCgov guidelines in order to avoid getting sick & mitigate the spread of this virus. We must continue to work together to emerge stronger as a country during these trying times. pic.twitter.com/g5W5vSQIyH
— Mario Diaz-Balart (@MarioDB) March 18, 2020
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It’s only fitting that he’s from Florida…
Meanwhile, in Spain, where the prime minister has instituted a ‘shelter in place’ crackdown after his wife also caught the virus, health officials reported 2,943 new cases of the virus, bringing the total to 14,769, along with 105 new deaths, bringing the total to 638.
* * *
Update (1740ET): NYC Mayor Bill de Blasio insisted that there are nearly 2k case sin NYC alone as of Wednesday afternoon, and that 11 NYC residents had died from the virus. That 1,871 number is up from 1,339 this morning.
- DE BLASIO: NUMBERS GROWING REALLY RAPIDLY, 1871 CASES IN NYC
- DE BLASIO: 11 NYC RESIDENTS HAVE DIED FROM VIRUS
* * *
Update (1715ET): Despite myriad misgivings, the Senate passed the first economy-focused coronavirus relief package on Wednesday. A couple hours later, Senate Majority Leader Mitch McConnell said a second stimulus bill (the third bill dedicated to fighting the virus) could be passed as soon as Friday, even as Mnuchin and Pelosi continue to haggle over the details.
That bill could include $500 billion in direct payments to Americans, another $100 billion for industries in need of rescue, $300 billion in small and medium business loans, and possibly more. The dollar-amount, which keeps moving higher (Kudlow most recently put it at $1.3 trillion) is intended to shock and awe the public and quiet the panic as millions of Americans file for unemployment.
Yesterday, Mnuchin told lawmakers that if they didn’t pass the bill, that unemployment in this country could hit 20% – though Trump said that’s an “absolute, worst-case scenario”, and “we’re nowhere near it.”
We suspect sentiment regarding the bill’s chances is going to start having an impact on equity prices.
Meanwhile, the total number of global coronavirus cases has climbed to $214,000.
* * *
Update (1655ET): Trump economic advisor Larry Kudlow made some more bullish comments after his interview with Fox News, telling reporters with the White House pool that the administration could even resort to direct purchases of equities – a de facto nationalization – as part of its bailout package.
“Whatever it takes,” Kudlow said, at one point.
Meanwhile, after a handful of futures exchanges closed floor trading, the NYSE has decided to follow suit, closing floor trading (aka the CNBC live set) and move to only electronic trading beginning on Monday, according to NYSE owner IntercontinentalExchange.
In other news, the president of the Brazilian Senate has tested positive for Covid-19.
* * *
Update (1540ET): With Larry Kudlow has taken to Fox Business to try and jawbone the market higher as the Senate begins its vote on the ‘Part 2’ economic stimulus package for small businesses, which we suspect will pass following last night’s meeting with Mnuchin.
During the interview, Kudlow said the total value of the third economic stimulus package should be $1.3 trillion, and if it takes more than $1.3 trillion worth of stimulus for ‘Phase 3’, “we will do more than that”.
Yesterday, Mnuchin said the stimulus would include $1 trillion in direct aid to Americans (checks in mailboxes), and another $300 billion in tax relief for small businesses. As one twitter wit pointed out…
Kudlow today says phase three stimulus should be $1.3trln – growth rate of stimulus estimates is slowing 🙄 https://t.co/AnQpn5Nq9m
— Yogi Chan (@Yogi_Chan) March 18, 2020
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A word of advice, guys: the stimulus conversation is starting to sound a little desperate. The market wanted this done last week. The longer it takes from here on out, the further we will fall.
* * *
Update (1530ET): A State Department spokeswoman just said that the US is suspending visa services in most countries worldwide as the world turns inward to combat the coronavirus.
French Finance Minister Bruno Le Maire revealed an aid package on Wednesday, following in the footsteps of Germany by allowing French banks to ignore capital buffers to tap an additional €8 billion in capital. He also called on the ECB to follow up with a “massive” intervention, as the ECB governing council is reportedly holding an “emergency call” on virus response.
The US Air Force’s National Guard unit has transported 500,000 nasopharyngeal swabs for coronavirus tests from Italy to Memphis, Pentagon officials said.
In a worrying sign for the banks, JPM just reported that it will be closing 1,000 Chase branches out of the more than 5,100 across the US. This comes just one day after Treasury Secretary Mnuchin insisted that no banks were considering closures.
Facebook denied a WaPo report claiming the company was working with the government to build an app to help track the spread of coronavirus by exploiting sensitive personal data. Instead, the company announced a new website to help provide coroanvirus information – news, testing info, treatment, prevention – to all of FB’s 2 billion+ users.
* * *
Update (1420ET): Telegraph editor Steven Swinford reports that Boris Johnson – who was evasive when asked about the possibility earlier – has asked the government to draw up plans for a total London lockdown.
Exclusive:
Boris Johnson has asked departments to draw up plans for London lockdown
Cabinet Office has asked for proposals on restrictions, implementation & compliance measures
It’s being called the ‘London Shielding Plan’
Responses expected by Fridayhttps://t.co/ZK8yAzc1N4
— Steven Swinford (@Steven_Swinford) March 18, 2020
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In the US, the only areas that have been really locked down are New Rochelle and the area near the nursing home in Kirkland Washington where dozens of patients have died. The lockdown of London would be essentially unprecedented in the West, since it’s larger than any city in Italy, Spain or Paris.
