Watch: US “Successfully” Test-Launches Hypersonic Glide Body
Over the years, we’ve had a lot of coverage on hypersonic developments in Russia and China, mostly because their hypersonic programs are more advanced than the US. Now it appears the US could be catching up, as a new video via the US military shows a recent test of a hypersonic weapon.
The US Department of Defense (DoD) reported that it successfully launched a common hypersonic glide body (C-HGB) missile from the Pacific Missile Range Facility, Kauai, Hawaii, on March 19.
The Missile Defense Agency (MDA) monitored the launch of the hypersonic missile as it hit speeds above Mach 5. Information gathered in this launch will further the DOD’s hypersonic program, reported Defense Blog.
“This test builds on the success we had with Flight Experiment 1 in October 2017, in which our C-HGB achieved sustained hypersonic glide at our target distances,” said Vice Adm. Johnny R. Wolfe, Director, Navy’s Strategic Systems Programs, which is the lead designer for the C-HGB.
“In this test we put additional stresses on the system and it was able to handle them all, due to the phenomenal expertise of our top notch team of individuals from across government, industry and academia. Today we validated our design and are now ready to move to the next phase towards fielding a hypersonic strike capability.”
“This test was a critical step in rapidly delivering operational hypersonic capabilities to our warfighters in support of the National Defense Strategy,” said US Army LTG L. Neil Thurgood, Director of Hypersonics, Directed Energy, Space and Rapid Acquisition, whose office is leading the Army’s Long Range Hypersonic Weapon program and joint C-HGB production.
“We successfully executed a mission consistent with how we can apply this capability in the future. The joint team did a tremendous job in executing this test, and we will continue to move aggressively to get prototypes to the field.”
As a pandemic consumes the world, the global economy crashed, and President Trump already plowed $2 trillion into military modernization efforts — WWIII with Russia and or China could be much closer than anyone thinks.
Since the outbreak of coronavirus in Italy, Italians have learned that other European Union member states do not always practice the beautiful words that they like to preach — especially solidarity.
Solidarity is supposedly a fundamental principle of the European Union. It is enshrined in the EU treaties and the EU refers to it as one of its goals. According to article 222 of the Treaty on the Functioning of the European Union, one of the two principal treaties of the European Union:
“The Union and its Member States shall act jointly in a spirit of solidarity if a Member State is… the victim of a natural or man-made disaster. The Union shall mobilise all the instruments at its disposal… to assist a Member State in its territory, at the request of its political authorities, in the event of a natural or man-made disaster”.
The EU has invoked the solidarity principle when it comes to receiving migrants: During the 2015 migrant crisis, the EU assigned each EU country a fixed quota of migrants and refugees to accept. In 2017, the EU took Hungary, Poland and the Czech Republic to the Court of Justice of the European Union (CJEU) over their refusal to take migrants. In late October 2019, the Advocate General, legal advisor to the Court, said that EU law must be followed and that the EU’s principle of solidarity “necessarily sometimes implies accepting burden-sharing”. The Court has yet to issue a ruling on the issue, but it usually follows the advice of the Advocate General.
The EU even has a specific unit, the Emergency Response Coordination Centre (ERCC), which operates under the EU’s Civil Protection Mechanism, which helps both EU and certain non-EU states with crisis management, in accordance with the solidarity principle. This is where Italy appealed for help at the beginning of its coronavirus crisis — and received in return exactly nothing.
“We asked for supplies of medical equipment, and the European Commission forwarded the appeal to the member states,” Italy’s permanent representative to the EU, Maurizio Massari, toldForeign Policy. “But it didn’t work.”
In addition, Germany and France, leading EU member states, even imposed bans or limitations on the export of facemasks and protective equipment. This drew mild criticism from European Union officials, such as Stella Kyriakides, the EU’s Commissioner for Health and Food Safety, who had to remind member states, fruitlessly, that, “Solidarity is key.”
In the past, EU member states have shown solidarity.According to its website, since its inception in 2001, the EU Civil Protection Mechanism has responded to more than 330 requests for assistance inside and outside the EU. In July 2018, for instance, when Sweden was facing widespread wildfires, primarily forest fires, EU member states sent firefighting assistance.
The coronavirus outbreak, however, is different from geographically isolated crises, such as forest fires in a member state that can be managed by pooling firefighting or other resources. When an entire continent is in the midst of a highly contagious virus epidemic, solidarity becomes a more complex issue. Every state inevitably considers whether it can afford to send facemasks and protective equipment that might be needed for its own citizens. In other words, every state considers its own national interest first. In the case of Italy’s appeal for help, EU member states made their own interests their highest priority. This is classic state behavior and would not have caused any outrage prior to the establishment of the European Union.
What the coronavirus crisis reveals is that the member states of the European Union will revert to national interests when extreme circumstances call for it. While such revelations may not spell the immediate end of the European Union, they certainly raise questions about the point of an organization that pledges solidarity as a founding principle, but abandons that principle the moment it is most called for.
Coronavirus, however, is not the only recent issue to put into question the viability of the European Union.
The current crisis on the Greek-Turkish border has shown the EU not only as unhelpful, but an actual liability: The EU left an already overwhelmed Greece to deal with the migrant crisis — manufactured by Turkish President Recep Tayyip Erdogan for political gain — on its own, despite the apparent rhetorical support by European Commission President Ursula von der Leyen, who called Greece Europe’s “shield”.
On top of Europe’s attempts to deal with the coronavirus outbreak, the EU Commissioner for Home Affairs, Ylva Johansson, ordered that Greece must allow the migrants that Erdogan transported to the border to apply for asylum. Greek Prime Minister Kyriakos Mitsotakis had announced earlier that Greece was suspending all asylum applications based on article 78 (3) of the Treaty on the Functioning of the European Union, which states:
“In the event of one or more Member States being confronted by an emergency situation characterised by a sudden inflow of nationals of third countries, the Council, on a proposal from the Commission, may adopt provisional measures for the benefit of the Member State(s) concerned”.
Ylva Johansson, however, said that the commission would not propose suspending the right to asylum:
“Individuals in the European Union have the right to apply for asylum. This is in the treaty, this is in international law. This we can’t suspend.”
Suspending all common sense, however, is apparently something of which the EU is fully capable. As Johansson was making her irrational demands to Greece at a time when Europe was at a breaking point grappling with the coronavirus outbreak, German Chancellor Angela Merkel appeared to show signs that she might submit to Erdogan’s migrant blackmail. Less than two weeks after Erdogan had thousands of migrants transported to the border with Greece, Merkel said, according to a report by Die Welt, that she would work “with all her strength” to “take the EU-Turkey agreement to a new level”.
The agreement to which Merkel was referring is the 2016 deal between the EU and Turkey, to hold migrants in Turkey in exchange for six billion euros. Up until now, the EU had focused less on Turkey’s other demands, also written in the 2016 deal, but Merkel’s recent statement brought the issues back into focus: Visa-free travel for Turks in the EU, duty-free movement of Turkish goods within the EU, the setting up of a “safe zone” in northern Syria, and the resumption of regular meetings between Turkey and the EU.