Johnson has pivoted in his approach to the virus in recent days after experts determined that the UK government’s approach, which left businesses and schools open, while encouraging everybody exhibiting symptoms to quarantine as soon as they emerged, risks killing hundreds of thousands, while some have accused Johnson of embracing a ‘herd immunity’ approach, which the administration has denied.
Earlier this week, Johnson advised all Britons – especially those working in the capitol – to work from home and avoid going out if possible, yet tube ridership has only declined 19%.
Additionally, officials said, the Johnson administration isn’t planning on adopting the measures within the next 48 hours. But they’re worried that as more individuals ignore the government’s advice, they might need to take a heavy handed approach.
Boris Johnson has asked government departments to draw up plans for a lockdown of London to help stop the spread of coronavirus.
The Cabinet Office has written to departments asking for recommendations about restrictions, how they could be implemented and how to ensure “compliance.”
The measures, which are being described as a “shielding plan for London”, could be introduced as soon as next week and see businesses closed and restrictions placed on travel. Robert Jenrick, the housing minister, is taking the lead on the policy.
Under new emergency powers the government will be able to “close premises” and “restrict or prohibit events and gatherings” including halting cars, buses, trains and planes.
The issue of ‘enforcement’ came up several times.
Across the channel, France reported a total of 9,135 cases on Wednesday, a jump of 1,404 cases from Tuesday, according to Director General for Health Jerome Salomon, who released the figures during a daily briefing. Deaths rose to 264 from 175 the day before.
Earlier, the WHO branded the virus an “enemy against humanity,” and urged a collective response to fight the global outbreak.
“This coronavirus is presenting us with an unprecedented threat,” WHO chief Tedros Adhanom Ghebreyesus said Wednesday.
As expected, the EU on Wednesday barred travelers from outside the bloc for 30 days to try to slow the rapid spread of the virus. Though it estimated that there are still 80,000 EU citizens abroad who must return home.
Europe has now recorded 4,023 deaths, including 2,978 in Italy which recorded its highest single day toll Wednesday, surpassing 3,384 deaths in Asia. Across the Continent, more than 84,000 cases have been confirmed, with Italy, Spain and France leading in both infections and fatalities.
While Italy, France, the UK and Spain suffer, Germany has had slightly more success in containing the virus, as cases and deaths have remained muted while testing has always been high. As of Feb. 24, Germany had 16 confirmed cases.
On Wednesday, Chancellor Angela Merkel delivered a major televised address – a format typically saved for her new years’ address – warning the country that it’s facing its most serious challenge since World War II where “solidarity” was critical. Cases in the country jumped by more than 1,000 overnight to a total of 8,198, while the German death toll has been steady at 12 for days. If effective measures aren’t taken, 10 million Germans could be infected in the next three months, Germany’s top health authorities have warned.
“The coronavirus is currently changing life in our country dramatically,” Merkel said. “Our expectations of normality, of public life, of community – all that is being tested like never before.” She called on all Germans to “do their part” in limiting the damage.
Schools have been closed in some areas (particularly in hard-hit Bavaria), and restaurants and bars across the country have shuttered or reduced their hours, though no blanket bans or closures have been adopted by federal officials.
* * *
Update (1350ET): UK PM Johnson just ordered all schools across the UK to close, and promised to “do more” after passing a massive stimulus package yesterday.
NEW: Boris Johnson announces:
-Schools closed from Friday ‘until further notice’
-Staying open for children of key workers & vulnerable children
-Working on voucher scheme for children on free school meals
-Exams in May and June cancelled— Daniel Hewitt (@DanielHewittITV) March 18, 2020
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The prime minister promised nervous students that “exams will not take place as planned in May and June” and that schools would ‘remain open’ on some level to accommodate the children of emergency workers as well as ‘vulnerable pupils’. To lessen the financial blow to families, Johnson added that the government will provide vouchers for free school meals for those eligible.
* * *
Update (1330ET): Italy has reported another record jump in deaths on Wednesday: 475 new deaths were confirmed, bringing total to 2,978. Meanwhile, the total number of confirmed cases has climbed to 35,713 from 31,506, with a total of 2,978 deaths.
UK also reported its largest jump in deaths, reporting an additional 37 fatalities, bringing its total to 104, while it’s case total lingers below 3,000, while government epidemiologists project that the true number infected is likely closer to 50k, given the death toll.
Schools in Scotland and Wales are set to close on Friday, with PM Boris Johnson and his education secretary Gavin Williamson hinting that the situation in schools is getting harder to control, and with ensuring safety becoming more difficult, it’s about time to close up shop.
* * *
Update (1255ET): The UAW has reportedly succeeded in convincing Detroit automakers to shut down all US factories, following similar decisions by German and South Korean car companies.
As the reporters in the briefing room chew over Trump’s insistence on blaming China while maintaining a 4ft perimeter of personal space, we’d like to highlight the results of a study by the University of Southampton showing there could have been a 95% reduction in cases world wide if China had acted to contain the virus 3 weeks earlier.
The UK is reportedly about to close schools across the country as PM Boris Johnson continues his policy about-face after the experts advising the administration’s shifted their view and warned that if Johnson were to stay the course – ignoring the quarantines and closures being implemented everywhere else – it would likely result in “hundreds of thousands” of deaths.
The education secretary has said that the situation for schools has become “increasingly challenging” and that the circumstances are “shifting.”
* * *
Update (1250ET): Trump said China hasn’t asked the US for any leeway on the ‘Phase 1’ trade pact, though he speculated that they might thanks to the enormous economic hit they are taking.
Regarding Mexico, Trump said he’s not closing the border, but is invoking a “provision” giving him greater latitude.
In unrelated, but encouraging, news for some of the most vulnerable Americans during this time of crisis, HUD has suspended all foreclosures/evictions until the end of April, Trump said.
* * *
Update (1220ET): President Trump has invoked the Defense Production Act and deploys FEMA to all regions of the country.
After once again calling on Americans to heed the governments guidance, Dr. Birx said she has seen some preliminary data suggesting that young people are being infected at much higher rates because of their indifference to the virus – which would explain the unusually large number of young people in serious condition in Italy and other parts of the country.
With tests about to become widely available, the US could see numbers of cases rise pretty swiftly, potentially provoking claims that the US is “worse than Italy”. She advised the public to ignore this, adding that Roche and Thermo-Fisher have really stepped up in providing tests.
Unsurprisingly, one of the first questions posed to Trump was an inquiry about why he keeps referring to the virus as the “Chinese virus”, with the reporter snarkily noting that more Europeans now have the virus than Chinese people.
“Because it comes from China,” Trump calmly replied, before going on to explain that “China was saying that US soldiers spread the virus to China…I can’t have that.”
Trump also said that the economy is “nowhere close” to the 20% unemployment number that has been bandied about since Mnuchin reportedly brought it up during a meeting with Republican lawmakers.
Notably, Dr Anthony Fauci, who is nearly 80 and technically in the “high risk” contingent for the virus, was absent from today’s briefing. Maybe that’s why markets were so unimpressed.
* * *
Update (1200ET): Mitch McConnell has called a vote on the second part of the federal coronavirus response package for 2 pm. The bill was stalled after some GOP lawmakers insisted on making ‘technical alterations’.
In a series of tweets, McConnell says he will support the bill, though he feels it doesn’t go far enough to help small business owners. Of course, in the middle of a crisis, we suspect the small businesses McConnell is championing would rather have something concrete, than all the empty soundbites in the world.
The Senate is going to vote on the House’s proposal. I will support it. But it does not help enough Americans and, crucially, it adds even more uncertainty for small businesses. It will make it all the more urgent for the Senate to pass bold legislation to help small businesses. pic.twitter.com/R0DjHKBLrI
— Leader McConnell (@senatemajldr) March 18, 2020
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The market is moved higher in recent trade. Is the Trump Administration about to show investors that it has the capacity to step up in times of crisis? Stay tuned…
* * *
Update (1150ET): Cuomo and NY public health officials just confirmed that they’re “looking into” reports about a “cluster” of cases in Borough Park, Brooklyn, a neighborhood that’s overwhelmingly populated by ultra-orthodox Jews, stirring up memories of last year’s measles outbreak.
In other news, the total cases diagnosed in Europe has now passed the total from China.
* * *
Update (1140ET): As we wait for the inevitably tardy White House task force, accompanied by President Trump, to deliver Wednesday’s briefing, here are a few more updates:
Companies in NY shouldn’t have no more than 50% of their workforce in their facilities at any time, NY Gov Andrew Cuomo said, as his daily presser began.
Providing an update on the #Coronavirus pandemic. WATCH LIVE: https://t.co/eq4DDnvc9V
— Andrew Cuomo (@NYGovCuomo) March 18, 2020
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After initially proposing a $50 billion airline bailout, Trump is reportedly proposing lending to air carriers from the Exchange Stabilization Fund, a pool of capital at the Treasury used for direct FX-market interventions. The administration is also reportedly planning to set aside another $150 billion for other industry bailouts.
With NY still leading the country in testing thanks to a handful of ‘drive thru’ testing centers that have opened in the southern part of the state, Cuomo said the state has now confirmed 2,382 cases in the state, up 1,008 since yesterday, slightly larger than yesterday;’s jump. That’s a larger total than all but 10 countries.
In Norway, lawmakers passed a bill granting the country’s executive emergency powers, what appears to be a first in Europe.
* * *
Update (1110ET): The EU has reportedly decided on a plan that will ‘pave the way’ for the ECB to make the bond purchases that it has promised.
In other news: Amid the market carnage, Wal-Mart shares climbed 6.1% higher on Wednesday to hit a fresh record high. In Canada, PM Trudeau confirmed that the decision to close the northern border was a mutual decision.
And once after again trashing President Trump’s fiscal plan of giving every American $1,000, Senate Minority Leader Chuck Schumer said Wednesday that the payments to Americans need to be “bigger” and “more frequent”. He’s not the only one: Bernie Sanders said he would double the amount to $2,000 per adult American during a post-primary announcement on Tuesday. Even Andrew Yang tweeted that he was “consulted” about his infamous ‘freedom dividend’ policy.
Like a teenager intent on acing that first job interview, when it comes to the market chaos, the White House simply won’t take ‘no’ for an answer, and has repeatedly tried to jawbone us out of this crisis, even as the reaction has made plain that only concrete action from the Trump Administration and Congress can save us from this meltdown.
Steve Mnuchin was in the middle of an interview with CNBC Wednesday morning when the Washington Post reported that the White House now intends to send two $1,000 checks to adult Americans, in addition to the $300 billion in ’emergency liquidity’ (ie zero-interest loans) it’s also promising.
Here’s a few headlines from the Mnuchin interview.