If the EU were to approve visa-free travel for Turks — or whoever has the means to buy a Turkish passport — millions of Turks would be able to enter the EU legally and potentially “disappear” there. Already at breaking point, the EU would arguably become a very different kind of “European” Union with Turkey, a country of 80 million people, literally invited to enter Europe.
Germany also pledged more money for Turkey.According to Deutsche Welle, Merkel told Erdogan that she was willing to increase EU funds for “the care of refugees in Turkey in return for Ankara stopping thousands of refugees attempting to cross the Turkish-Greek border”.
Turkey’s migrant blackmail worked surprisingly well and surprisingly fast. “We must not allow refugees to be turned into pawns for geopolitical interests,” announced German Foreign Minister Heiko Maas at the beginning of the Greek border crisis. “No matter who tries, they must reckon with our resistance.” Germany, and the EU with it, has been exposed as a house of cards. As the house folded, the world was left in little doubt that Erdogan was running the show.
Consequently, on March 18, Erdogan announced that the migrant crisis that he had orchestrated was officially over: Turkey was closing its borders with Greece and Bulgaria, ostensibly due to the coronavirus. The Telegraphcited reports from Turkish news website Medyascope that around 150 buses had been readied to collect migrants from the border and ferry them back to Istanbul and refugee camps. Erdogan got what he wanted.
All Erdogan needs to do now it sit back and wait for the EU, with Merkel at the helm, to meet his demands.
As State Censorship Grows, VPN Usage Soars During COVID-19 Crisis
The global COVID-19 outbreak has led to a surge in VPN usage according to Atlas VPN. The company published data from their 50,000 weekly users and during the weeks from March 2-8 and March 9-15 and, as Statista’s Niall McCarthy points out, it shows a steep rise in VPN usage in countries dealing with significant outbreaks.
In Italy where there were close to 25,000 cases and more than 1,800 deaths on March 16, VPN use climbed 112 percent during the two weekly periods mentioned above. Likewise in Iran, it climbed 38 percent.
Even in countries with fewer cases, VPN popularity has increased. For example, the United States had 3,802 confirmed cases at the start of this week while VPN usage climbed 53 percent over the course of the past week. In countries experiencing lockdowns in a bid to slow COVID-19’s spread, there have also been increases. In Spain, usage grew 36 percent while it climbed 29 percent in Germany and 21 percent in France.
Atlas VPN attributes the growth to more people staying at home due to lockdowns, quarantines and social distancing. In most countries dealing with significant outbreaks, schools and malls remain closed while employees are being encouraged to work from home. That has resulted in more people spending their time online with some availing of VPN services to access geoblocked streaming content. Most companies also only allow their employees to work via a VPN connection to ensure the safety of their files and avoid hacking.
After the coronavirus pandemic subsides, Americans should not forget Beijing’s malicious campaign against their country.
For more than a month, the central government’s foreign ministry and the Communist Party’s Global Times have been trying to tar the Trump administration. The campaign culminated in a series of tweets from rising Beijing star Zhao Lijian, foreign ministry spokesman and deputy director general of the ministry’s Information Department.
On March 12, in a tweet, he accused U.S. officials of being “immoral.” Hours before, he had tweeted that “patient zero” was in the U.S. and suggested that the U.S. Army had “brought the epidemic to Wuhan” — intimating that America was conducting germ warfare.
Also that day, foreign ministry spokeswoman Hua Chunying, Zhao’s boss, twisted testimony of Robert Redfield, director of the Centers for Disease Control and Prevention, to try to show that the coronavirus outbreak had started in America.
President Donald J. Trump, in his Rose Garden press conference the next day, March 13, downplayed the overtly hostile messages. He first noted his conversations with Chinese ruler Xi Jinping and then said, referring to Chinese leaders, “they know where it came from.”
Actually, it is worse if Chinese officials in fact knew where the coronavirus originated. In this case, these officials, by going out of their way to blame the U.S., were demonstrating once again the inherent hostility of their system to America.
Unfortunately, Beijing cannot be deterred. The U.S. State Department on March 13 summoned Chinese Ambassador Cui Tiankai to protest the foreign ministry’s disinformation campaign. Despite the warning, the Chinese ambassador to South Africa, Lin Songtian, on March 16 continued to promote the coronavirus-not-originated-in-China theory, with a tweet.
From here, it looks as if relations are only going to deteriorate. For one thing, Beijing’s official Xinhua News Agency has been threatening to cut off “medical supplies,” “plunging” America into a “mighty sea of coronavirus.”
Beijing has, according to Trump’s trade advisor Peter Navarro, already nationalized one American factory making medical masks. Moreover, Fox Business Network’s Maria Bartiromo on air repeatedly said the Chinese forced at least one ship carrying masks, gloves, and other protective gear to the United States to return to China.
Beijing’s threat to cut off supplies and harm Americans will only encourage the U.S. to cut trade with China, or, more precisely, to not allow trade to return to pre-coronavirus levels. Reducing commerce, some believe, is the only long-term solution for the U.S. as Chinese communists have tried to use their central role as a manufacturer to spread totalitarianism and advance other geopolitical goals anathema to the Western democracies.
The cutting of links will still leave trade at high levels, at least at first. Nonetheless, the large volume of commerce, often called the “ballast” of China-U.S. ties, probably will not stabilize relations.
“Does trade increase or decrease the likelihood of conflict?” Samuel Huntington, the late Harvard political scientist, asked in The Clash of Civilizations and the Remaking of World Order.
“The assumption that it reduces the probability of war between nations is, at a minimum, not proven, and much evidence exists to the contrary.”
High levels of trade did not prevent the First World War, he pointed out in that landmark book. As Huntington, building on the work of others, noted, what is important is expectation. “Economic interdependence fosters peace,” he wrote, “only ‘when states expect that high trade levels will continue into the foreseeable future.'” If, however, trade partners “do not expect high levels of interdependence to continue, war is likely to result.”
Trump expects trade between the two nations to increase, saying on March 13 that China will be buying $250 billion more products pursuant to the Phase One trade deal signed January 15. Beijing in that agreement generally promised within a two-year period to increase purchases of U.S. goods and services by $200 billion over 2017 levels.
Trump’s optimism is not shared in Beijing, however. China, using the epidemic as an excuse, is now pushing to change the agreement by deferring its purchase obligations, the heart of the arrangement as far as the U.S. is concerned.
The Global Timesnotes that the pandemic inhibits Chinese demand for American goods, but that is not necessarily a good reason for relief from the terms of the deal.
Why not? Xi Jinping, after all, knew about the coronavirus epidemic long before he authorized the signing of the deal in the White House. In February, he said he had chaired a meeting of the Party’s Politburo Standing Committee on January 7 in which he issued orders to contain the epidemic. Xi’s knowledge of the outbreak on January 15 and his push for relief now, therefore, makes him look cynical. In all probability, he had no intention of honoring his side of the bargain from the beginning. Recall that Xi broke his September 2015 pledges to former President Barack Obama not to militarize China’s artificial islands and not to hack America for commercial purposes.