- MNUCHIN PROPOSES $500B IN AID CHECKS PAID IN TWO INSTALLMENTS
- MNUCHIN SUMMARIZES VIRUS AID PROPOSAL IN FACT SHEET
- U.S ALSO OUTLINES $200B IN CORPORATE AID, $300B SMALL BUSINESS
- CHECKS TO AMERICANS WOULD COME ON APRIL 6, MAY 18 IF APPROVE
In a few minutes, we’re bound to hear more from the White House task force.
* * *
Update (1000ET): In a statement released by the Pentagon, 49 American members of the American military have now tested positive for the virus, 13 more than Tuesday.
Three of them have been hospitalized.
In addition, 14 DoD contractors have tested positive, 19 spouses of service members and 7 contractors.
* * *
Update (0940ET): President Trump just tweeted that the US will be closing the 5,500-mile Canadian border “by mutual consent” – adding that trade and other “essential” traffic wouldn’t be interrupted.
We will be, by mutual consent, temporarily closing our Northern Border with Canada to non-essential traffic. Trade will not be affected. Details to follow!
— Donald J. Trump (@realDonaldTrump) March 18, 2020
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Since the order comes via “mutual consent”, American citizens won’t be able to cross into Canada. This comes after PM Trudeau closed the country’s borders to all foreigners except Americans earlier this week.
In other news, NYC Mayor de Blasio said the city needs the military’s help to combat the virus, eliciting mental images of phalanxes of soldiers walking down Fifth Avenue, like something out of a disaster movie.
As we wait to see if the rest of the Olympic Committee will take the advice of Spanish Olympic Committee head Alejandro Blanco and push to cancel the games…especially as quarantines make it impossible for athletes to train.
In the UK, a reporter for the London-based ‘City AM’ business newspaper said she’d heard that the government is planning in order to ban nonessential traffic in and out of London. The quarantine order would also shutter all stores besides groceries and pharmacies.
Additionally, the Eurovision 2020 contest has been cancelled.
An official statement from the European Broadcasting Union on the #Eurovision Song Contest 2020. pic.twitter.com/b3h7akxvpF
— Eurovision Song Contest (@Eurovision) March 18, 2020
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* * *
With US equity futures limit-down again overnight, the novel coronavirus outbreak is beginning to feel like ‘Groundhog Day’.
And if the market’s performance isn’t enough to get readers doubting their own sanity, some of the novel coronavirus headlines hitting in the early morning and overnight just might do the trick. One day after Chinese health officials reported just a single case of Covid-19 that was transmitted domestically, President Xi has warned that “inbound” cases of the virus – ie foreigners traveling to China who are already infected – are placing China at risk for reinfection. So, after China infected the world, President Xi is warning that the world might soon reinfect China.
Overnight, Hong Kong reported 14 new confirmed cases – its largest single-day jump – after new cases slowed to a trickle in recent weeks. According to the SCMP, all except one of those cases was a foreigner bringing the virus back to HK.
Singapore and Taiwan, which were widely praised for acting swiftly to stamp out the virus via mandatory closures, travel restrictions and – as the NYT explained in a story published Wednesday morning – swiftly tracing and isolating contacts of the recently diagnosed. In South Korea, a spate of new clusters around densely populated Seoul has raised fears about another runaway outbreak, per the SCMP.
The KCDC reported 93 new cases on Wednesday, up from 84 a day earlier and 74 on Monday. The new cases took the total infection caseload to 8,413.
As Republican “deficit-hawks” like Lindsey Graham pushed back against the Trump Administration’s latest ‘helicopter money’ stimulus plan yesterday that will inject $1 trillion into the economy (on top of $300 billion in deferred tax payments), Treasury Secretary Steven Mnuchin took a page out of the ‘TARP’ playbook and warned a group of GOP senators during a closed-door meeting on Tuesday that the unemployment rate in the US could soar to depression levels of around 20% if they failed to pass the legislation, then promptly leaked his comments to Reuters, with the stipulation that Mnuchin’s comments didn’t represent an official “forecast”, merely one of many worst-case scenarios that could come to pass if the federal government continues to sit on its hands.
In the Middle East, Iran reported another 147 deaths from the virus on Wednesday, bringing its death toll to 1,135. Elsewhere, the Sultanate of Oman entered an almost full lockdown beginning at noon local time on Wednesday as the sultanate imposes the most restrictive measures across the Gulf states to limit the spread of coronavirus after the region recorded its first death outside Iran two days ago.
In the UK, Sainsbury’s supermarket chain said Wednesday that it would begin limiting customer purchases to between 2-3 items to combat hoarding.
As suddenly unemployed workers in the US crash state benefit websites, the ILO has warned that the pandemic could leave up to 25 million more out of work, and drastically slash incomes.
Globally, the total number of Covid-19 cases passed 200,000 overnight – more than doubling over two weeks – after health officials around the world reported the largest jump in cases yet, with an additional 15,615 confirmed on Tuesday, and even more confirmations following overnight.
So far, the US has confirmed 6,496 cases, including 114 deaths. In Italy, the second worst-hit country after China (and likely Iran, which lags Italy on the official death toll but likely has thousands of dead or deathly ill who aren’t being counted. In Italy, infections topped 31,500 and deaths reached 2,503 by Wednesday morning.
Tyler Durden
Wed, 03/18/2020 – 20:45 - "It's Rather Devastating": The Coronavirus Outbreak Cost One NYC Caterer Half A Million Dollars
“It’s Rather Devastating”: The Coronavirus Outbreak Cost One NYC Caterer Half A Million Dollars
The coronavirus outbreak is lopping severe pressure on businesses globally. In the last 72 hours alone, we have covered New York City restaurants that have been decimated and executives in the airline and travel industry who have cut their salaries as a response.