In any event, this year Sino-U.S. trade will almost certainly decline. Such a delinking would be in line with Trump’s stated desire to bring manufacturing back home.
The president has evidently been thinking about these matters for a long time. On July 21, 2017, for instance, he issued his Executive Order on Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States. The Defense Industrial Base study, as it is known, exposed American vulnerabilities and led to actions to encourage manufacturing to return home. Trump can now use his sweeping powers granted under the International Emergency Economic Powers Act of 1977 to continue this essential process.
Of course, war does not inevitably result when countries “delink,” “decouple,” or “disengage” their economies. Yet China and the U.S. are also moving apart as Americans become wary of an increasingly belligerent Chinese state, one that already has demonstrated that it has, for instance, little reluctance to injure Americans.
China, as we now know, allowed the coronavirus to spread for six weeks in December and January before Xi publicly acknowledged the disease. So, it is no surprise that Americans — and the Chinese people, who are now demanding fundamental political change — realize that the real disease is communism.
Coronavirus proves that for America and the Free World, China’s communism is the enemy — the one that really counts.
“You’re Grounded” – Visualizing COVID-19’s Effect On Global Flight Capacity
It’s not an exaggeration to say that the COVID-19 pandemic has thrown the world into a tailspin.
As the number of new cases continues to surge in parts of the world, numbers are beginning to decline in others as public health officials and governments tirelessly work to slow the contagion and reach of the virus.
However, as Visual Capitalist’s Iman Ghosh notes, the potent combination of trip cancellations and country-specific restrictions on international flights has had a staggering impact on the $880 billion global airline industry. Today’s visualization highlights data from the OAG Aviation Worldwide, which tracks how global flight capacity differs from last year’s numbers.
Nearly all countries have some type of travel advisory in place, with many encouraging people to avoid non-essential travel even before COVID-19 was officially considered a pandemic by the World Health Organization (WHO).
The earliest impacts of these were felt in February, as flight capacity in and out of China dropped sharply around Lunar New Year. Also, the country’s sharpest year-over-year drop was recorded on February 17, 2020, with a 71% drop in flights compared to the same date in 2019.
Flight capacity for Hong Kong, which was already seeing its traveler numbers declining due to months-long protests, continues its slump. As of March 16, 2020, it was down by an immense 81% compared to 2019 – the most of any jurisdiction represented in the data.
Monitoring the Situation Elsewhere
Meanwhile in Europe, Italy saw a 22% drop in flights coinciding with the announcement of a national lockdown on March 9, 2020. Now that the situation has intensified, flights to and from Italy have plummeted 74% from their normal rates.
On March 11, 2020, the U.S. enforced a 30-day ban on travelers from the Schengen Area, a free-travel zone consisting of 26 countries in Europe. Although the UK and Ireland were initially exempt, the ban has since been extended to include both countries as well.
Meanwhile, as of March 17th, the U.S.-Canada border is closed for all non-essential travel. This follows a previous announcement from the Canadian government that it would be curbing entry to only Canadian citizens, family members, permanent residents, diplomats, and Americans.
Broadly speaking, countries around the world are taking similar actions to limit the spread of the virus and “flatten the curve”:
As both COVID-19 and the global response to it continues to evolve, here are the largest flight capacity reductions across a few more countries in the past week:
Naturally, the economic impact on airlines has been immense. Nearly 40% of flights impacted by the European travel bans are U.S. based, such as Delta and United Airlines, with billions in lost revenue already estimated for this year.
Many airlines worldwide face the threat of bankruptcy in coming months, if these declining trends continue. To hedge against these domino effects of the outbreak, U.S. airlines are requesting upwards of $60 billion in bailouts and direct assistance from the government.
COVID-19 is throwing everything up in the air—including the fate of airline companies. It’s not yet clear when these stringent travel restrictions may be lifted, but one can only hope that these airlines do not have to continue to weather the storm much longer.
China’s Housing Bubble Bursts: Evergrande Cuts Earnings Guidance By 50%
Now that the world is firmly focusing on apocalyptic forecasts about the state of the US and global economy, with St Louis Fed president James Bullard the latest to pour gasoline into the fire with his worst-case prediction of a 50% GDP drop and 30% surge in unemployment in Q2, it is easy to forget that China, which started this whole pandemic, is still in economic lockdown. And while Beijing is pretending that the Shanghai Sniffles are now firmly behind it, and forcing people back to work while openly fabricating disease numbers – because like Lloyd Blankfein it has realized that an economic depression is an even worse outcome than millions infected – the reality is that China’s economy is facing an unprecedented crisis of its own.
Today we got a stark reminder of that, when Evergrande Group – China’s second-largest property developer by sales – tumbled in early trading Monday after saying it expects full-year earnings to fall by half.
As Bloomberg first reported, the residential property developer said in an exchange filing Sunday that net profit for 2019 is expected to come in it around 33.5 billion yuan ($4.7 billion), a drop of about 50% from the previous year.
“The decrease in profit is mainly attributable to the delivery and settlement of the lower-priced clearance stock properties in 2019, which drove down the unit price of the property delivered,” Evergrande said.
That sent the firm’s Hong Kong-traded shares down as much as 17.4% on Monday, the biggest intraday drop since July 2015. And with the stock tumbling by more than two-thirds since its late 2017 highs, Citigroup downgraded the stock to “sell” and slashed its price target by 56%, as the expected decline in core profit was far below Citigroup’s estimate of a 27% year-on-year drop.
To be sure, there are plenty of reasons to dump the stock: Evergrande is one of China’s most-indebted developers with net debt of $88.5 billion as of June. As Bloomberg reminds us, the company has been pouring billions of dollars into acquisitions as its Chairman and major shareholder Hui Ka Yan pursues an ambition to make Evergrande the world’s biggest maker of electric cars in the next three to five years.
Yet while Evergrande did everything in its power to offset the current demand plunge, embarking on an aggressive marketing campaign as the coronavirus outbreak deepened, offering discounts of up to 25% on many of its projects, get-out clauses for buyers and price-match promises, its guidance indicates that the housing bubble in China has finally burst despite laughable government official data which saw an actual increase in average housing prices in February when the economy cratered.
The recent price cuts followed a surprise move all the way back in March 2019, when with the economy supposedly humming, Evergrande announced it first (of many) price cuts, offering properties at a 10% discount. It’s only been downhill from there.
In some ways, Evergrande’s liquidation campaign worked out: the firm’s contracted sales for Feburary jumped 108%, however this was achieved with firesale prices, and now that the entire Chinese house of cards is, literally, shaking it is only a matter of time before the ongoing economic malaise tears it to the ground.
This ia problem because as we said back in 2017, the “fate of the world economy is in the hands of China’s housing bubble“, and explained that for the Chinese population, and growing middle class, to keep spending vibrant and borrowing elevated, it had to feel comfortable and confident that its wealth would keep rising.