One businessperson, New York city caterer David Turk, shared with Bloomberg how the outbreak has cost him $500,000 – and that’s only so far.
Just hours after we reported about the mass cancellations that were happening across the city, we are now privy to the financial mayhem it is wreaking. Turk said: “There was a deposit paid but the balance of it was what we were counting on, and of course it’s gone. Virtually everything that was on the books is either canceled or going to be rescheduled for a later time.”
New York City has taken drastic measures to stop the spread of the virus, including cancelling the St. Patrick’s Day parade, events at Madison Square Garden and shutting down Broadway.
Businesses in the city are bracing for major disruption, the length and severity of which many are still unsure of.
Turk says about 10 events that he was scheduled to work have been cancelled. He also said that others in the catering industry are already laying people off. He plans on asking his landlord for a rent concession to try and prevent laying off his own workers.
He concluded: “It’s rather devastating. This is going to be horrible for the New York economy. horrible. There’s going to be a lot of people who are going to need help.”
Tyler Durden
Wed, 03/18/2020 – 20:40 - Lehman Playbook Continues: Fed Unveils Another Bailout Fund To Avoid Money Market Funds 'Breaking The Buck'
Lehman Playbook Continues: Fed Unveils Another Bailout Fund To Avoid Money Market Funds ‘Breaking The Buck’
The four-letter acronyms for ‘bailout’ continue to play out exactly like during the Lehman crisis (as we previewed here), as The Fed desperately tries to hold the backbone of the entire global financial markets together with whack-a-mole buying programs to avoid investors seeing behind the curtain of the whole Potemkin Village.
Earlier this week we previewed all this, noting that, in addition to the revival of the PDCF, we may also see the return of AMLF and MMIFF…
The second (MMIFF) was designed to provide liquidity for money market mutual funds, stimulating them to extend the term of their money market investments.
Instead of scrambling for overnight assets because of liquidity fears, this would help maintain demand for term securities in the money market. Although no loans were made under the MMIFF, the facility could be useful this time. While CPFF helps issuers of commercial paper, money market mutual funds are still in need of liquidity.
A related facility, which peaked at $140bn in 2008, was the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF) which provided funding for depository institutions purchasing asset-backed commercial paper from money market mutual funds.
As if one needs reminding, one of the more dramatic events from the 2008 crisis was the sight of mutual funds trading below $1 – so-called ‘breaking the buck’.
When money-market investors fear they won’t get back their capital it will make a bad situation into a real crisis.
The Fed has enough to deal with without a run on mutual funds by retail investors, and so, sure enough, in addition to unlimited repo, CPFF, TALF, and PDCF, The Fed has just announced the establishment of a Money Market Mutual Fund Liquidity Facility, or MMLF.
As the biggest buyers of commercial paper, this bailout facility is clearly aimed, once again, at being another effort to reduce the spiking risks (and freeze) in the critical short-term liquidity markets.
While yields did compress a little (positive) today, risk increased notably despite CPFF…
And so, paging through the “OMFG, what do we do now that didn’t work in the past”-playbook, this new facility will make loans available to eligible financial institutions secured by high-quality assets purchased by the financial institution from money market mutual funds.
We wait to see how effective this latest four-letter-word will be in calming the savage beast of a global dollar shortage.
* * *
The Federal Reserve Board on Wednesday broadened its program of support for the flow of credit to households and businesses by taking steps to enhance the liquidity and functioning of crucial money markets.
Through the establishment of a Money Market Mutual Fund Liquidity Facility, or MMLF, the Federal Reserve Bank of Boston will make loans available to eligible financial institutions secured by high-quality assets purchased by the financial institution from money market mutual funds.
Money market funds are common investment tools for families, businesses, and a range of companies. The MMLF will assist money market funds in meeting demands for redemptions by households and other investors, enhancing overall market functioning and credit provision to the broader economy.
The term sheet below details the types of assets, including unsecured and secured commercial paper, agency securities, and Treasury securities, that are eligible, as well as additional information. The MMLF program will purchase a broader range of assets, but its structure is very similar to the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, or AMLF, that operated from late 2008 to early 2010. The MMLF is established by the Federal Reserve under the authority of Section 13(3) of the Federal Reserve Act, with approval of the Treasury Secretary. The Department of the Treasury will provide $10 billion of credit protection to the Federal Reserve in connection with the MMLF from the Treasury’s Exchange Stabilization Fund.
Term Sheet:
Money Market Mutual Fund Liquidity Facility
Facility: To provide liquidity to Money Market Mutual Funds (“Funds”), the Federal Reserve Bank of Boston
(“Reserve Bank”) would lend to eligible borrowers, taking as collateral certain types of assets purchased by
the borrower from Funds (i) concurrently with the borrowing; or (ii) on or after March 18, 2020, but before
the opening of the Facility.Borrower Eligibility: All U.S. depository institutions, U.S. bank holding companies (parent companies
incorporated in the United States or their U.S. broker-dealer subsidiaries), or U.S. branches and agencies of
foreign banks are eligible to borrow under the Facility.Funds: A Fund must identify itself as a prime money market fund under item A.10 of Securities and Exchange
Commission Form N-MFP.Advance Maturity: The maturity date of an advance will equal the maturity date of the eligible collateral
pledged to secure the advance made under this Facility except in no case will the maturity date of an advance
exceed 12 months.Eligible Collateral: Collateral that is eligible for pledge under the Facility must be one of the following types:
1) U.S. Treasuries & Fully Guaranteed Agencies;
2) Securities issued by U.S. Government Sponsored Entities;
3) Asset-backed commercial paper that is issued by a U.S. issuer, is rated at the time purchased from the
Fund or pledged to the Reserve Bank not lower than A1, F1, or P1 by at least two major rating agencies
or, if rated by only one major rating agency, is rated within the top rating category by that agency; or4) Unsecured commercial paper that is issued by a U.S. issuer, is rated at the time purchased from the
Fund or pledged to the Reserve Bank not lower than A1, F1, or P1 by at least two major rating agencies
or, if rated by only one major rating agency, is rated within the top rating category by that agency.In addition, the facility may accept receivables from certain repurchase agreements.