However, unlike the US where the stock market is the ultimate barometer of the confidence boosting “wealth effect”, in China it has always been about housing as three quarters of Chinese household assets are parked in real estate, compared to only 28% in the US, with the remainder invested in financial assets.
Beijing knows this, of course, which is why China consistently reflates its housing bubble any time it feels the broader economy is slowing, hoping that any subsequent popping of the bubble, which happened in late 2011 and again in 2014, will be a controlled, “smooth landing” process.
Alas this time it appears to have failed, because while Beijing has been scrambling to indicate that it has again succeeded in maintaining price stability – per Beijing’s massively doctored official data – allowing the air out of the “Tier 1” home price bubble which peaked in early 2016, while preserving modest home price appreciation in secondary markets, the Evergrande profit cut clearly indicates that China’s housing market is now facing nothing short of a hard landing.
One final though: back in the global financial crisis of 2008 it wasn’t the US fiscal stimulus, nor was it even the Fed’s QE that sparked the global recovery that pulled the developed world out of a depression: it was China, which turned on the debt afterburners and issued trillions and trillions in new money, eventually reaching the absurd point in 2017 when China accounted for half of all global debt created since 2005.
Needless to say, much of this credit spree was contingent on continued stability in China’s housing market. However, now that that is gone, and with Chinese debt to GDP around 300%, or an all-time high, one can forget any hope for a massive Chinese credit-fueled recovery similar to what happened in 2008. In fact, if China’s housing bubble has indeed burst, and for validation of this keep a close eye on what Evergrande will say in the coming weeks, what the world should expect is a reversal of China’s epic debt firehose, which unfortunately means that just as China managed to pull the world out of its 2008 depression, payback time has arrived and this time it is China that will ensure that the depression of 2020 is truly one for the ages.
The unilateral response from governments to the coronavirus is to helicopter money to people and their businesses in unlimited quantities. Their priority is to keep the debt-driven Keynesian show on the road, and policy makers are approaching the task with unseemly gusto.
There was evidence that the credit cycle was already on the turn with the global economy entering its regular period of financial and economic crisis even before the coronavirus hit. Thinking it is only a matter of dealing with the pandemic before returning to normal is therefore a common and fatal mistake. The combination of current events is leading to an infinite problem: central banks, and the Fed in particular, are trying to backstop everything and they will undoubtedly fail.
The central issue is the dawning inability of the Fed, in charge of the world’s reserve currency, to keep financial markets under control. The quantities of money required to rescue the US economy and dollar-centric supply chains abroad are potentially far greater than anyone realises and will destroy not just the dollar, but the whole fiat money system of rigged financial markets upon which debt financing depends. The EU is in a similar but more parochial fix with the addition of a banking system visibly on the verge of collapse.
The timescale for the demise of unsound fiat currencies is likely to be very short, by the end of 2020 – exactly three centuries since a similar fiat currency experiment failed in John Law’s Mississippi bubble.
Doubting Thomases must surely realise by now that the central banks are in danger of losing control over financial market prices, not just for a short period of time, but more drastically than that. Besides a new round of quantitative easing announced last Sunday – $500bn into Treasuries and $200bn into agency debt – the new target for the Fed funds rate was lowered to 0 – ¼ %. This 1% cut followed an earlier reduction in the funds rate of ½ % as well as last Thursday’s announcement of a $1.5 trillion cap on three-month and one-month repos. To these sums we must add the $60bn in purchases of coupon-bearing securities also announced last Thursday.
Taken together, that is a liquidity injection into the American banking system of $2.206 trillion, which in context will be the equivalent of a 59% increase in the Fed’s balance sheet since the repo crisis started in September.
A further source of monetary inflation is in the dollar swap lines with the Bank of Canada, Bank of England, Bank of Japan, the ECB and the Swiss National Bank.
Clearly, the Fed is doing everything it can to achieve a number of objectives simultaneously. It needs to ensure the funding is in place for the US Government, which is dramatically increasing its spending. It must ensure the banks have sufficient reserves so as not to foreclose on its customers, thereby preventing a deflationary contraction of bank credit. It needs to inject liquidity into wholesale money markets to ensure no financial entity becomes insolvent. It is trying to anticipate future negative effects of the coronavirus, which are likely to be far greater than anyone dares admit in public. Heroically, the Fed’s public mission is to rescue the American economy single-handedly by providing the money required. And last but not least, it must retain control over financial market pricing to deliver these objectives.
Over the last fortnight that control was demonstrably lost. Equities crashed and government bonds soared, but values of the latter were somewhat false, because in the absence of liquidity market makers increased their bid/offer spreads and reduced their size; that is to say the quantity of bonds they were prepared to deal in on the widened quote were nominal. As well as volatility, the market makers, being brokerage subsidiaries of the banks, were restricted in the amount of liquidity provided by their parents, reflecting a wider systemic shortage.
The Fed hopes that by providing an unprecedented quantity of dollar liquidity that normality will return, and all its objectives listed in the penultimate paragraph above can be achieved. But, returning to a theme of recent Goldmoney Insights, the relationship between the dollar and financial assets has become eerily similar to that between John Law’s livres and his Mississippi bubble three-hundred years ago. The massive printing of livres and livres bank credit to support Law’s asset bubble failed, firstly by undermining the purchasing power of his livres to zero measured against gold and silver, and then by failing to prevent a collapse in the targeted financial asset, his Mississippi venture.
Today, the situation is only different in that the Fed is trying to save the status quo rather than construct a new one. But from December 2015 the gold price began to rise from $1050 to current levels, which is the appropriate non-fiat measure of the dollar’s purchasing power. This fact says much about gold and silver’s reaction last week and this, which was to fall heavily in paper form, while physical demand led to shortages and premiums everywhere. And now we have credible reports of refinery output being curtailed, particularly in Switzerland’s Ticino canton where three of the large Swiss refiners are based.
After the mid-eighties, gold was used as a low interest rate form of collateral for the purchase of other higher-yielding assets. In recent years that function has ceased, and it has become a plaything of bullion banks, skilled at using futures and forwards to soak up speculative demand in a highly profitable fleecing of speculative interest. The continuance of this game depended entirely on the Fed and other central banks setting the framework for prices of financial assets in the wider context by retaining an iron control over markets. Recent events have shown that that has almost certainly come to an end and increasingly the bullion banks see a logic in getting out of the gold and silver paper business by squaring their books.
Estimating dollar liquidity requirements
It is worth noting that the global economy as well as that of the US is on the cusp of a credit cycle that was turning into its regular contractionary stage, even before the coronavirus exploded onto the world stage. The massive expansion of both base money and bank credit since the Lehman crisis coupled with American trade protectionism replicates the situation in late-1929 when the Wall Street crash began, the Dow fell 89% and the great depression followed. The twin vectors behind those events are of different relative force today. Then, trade tariffs were jacked up 30% on average by the Smoot-Hawley Tariff Act, more than today’s American protectionism against Chinese imports. But this time, the expansion of money and bank credit over recent decades is far, far larger, and we are entitled to expect a synergistic effect between these two factors leading towards a similar result.
That being the case, the coronavirus is an added burden on the world’s economy which was already tipping into a slump, and will be particularly damaging for its reserve currency, the dollar. The disruptions the pandemic brings to supply chains are a dramatic advancement and escalation of what would have happened over time anyway.
Across all businesses there are those which have assets that can be sold and have cash at the bank to draw down, and there are those whose cash and liquid assets are limited or barely exist. When the former category draws down on cash reserves, deposits at the banks are reduced. The banks then have to either borrow the difference in money markets or reduce their holdings of assets, usually in the form of loans, Treasury bills, Treasury bonds, commercial bills or commercial bonds. Inevitably, the choice will devolve down to a reduction in the banks’ individual balance sheets, satisfied by reducing their loan books and by asset sales.
On the other hand, there are businesses running on overdrafts, which will find out if their banks are still good for pre-agreed overdraft ceilings. Given the drawdowns on business deposits from their more liquid customers, it is likely they will seek to reduce overdraft ceilings to help balance their books.
But businesses also face decisions as to whether they and their customers will survive the pandemic. Government promises to help is usually offered in loans, in which case they will have to be repaid, merely putting off the evil day. Many SMEs will choose to close in order for their owners to rescue what they can rather than face a drift into bankruptcy. Some will try to survive by cutting costs, such as airlines laying off staff on unpaid leave, or by lengthening payment times, passing the problem to their suppliers.
The notional exposure of America’s banks to this aspect of difficulties faced by private sector businesses is illustrated in outstanding loans and leases, which according to the St Louis’s FRED database stands at $10.12 trillion.
FRED’s chart above shows how the last credit crisis caused a contraction in outstanding loans and leases, and we know that this crisis is bound to do so again. But what will be the scale of the developing credit crisis, given that by bunching payment issues the coronavirus has increased the impact and its suddenness?
To estimate a ballpark figure, we should look at gross output (GO). Unlike GDP, which captures final sales value, GO includes the payments between production stages, and is illustrated in FRED’s chart below.
The effect of the last credit crisis in 2008-2009 was significant, knocking about $4 trillion off the total. This time, with the added burden of widespread supply chain payment failures it obviously will be far larger. We can only guess what a national shutdown will do. If, as in Italy and France, Americans end up only being able to buy pharmaceuticals and food, that would preserve only 8% of GO. Payment failures will therefore be a significant part of the remaining $36 trillion of the GO statistic.
Not only are all goods, but services are affected as well. And supply chains are not as simple as the term might suggest with a one-dimensional series of inputs leading to a final product. Inputs from many other sources are required in each step of the way. It is no exaggeration to say that the interconnectedness of all these processes accounts for nearly all of private sector GO.
That payment failures are beginning to have an impact is seen in the enhanced level of repo facilities daily extended by the Fed. It can only escalate from here.
Dollar payments in supply chains are not confined to US domestic manufacturing but apply to dollar-denominated chains of imported goods in other jurisdictions, of which Apple’s iPhone manufacturing supply chain is a prime example. All it takes is one small delivery hitch and suddenly expected payments that do not materialise have to be covered all down the line, We cannot know the true extent of the likely problem, but with major economies being disrupted by the virus for more than a month or two and with everyone working on a just-in-time basis the banking system will end up with deposit drawdowns, demands for increased overdraft facilities and non-performing loans totalling as much as two or three times FRED’s total loans and leases outstanding from businesses, not just in America, but in dollar trade settlement chains abroad as well.
No wonder there are emerging liquidity issues in the system. But with the Fed and the US government promising to underwrite all businesses facing difficulties as a consequence of the virus, the inflationary consequences for the dollar will be staggering. The responsibility of the dollar being the world’s reserve currency is that the Fed’s remit must also cover both domestic and foreign dollar settlements if it is to continue to maintain control over pricing in American financial markets.
Realistically, the chances of success are close to nil, partly because the Fed will be slow to offer facilities to those parts of dollar-settling supply chains outside the countries with existing currency swap agreements. China, South Korea and Taiwan, and others will have to resort to liquidation of dollar reserves, including US Treasuries. And then there are those that rely on dollar funding in the broader sense: Credit Suisse’s Zoltan Pozsar highlights Scandinavia, Southeast Asia, Australia and South America, to which we can add the entire shadow banking systems in London and all other non-US financial centres.[i]
Unless it implements Section 133.3 of the Federal Reserve Act (which allows the Fed to lend directly to non-banks) the only channel for liquidity flows is through commercial banks in the federal system. Even if the Fed makes infinite liquidity available to them, the Fed will be unable to stop banks from managing their risks as they see fit. Banks will at the margin reduce their balance sheet leverage and collectively risk descending into a cycle whereby collateral liquidation leads to falling values for financial assets, forcing further liquidation of collateral when formally secure lending becomes uncovered. This was one of the evils of fractional reserve banking identified by Irving Fisher in the great depression. And logic simply tells us liquidity provided by the Fed will be readily absorbed by the banks and not passed to many of their riskier customers, particularly in the SME sector.
We should be in no doubt that while it is easy for the government and its central bank to promise funds to businesses so they can continue to trade, it is virtually impossible in practice for them to do so in a timely manner. But if, as hopefully this article has demonstrated, payment disruption and failure is likely to be on a scale far greater than outstanding loans and leases, the debauchment of the currency will without doubt undermine its purchasing power. As we have shown above, the total settlement chain at risk onshore in the US is captured in GO, which officially stands at $38 trillion. For comparison, the amount of money in public hands, that is cash, checkable deposits and savings deposits, is just under $14 trillion, the bulk of which is matched by bank credit, which will almost certainly contract. If the US Government and the Fed are to make good on their promise to rescue businesses from the coronavirus, they are committing themselves potentially to helicopter considerably more money through the banks than is currently held in public hands.
It cannot happen in one hit: that would be absurd. It is more likely that it will be dispensed in tranches, of which last week’s $2.206 trillion is the first. Whether Mnuchin’s announcement of $1.2 trillion being helicoptered nationwide is part of or additional to that announced by the Fed is immaterial. Once that is absorbed, not only would markets depend on further tranches being rapidly announced and rapidly delivered, but they will begin to discount the consequences as well.
Given that the Fed is backstopping it all by expanding its own balance sheet, in a matter of a few months its monetary base will have to expand to unknowable multiples of the current $3.44 trillion, shown in FRED’s chart, above.
The government funding problem
It will be impossible for the Fed to dramatically expand the monetary base without undermining the purchasing power of the currency, particularly since it had already been expanded by an unprecedented 350% in the wake of the Lehman crisis eleven years ago. The principal method deployed is expected to be the same, that is to say quantitative easing. The advantage to the Fed is QE funds the government borrowing requirement and bolsters commercial bank reserves at the same time.