Rate: Advances made under the Facility that are secured by U.S. Treasuries & Fully Guaranteed Agencies or
Securities issued by U.S. Government Sponsored Entities will be made at a rate equal to the primary credit
rate in effect at the Reserve Bank that is offered to depository institutions at the time the advance is made.
All other advances will be made at a rate equal to the primary credit rate in effect at the Reserve Bank that is
offered to depository institutions at the time the advance is made plus 100 bps.Fees: There are no special fees associated with the Facility.
Collateral Valuation: The collateral valuation will either be amortized cost or fair value. For asset-backed
and unsecured commercial paper, the valuation will be amortized cost.Credit Protection by Department of the Treasury: The Department of the Treasury, using the Exchange
Stabilization Fund, will provide $10 billion as credit protection to the Reserve Bank.Non-Recourse: Advances made under the Facility are made without recourse to the Borrower, provided the
requirements of the Facility are met. For avoidance of doubt, borrowers under the MMLF will bear no credit
risk.Regulatory Capital Treatment: Separately and consistent with the purposes of the MMLF, the Board, the
OCC, and FDIC will act to fully neutralize the impact of a depository institution holding company or depository
institution’s participation in the facility for purposes of regulatory capital requirements, including risk-based
capital and leverage requirements. The Board, OCC, and FDIC will fully exempt from risk-based capital and
leverage requirements (i) any asset pledged to the MMLF and (ii) any asset purchased from a Fund on or after
March 18, 2020 that the firm intends to pledge to the MMLF upon opening of the Facility.Program Termination: No new credit extensions will be made after September 30, 2020, unless the Facility is
extended by the Board of Governors of the Federal Reserve System.* * *
So this better all be fixed by September?
The market for now was completely unimpressed by this latest effort:
Tyler Durden
Wed, 03/18/2020 – 20:40 - Johnstone: 9 Surreal Thoughts About Covid-19 & What's Coming Next
Johnstone: 9 Surreal Thoughts About Covid-19 & What’s Coming Next
Authored by Caitlin Johnstone via Medium.com,
This gig is kinda weird at the moment. I write about what’s going on in the world for a living, and there’s certainly plenty going on in the world to be written about. But also there’s this acute awareness that anything I write about today is going to look petty and insignificant in the very near future.
I mean, we’re in the first moments of an unfolding pandemic which, from what I can tell just looking at the numbers, is about to change the world in some pretty significant ways. Governmental faceplant after governmental faceplant after missed opportunity after missed opportunity all around the world appears to have set us on a trajectory toward overburdened healthcare systems, severe economic downturns, and, of course, mass deaths.
And maybe chaos. And maybe healing. And maybe, when all is said and done, a total restructuring of power and the way we do things.
Standing on the precipice of that, how the hell am I supposed to write about how Bernie didn’t go hard enough at Biden in the last debate or whatever? So many of the arguments we’ve been placing so much importance on lately could easily look irrelevant in a matter of weeks.
Anyway, here are nine thoughts on COVID-19 and what’s coming.
My job is literally to monitor and compare global policy responses to coronavirus, and this is categorically untrue.
Countries that are doing it better include: Sth Korea, Taiwan, Hong Kong, Singapore, China (after the first month of lies and obfuscation), Austria and Australia https://t.co/4xpS7qodjL— Ryan Heath (@PoliticoRyan) March 16, 2020
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1 – Everyone in conspiracy circles has strong opinions about what’s going on, so anything I could possibly say about this is going to get a ton of pushback from some faction or another. That’s fine. In my opinion the fears that the ruling class will seize this opportunity to advance preexisting authoritarian agendas are well-founded, and people are right to have suspicions about the official narrative on the origins of the virus, but people who are still saying the whole thing is fake from top to bottom and it’s just another flu/no big deal have been proved wrong by facts in evidence. People should minimize social contact to avoid overburdening healthcare systems and thereby killing people. No matter how certain you are that this is all fake, you’re not certain enough to justify needlessly risking lives.
2 – Google-owned YouTube has just announced that they’re going to be censoring a lot more videos during the pandemic, citing the need to rely on automated censorship as they scale back workers’ presence at the office. No attempt has been made to explain why YouTube staff can’t just review the material working from home. Definitely worth keeping an eye on; if widespread authoritarian measures are going to be implemented during this time, increasing internet censorship will likely be the first step.
3 – I think this is going to hit America much harder than other countries, unfortunately. Combine a literal joke of a healthcare system with a president who up until just today has been dismissive of the threat the virus poses, the fact that the majority of Americans can’t afford a $1,000 emergency expense at a time of mounting layoffs while being chronically uninsured or underinsured, an inability to make anything happen without massive corporations voluntarily going against their own profit margins, a culture of rugged individualism with a reflexive distaste for collectivist organization for the good of the whole, and a highly religious population with many preachers telling their underinsured parishioners to demonstrate their faith by gathering at the megachurch and shaking hands with everyone, and you’ve got a recipe for disaster.