Before the current hiatus the Congressional Budget Office forecast a Federal Government budget deficit of just over a trillion dollars. Government spending, not least on coronavirus related issues, is likely to be greater than forecast, and tax revenues, if they are not merely put into abeyance will fall considerably. Consequently, the deficit will rise, and it is conceivable it will be running at twice the forecast level. When markets settle down from recent events, traders will be asking themselves who else, other than the Fed, will buy US Treasury bonds. And then there will be a further question: with banks, non-banks and foreigners dashing for dollar liquidity, who will buy their existing holdings of Treasury debt?
The funding problem can only be estimated in an omnibus fashion, by wrapping up government borrowing needs, bolstering bank balance sheets, dealing with global payment failures etc. into one solution. Before the coronavirus hit and began dislocating the entire financial system, credit cycle analysis assumed a slump could double the budget deficit, adding a further trillion or so to existing government funding requirements. Rarely has consideration been given to additional systemic issues because they were unknown. That is no longer the case.
Given that through QE or asset purchase programmes all the funding and liquidity problems highlighted in this article are likely to be addressed, it is no exaggeration to say that by the year-end that could involve doubling or tripling the quantity of US Treasury bonds and bills in the secondary market, perhaps taking them from $16.7 trillion currently to over $40 trillion. Then there is a secondary problem: of the existing pile of $16.7 trillion, $9.8 trillion is owned by foreigners, likely to be forced to sell them down in the search for liquidity or simply to avoid portfolio losses.
Since we are focused on the dollar as reserve currency, we have not even scratched the surface of problems in other currencies. The eurozone in particular has banking problems, which given the likely economic and financial effects of the coronavirus will see major bank failures in a matter of months, if not in weeks.
Only last night the ECB announced a further €750bn stimulus to its existing asset purchase programmes, from which individual nations will fund their promises to subsidise industry and employment. The British and European governments stand ready to shower their populations with money. The British this week announced a package of support amounting to an estimated £320bn, helicoptering money and bridging loan facilities to small businesses everywhere. Echoing Mario Draghi, in the words of both Boris Johnson and his Chancellor Rishi Sunak repeated multiple times, whatever it takes.
France announced a similar €300bn package as well, Germany has promised €500bn, and others are following suit. The ECB’s €750bn is already too little. Everywhere, the fiat currency solution is print, print, print. With interest rates at or below the zero bound it is all that central banks can do, while their governments will face declining tax revenues as well as increasing welfare commitments.
Thus far, there is no recognition yet of the pan-European supply chain problem. The EU’s GO is similar in scale to that of US GO, additional to all announced inflationary support allocated so far.
It is suddenly becoming clear that the global Keynesian experiment of the last ninety years faces an existential crisis. The explosion of funding requirements can only be satisfied so long as bond markets maintain current valuation levels. In other words, we have become dependent and complicit on markets rigged by the state and are facing the same fate as that of John Law’s France exactly three hundred years ago. Once the problems started, his unbacked currency became valueless in about ten months. As then, the fate of financial markets today depends entirely on fiat currencies, because their issuers are becoming the only buyers of their own debt.
Price inflation; myth and reality
Government statisticians have succeeded in goal-seeking a two per cent rate of price inflation by statistical method. Part of the market control mechanism has been for this and other government statistics to be accepted by investors as true. That being the case, a low-growth outlook, in other words one that does not threaten a rise in price inflation, broadly justifies the current pricing levels of government bonds. Given their personal experience that the rate of price inflation is actually considerably higher, one would think that managers of bond funds would realise the deceit, but the fact is that they are blind to it. Being prepared to ignore the reality of their own experience and accept the authorities’ version of the rate of price inflation is central to government control over price levels in financial markets. If, as independent sources such as Shadowstats.com and the Chapwood Index conclude, prices are rising at approximately a ten per cent clip then a 10-year maturity US Treasury bond should have a gross redemption yield of at least that, implying a market price below well below fifty cents on the dollar.
A collapse in US Treasury prices of that magnitude would be a disaster for government finances, and the whole Keynesian scheme. The cost of debt funding would rapidly spiral out of control. Given our thesis that funding payment failures and other objectives will require a veritable explosion in the quantity of government debt forced on the market, it is almost certain the dollar’s value in terms of purchasing power will be fatally compromised. It will initially be reflected in the dollar price of gold, as described in the introduction to this article.
Supplies of the basics that people buy for their day to day existence are already in short supply with supermarket shelves empty, which tells us that following the initial stages of the current economic and financial dislocation prices will rise, even before taking into account the acceleration of monetary debasement already in the works. Price rises of these staples could lead to price controls, which will only make things worse, a playbook seen throughout history from the time of Diocletian (284-305AD) onwards.
But this inflation is different in many ways. Instead of being primarily a collapse of purchasing power driven by the public’s rejection of their state’s fiat currency, it will be driven by a matching, but slightly lagging collapse of the whole panoply of financial asset values. That at least is the lesson of the only other recorded instance of it happening, John Law’s pre-Keynesian scheme.
The outlook for gold and silver
The current market hiatus has seen a breakdown between financial markets and physical bullion, with supplies of coin and small bars sold out. To add to supply problems, it is rumoured that the three major Swiss refiners based in the Ticino canton are either in lockdown or having logistical problems.
The dichotomy is between the world of financial assets and the real world of people. Events over the last few weeks have raised the possibility that the central banks, particularly the Fed in whose dollars everything is priced, are losing control over the whole financial system. Normally scared into financial submission, ordinary people are not buying the establishment’s Kool-Aid anymore. They know nothing, they do not understand what is happening, but at the margin they want precious metals at any price.
The monetary find this behaviour unacceptable. They have routinely killed off embarrassing price rises in gold and silver as the means of subduing public interest. The prospect of monetary inflation following a coronavirus lockdown will make it impossible to repeat the exercise successfully, because of the monetary inflation involved.
Meanwhile, bullion banks are in a bind, having far greater gold and silver obligations than their access to physical gold for cover. These obligations are overwhelmingly in paper, futures and forwards, as well as liabilities to customers with unallocated accounts. Anecdotal evidence also suggests that customers with allocated accounts have already had difficulties getting physical delivery in recent years. Therefore, while public demand for physical bullion has been increasing, the bullion establishment has become badly exposed to the monetary consequences of the coronavirus pandemic.
Central banks and the Bank for International Settlements cannot afford to see a bullion bank blow-up, and doubtless have been working behind the scenes to prevent one. Gold is likely being leased to the bullion banks, giving them some liquidity on paper, but in practice it never leaves the central bank’s vault and therefore its possession. Futures are sold with the purpose of triggering the speculators’ stops, creating an avalanche effect on the price. The intention is for bullion banks to either get at least square in their positions or preferably long, because they know that when the suppression exercise is over, the price of gold and silver will rise dramatically in the face of fiat money expansion.
What they don’t know yet is the fate of fiat currency. We know from analysing John Law’s experience in 1720 that in 2020 we are likely to see the end of it very soon. Conventionally expressed, that gives gold and silver prices of infinity, and moves of a hundred bucks or so are immaterial.
Monday Morning Coronavirus Package Re-Vote Rescheduled For Noon
Update (0005ET): Monday’s procedural vote will not be held at Noon – several hours into the trading day, vs. the 9:45 a.m. vote McConnell originally called to ‘see if there’s a change of heart’ during the first 15 minutes of trading.
In closing remarks, McConnell accused Democrats of “playing Russian roulette with the market.”
Update (2335ET): With futures still flirting with limit down as of this writing, Senate Majority Leader Mitch McConnell has set a new vote on the motion for Monday morning at 9:45 a.m. – “15 minutes after the (US) markets open to see if there’s a change of heart,” he said.
US Senate will re-vote on motion to proceed at 0945EDT Monday (1345UTC) “15 minutes after the (US) markets open to see if there’s a change of heart,” says @senatemajldr about #coronavirus relief legislation.
Update (2115ET): Senate Democrats were able to successfully block the coronavirus stimulus package from moving forward as five GOP senators were absent due to coronavirus or precautionary self-quarantine.
Senators voted 47-47 on advancing a “shell” bill, a placeholder that the text of the stimulus legislation would have been swapped into, falling short of the three-fifths threshold needed to advance the proposal.
Hopes of a quick stimulus deal quickly unraveled on Sunday as the four congressional leaders and Treasury Secretary Steven Mnuchin failed to break the impasse. Senate Majority Leader Mitch McConnell (R-Ky.) also delayed the procedural vote for three hours as they tried to get a deal. –The Hill
Senator Rand Paul (R-KY) was not present after announcing Sunday morning that he had contracted coronavirus and would self-quarantine. Two GOP colleagues he interacted with – Utah Sens. Mitt Romney and Mike Lee, also self-quarantined.
Meanwhile, GOP Sens. Rick Scott (FL) and Cory Gardner (CO) previously announced self-quarantines unrelated to Paul’s announcement.
Senate Minority Leader Charles Schumer (D-N.Y.) said the bill includes “problematic” provisions and that McConnell should have made the negotiations include both chambers and the White House from the beginning.
“Unfortunately, the legislation has not improved enough in the past three hours,” he said.
McConnell appeared visibly angry as he spoke from the Senate floor after the bill failed, pledging to force the vote again. –The Hill
“The American people are watching this spectacle. I’m told the futures market is down 5 percent. I’m also told that’s when trading stops. So the notion that we have time to play games here with the American economy and the American people is utterly absurd,” said McConnell.
“The American people expect us to act tomorrow, and I want everybody to fully understand if we aren’t able to act tomorrow, it will be because of our colleagues on the other side continuing to dither when the country expects us to come together and address this problem,” he added.
* * *
Update (1845ET): The coronavirus funding package failed to gain enough votes in a procedural vote Sunday evening at 6:35 p.m., however voting continued.
Efforts to seal the deal come amid four members of Congress testing positive – including GOP Sen. Rand Paul.
The bill was on tenuous ground throughout the day, with an earlier vote postponed because Senate Majority Leader Mitch McConnell didn’t have the votes.
“Leader McConnell had to postpone his 3 p.m. cloture vote on the motion to proceed because, thanks to Leader Chuck Schumer and Senate Democrats, he did not have the 60 votes required,” said Speaker Nancy Pelosi (D-CA) in a Sunday statement.
* * *
Update (1815ET): And just like that, futures quickly went limit down shortly after opening.
According to the WSJ‘s Nick Timiraos, one draft of the bill would allocate $425 billion into the Treasury for the Fed to cover losses on lending facilities. This will allow the Fed to provide a new generation of emergency lending programs that could prop up markets for securitization, investment grade corporates, longer-dated munis or small business loans.
This would allow the Fed to stand up a new generation of emergency lending programs that could support markets for securitization, investment grade corporates, longer-dated munis or small business loans
At the conclusion of a Sunday meeting with top congressional leaders and Treasury Secretary Steven Mnuchin, Pelosi told a staffer “We are so far apart.“
Recall in 2008, the House’s rejection of a $700 billion bailout – when Pelosi was also speaker – sent the Dow down nearly 7%. At the time, “House minority leader John Boehner, R-Ohio, said after the vote that passage would have been possible if it had not been for Pelosi’s “partisan speech,”” according to CNN.
* * *
Update (1510ET): With talks having broken down, Senate Majority Mitch McConnell (R-KY) has delayed an initial Senate vote on the stimulus package from 3 p.m. until 6 p.m. Sunday.
* * *
Update (1254ET): Lawmakers failed to hammer out an agreement after having deadlocked on several key provisions, according to The Hill.
“We continue to talk,” said Senate Minority Leader Chuck Schumer.
House Speaker Nancy Pelosi (D-Calif.) said after the meeting that House Democrats would offer their own stimulus package that she hoped would be “compatible” with the Senate’s package.
“I don’t know about Monday but we’re still talking,” Pelosi told reporters, referring to the preferred GOP timeline for passing a bill.
The impasse comes as the Senate will hold a first procedural vote at 3 p.m., where bipartisan support will be needed to move forward.
Democrats will meet at 1 p.m. to discuss their strategy.McConnell has given no indication that he will delay the vote, potentially forcing Democrats to either move forward with the GOP leader’s plan or block the bill from advancing. Schumer did not say as he left the meeting if Democrats would allow the bill to move forward. –The Hill
McConnell says he still want to pass a stimulus package on Monday – describing talks as “very close,” but acknowledging that people are still “elbowing and maneuvering for room.”
“Now we’re at a point in the discussion where people will shortly have to say yes or no,” he added.
* * *
With unemployment surging and GDP crashing, negotiations over a massive coronavirus stimulus package are coming down to the wire, as a 3 p.m. vote looms in the Senate over what is expected to cost between $1.5 – $2 trillion.
After blowing past two deadlines that Senate Majority Leader Mitch McConnell (R-KY) set for a deal, failure to come to an agreement could spell further disaster for the markets come Monday.
Republicans have drafted a bill which reflects agreements they’ve reached with Democratic lawmakers, and what they believe will be acceptable compromise on areas of disagreement. However, on Saturday night a spokesman for Senate Minority Leader Chuck Schumer said that there was no agreement yet, and that Democrats would not sign on to McConnell’s proposal without negotiation.
“We look forward to reviewing their first draft and negotiating a bipartisan compromise,” said the spokesman, according to The Hill.
Congress’s top leaders – the so-called ‘four corners’ met at 11 a.m. today to continue negotiations; the first time House Speaker Nancy Pelosi will have sat down with McConnell to discuss the massive deal.
After just one hour, Pelosi said that negotiations are ongoing, but that Democrats would be ‘introducing our own bill‘ and that a bipartisan agreement hasn’t yet been reached.
Limits on firms getting loans
A key sticking point for Democrats are enhanced worker protections using the loans as leverage, according to Schumer and Pelosi.
One GOP draft of the bill says companies receiving loans must keep employees on staff “to the extent possible,” but Democrats want to change this provision to offer loan forgiveness only if at least 90% of the workforce is retained, according to a person familiar with the negotiations.