Please stay as safe as you can.
How did China 🇨🇳 beat coronavirus⁉️
One of China’s creative techniques was the ❝Disinfection Tunnel❞ which was invented & manufactured in days, NOT years.— Erik Solheim (@ErikSolheim) March 16, 2020
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4 – Meanwhile China is having success getting the pandemic under control on its end, with its government’s ability to build hospitals and crank out brand new tech solutions with astonishing swiftness, and of course to clamp down on the public’s free movement as soon as it was deemed necessary. Now Beijing is moving into a world leadership position in tackling the pandemic, stepping in to aid nations which can’t get help elsewhere like Italy and Serbia.
5 – The US became a superpower after being left intact while competing nations were stuck rebuilding themselves from two devastating world wars, allowing it to surge ahead of the competition. China, as we’ve discussed here many times, has been poised to overtake America as the dominant world power, so it’s possible we’ll see China’s relative success and America’s relative failure on this front dance in a way which gives a significant boost in that direction in the same way the US was given a boost by the world wars. It’s very likely China comes out of this notably further along in its agenda to create a multipolar world than before this all began.
6 – And the US of course realizes this threat, which is why my social media notifications right now are full of propagandized human livestock bleating about China being the Latest Official Bad Guy who I absolutely must believe very bad things about. A dying empire knows it’s going to need to take some drastic, dangerous measures to secure world dominance in the face of a surging contender, and it knows it needs to manufacture consent for those drastic, dangerous measures. Anti-China propaganda has been pouring into mainstream consciousness with more and more aggression lately, first and foremost within right-wing echo chambers but also within mainstream liberal ones — Joe Biden compared the Chinese government to Jack the Ripper just last night.
The result has been rank-and-file westerners beginning to lose their minds about China, which has looked exactly like a right-wing mirror of the Russia hysteria we watched unfold throughout late 2016 and early 2017. I have been encountering far more hysterical anti-China sentiment online than I was even a week or two ago; a poll published at the beginning of this month reports US anti-China sentiment is at a 20-year high, and I’ll wager if they took it again today it would be significantly worse.
People are now constantly shrieking about how authoritarian the Chinese government is, which is stupid, because China has always had an authoritarian government. It hasn’t changed; the only thing that’s changed is the narrative management, with glaring adjustments like the mass media reporting on the Hong Kong protests vastly more than the anti-government demonstrations in US empire-aligned nations like France. All this irrelevant emphasis on where the virus originated isn’t there to protect you from the virus, it’s there to make China look bad. China is no more of a threat to you than it was two years ago; the only thing that’s changed is you’re now being hammered with narratives about how threatening it is. Mass media converging upon a single empire-targeted nation is never a good thing.
7 — It’s interesting how the virus which might knock down the most powerful government in the world behaves so much like that government: dominating world affairs and killing the most vulnerable members of the populations it attacks. Nations which are being smashed with US sanctions have already been watching their frail and elderly die of inadequate medical care and malnutrition, and now with the coronavirus they’re experiencing those same exact effects squared. Which is why places like Iran are being hit so uniquely hard. America is like if COVID-19 was a country.
8 — Also interesting is watching people react to the way so many of the corporate and government policies which have been causing ordinary human beings to suffer great pains are now simply being canceled all around the world in response to the pandemic. This Slate article documents a number of the changes which have been made just in America, like how for people being thrown in jail for minor offenses, “San Antonio is one of many jurisdictions to announce that, to keep jails from being crowded with sick citizens, they’ll stop doing that. Why were they doing it in the first place?” Or how “Trump has instructed government agencies who administer loans to waive interest accrual for the duration of the crisis. But why on earth is our government charging its own citizens interest anyway?”
We’re seeing immense burdens lifted from people with an easy “Oh, that’s making the pandemic worse? Okay we’ll stop that then.” And we’re seeing people react with fully justified indignation with, “Well why were you doing that to me in the first place??”
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And the answer is very simple: because until now, your suffering wasn’t exacerbating a virus which does not discriminate on the basis of class. Politicians and billionaires are just as capable of losing their lives and loved ones to this virus as anyone else, as the CEO of Universal Music Group just learned with his COVID-19 hospitalization. Simply not causing needless human suffering wasn’t enough to get them to stop crushing people; it had to actually show up on their doorstep to make a difference.
9 — I have long thought that it would be awesome if the world could just take a nap for a minute. Capitalism is built around the glorification of busyness. We’re going to find out how many jobs we can do from home, how many jobs are only busywork, how many jobs we can comfortably consolidate or do without completely, and how many jobs are actually harmful. A big chunk of jobs have nothing to do with feeding, housing or caring for us, and everything to do with persuading people that they are deficient in some imaginary way and require this placebo tonic snake-oil to make us better again. Religion is one such job. Advertising, marketing, and most media are others. If we redesign the economy, we could do away with those altogether and have all that creative effort go toward healthy things.
Primarily though, we all need a big rest from constantly doing such soul-draining things. Having to do this while under the worry that we won’t be able to pay our rent and bills is not ideal, but do as my Mum always says — worry about the things you can change, and for the things you can’t change right now, leave them for the birds. Leave the bills for the birds for now. We will work out something; we always do. But for now, you are safe and you have everything you need. Notice that. Once you’ve established that you’re solid in this moment at least, take this time to really dig as deeply in to relaxation as you can. Watch some stand-up and get yourself laughing, sing to some youtube karaokes, nap often and deeply, take showers and baths, really taste your food and enjoy your breath, yawn and stretch and cuddle and shake it all out. Forget about cleaning out the cupboards or learning that instrument or reading that book or whatever cute thing you decided you really should do now that you have the time — let your animal body lead the way, and give your brain a rest from all the shoulds and shouldn’ts. You’re fine just to do nothing at all. Sink in to that.
* * *
Thanks for reading! The best way to get around the internet censors and make sure you see the stuff I publish is to subscribe to the mailing list for my website, which will get you an email notification for everything I publish. My work is entirely reader-supported, so if you enjoyed this piece please consider sharing it around, liking me on Facebook, following my antics onTwitter, checking out my podcast on either Youtube, soundcloud, Apple podcasts or Spotify, following me on Steemit, throwing some money into my hat on Patreon orPaypalpurchasing some of my sweet merchandise, buying my books Rogue Nation: Psychonautical Adventures With Caitlin Johnstone and Woke: A Field Guide for Utopia Preppers. For more info on who I am, where I stand, and what I’m trying to do with this platform, click here. Everyone, racist platforms excluded, has my permission to republish, use or translate any part of this work (or anything else I’ve written) in any way they like free of charge.
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Tyler Durden
Wed, 03/18/2020 – 20:20 - Organized Crime? Robberies By Suspects Wearing Virus Masks Reported Across East Coast
Organized Crime? Robberies By Suspects Wearing Virus Masks Reported Across East Coast
The virus crisis in America is leading towards the unraveling of the social fabric. A string of robberies has been reported across the East Coast with suspects wearing medical masks.
The Hill reports that the robberies appear unrelated, but as we’ve noted before, organized crime gangs could be on the prowl.
Medical masks are perfect covers to shield one’s identity. That’s what happened late last month when two men robbed a bank in the Atlanta suburb of Smyrna.
Earlier this month, two men wearing medical masks robbed three workers transporting $200,000 at the Aqueduct Racetrack in Queens, New York.
Last week, a medical mask-wearing man robbed a Boston bank, then the same thing happened in New Jersey.
People wearing medical masks in public settings are becoming the norm these days, as a fast-spreading virus has so far infected 3,802 people and killed 69. Education systems, restaurants, bars, shops, and gyms have been asked to shut down in New York and California. Mass gatherings are starting to be banned or at least limited in some regions across the country as social distancing is in an attempt to flatten the curve and keep infections down to prevent hospital systems from being overwhelmed.
The National Guard was called up Friday and is deploying 1,000 troops across six states. A new risk is developing, one where organized crime gangs could start targeting shops and or communities during a nationwide shutdown.
To sum up, the virus crisis sweeping across America could lead to a surge in crime. Also, when the economy experiences below-trend growth, an increase in crime usually follows. And now it makes sense, why instead of food, people are loading up on weapons…
My gun shop in Culver City, California
Hopefully, Liberals are starting to wake up and realize owning guns and the 2nd amendment is essential.
Too bad all these people will have to wait ten days to pick up their firearms pic.twitter.com/9H7LaBH1DY
— Josh (@JoshLeCash) March 14, 2020
Tyler Durden
Wed, 03/18/2020 – 20:00 - Visualizing Central Bank Gold Buying And Gold Repatriation
Visualizing Central Bank Gold Buying And Gold Repatriation
Submitted by BullionStar.com,
Gold buying by the worlds’ central banks is now at a 50 year high, with sovereign gold buyers having added a net 650 tonnes of physical gold to their strategic monetary reserves in each of the years 2018 and 2019.
Central banks purchase gold for a number of reasons, chief among them being that gold provides protection in times of acute market crisis and stress.
Gold is “a major line of defense under extreme market conditions”, says the Hungarian central bank.
“Gold provides a kind of anchor of trust, especially in times of stress and crisis”, states the Polish central bank.
According to the German Bundesbank, “gold is a type of emergency reserve which can also be used in crisis situations”.
With the entire financial and monetary system currently undergoing monumental dislocations across all asset classes, the gold accumulation and holding strategies of these central banks look more shrewd now than ever. If/when the monetary system is collapsing, gold will most likely be the anchor in the monetary reset stemming from the collapse.
Many influential central banks have also been withdrawing thousands of tonnes of gold from the Bank of England and US Federal Reserve vaults and flying it back to the security and safety of their home countries.
But why are central banks buying more gold bars than at any time since 1971? And what has spooked countries such as Germany, the Netherlands, Poland and Hungary that they no longer have confidence in holding their sovereign gold reserves at custodian vaults in London and New York?
With this visually impressive new infographic from BullionStar, you can now find the answers, including:
-
Which central banks in the world are leading the gold buying scramble?
-
How central bank gold buying mirrors the flow of gold from west to east?
-
What are the motivations of these countries in buying vast quantities of gold?
-
Which leading central banks have airlifted gold back to their home countries?
-
How much gold in total have these repatriating central banks brought back?
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Why has trust eroded towards the Bank of England and New York Fed vaults?
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Why gold is likely the strategic anchor of a new future monetary system?
To embed this infographic on your site, copy and paste the code below
This infographic from BullionStar.com was originally published on the BullionStar website under the same title “Infographic: Central Bank Gold Buying and Gold Repatriation“.
Tyler Durden
Wed, 03/18/2020 – 19:40 -
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