Democrats took issue with the discretion that the Treasury secretary has for the money going to corporations, including which companies receive funds, the person said. Mnuchin would also have the option to waive restrictions on stock buybacks under the Republican proposal, the person said.
Democrats also want a more than two year restriction on increasing executive pay for companies that receive federal loans, the person said. –Bloomberg
On Sunday, Treasury Secretary Steven Mnuchin appeared on Fox News, where he outlined key provisions of the impending deal which he expects to pass on Monday – including up to $3,000 for a family of four, and a massive lending facility of up to $4 trillion to maintain liquidity.
“Working with the Federal Reserve — we’ll have up to $4 trillion of liquidity that we can use to support the economy,” he said, adding “Those are broad-based lending programs. … We can leverage our equity working with the Federal Reserve.”
Secretary Mnuchin joined FOX News Sunday to discuss the latest economic relief package being discussed on Capitol Hill amid the coronavirus pandemic. Some highlights include small business loans, direct deposits, and enhanced unemployment insurance. #FNS#FoxNewspic.twitter.com/1eZKI15ONC
For an overview of what could happen if this deal isn’t passed, Guggenheim Investments’ CIO Scott Minerd offered some thoughts last week (in case you missed it).
Needless to say, failure would sap much-needed confidence from markets which have already lost around 35% since the coronavirus spread globally last month.
What does this mean for markets and futures? While we wait for the regular 6pm reopening, the spread-betters at IG are indicating a Dow down some 562 points as of this moment, with the Dow set to open somewhere in the mid-18,000s.
Amazon Doubles Its Workers’ Overtime Pay As Demand Spikes Due To Coronavirus Lockdowns
Today in “good things happen when the free market works, despite the fact that we’re facing an existential global threat” news…
Amazon workers are getting a raise due to a rise in demand for the company’s products. Imagine that – it’s almost like allowing the market to work can bring workers benefits. Someone alert the Democratic Socialists.
Amazon made the announcement late last week that it’s going to be doubling its hourly wages for associates that are working overtime in the company’s U.S. warehouses as demand spikes as a result of the growing nationwide coronavirus lockdowns.
The company told CNBC: “All hourly associates working in the U.S. Ops network will receive double their regular hourly rate for every overtime hour worked in a workweek. This temporary increased overtime pay is effective March 15, 2020, and will continue through May 9, 2020.”
Amazon said that workers are eligible to receive the overtime after passing 40 hours in a week. On Monday, Amazon announced it would be hiking its hourly rate for associates from $15 to $17 until the end of April. The company also said it was going on hiring binge, looking to bring on 100,000 warehouse and delivery worker to meet its surge in demand.
Amazon has encouraged workers who have been laid off or furloughed elsewhere to apply for jobs: “We want those people to know we welcome them on our teams until things return to normal and their past employer is able to bring them back.”
About one week ago, Amazon began to warn that it was running out of stock on some popular household items due to dramatic increases in demand. The company also said it would provide employees up to two weeks of pay if they were diagnosed with coronavirus.
We wonder if the employees who just saw their pay hiked dramatically – and those who just found a new job with Amazon after being laid off else – are complaining about the fact that Jeff Bezos is a billionaire.
Merkel Enters Isolation, New Zealand Goes “Full Quarantine” As COVID-19 Case Total Tops 335K: Live Updates
Summary:
UK death toll jumps ~60 to 281
Rand Paul tests positive
US case total nears 30,000
Ohio, Louisiana, Delaware join lockdown
Harvey Weinstein reportedly tests positive for COVID-19
Global cases top 335k
NYC total cases passes 9k, while New York state nears 20k
Merkel quarantines herself
5 GOP senators are in self-isolation
New Zealand goes full isolation
US death toll hits 374
Italy reports slowdown in deaths, cases
IOC sets 4 week deadline for Tokyo Games decision
WHO says lockdowns “not sufficient” to stop virus
NY secures supplies of meds that purportedly work to combat virus
Mnuchin proposes $4 trillion rescue package
Afghanistan, Kosovo and Romania all reported their first confirmed deaths
Italy set to revise death totals lower
Cuomo says nobody can say how long outbreaks will last
* * *
Update (2000ET): Stock futures hit limit down again overnight after Senate Democrats shot down the administration’s latest economic stimulus package, New Zealand said it would issue an order calling for nationwide self-isolation, while NYC announced the closure of all non-essential businesses.
As one twitter user pointed out…
5 Republican Senators now in self-quarantine and will most likely not be able to vote.
– Rick Scott FL
– Cory Gardner CO
– Mike Lee UT
– Mitt Romney UT
– Rand Paul KY
Dems have the majority in the Senate.
Mitch McConnell’s biggest nightmare.
Let’s see what happens now.
— Red Is Social Distancing (@Redpainter1) March 22, 2020
Back to the antipodes, Australia’s Parliament will convene on Monday for a special sitting to pass stimulus measures to support the economy.
Amid the growing chorus of concern about the Olympics, and calls for the Japanese government to cancel or postpone the games, Japanese Prime Minister Shinzo Abe told the Japanese Parliament on Sunday that Tokyo must consider postponing the Olympics if safety can’t be guaranteed.
The news for airlines keeps getting worse: Singapore Airlines just announced that it’s cutting 96% of its capacity through the end of April, joining carriers around the globe slashing flights as the fast-spreading coronavirus curbs travel demand.
Starting Monday, the company will ground 138 out of the 147 aircraft at Singapore Airlines and its SilkAir unit, according to a statement. 47 of 49 planes operating in the low-cost division will be grounded.
Mayor Bill de Blasio announced that all non-essential businesses in NYC will be closed beginning Sunday at 8 pm.
Grocery stores, pharmacies, internet providers, food delivery, financial institutions and mass transit may remain open. But they “must implement rules that help facilitate social distancing,” the mayor’s office said, adding that police will be in neighborhoods to “ensure compliance with these policies,” according to Bloomberg.
In keeping with its stretch of reporting zero or almost no domestic cases, China reported 39 additional coronavirus cases for Sunday, and once again claimed that all of them were infected abroad, according to a statement from China’s NHC.
For opera fans, Plácido Domingo, the reknowned Spanish singer and conductor, announced Sunday that he has tested positive for the coronavirus. This comes after he made a sizable payment to a charity committed to fighting sexual harrassment after resolving issues of his own related to that subject.
As the situation in the US grows increasing precarious, Joe Biden has rejected suggestions that the November US election might be postponed amid the pandemic, saying it’s important that voting continues as it has during other crises in American history.
Trump tweeted out a message to Rand Paul, who will be quarantined for a few weeks as he fends off the virus.
My friend (always there when I’ve needed him!), Senator @RandPaul, was just tested “positive” from the Chinese Virus. That is not good! He is strong and will get better. Just spoke to him and he was in good spirits.
Meanwhile, the global case total has topped 335k as New York City reports another batch of cases. And that Navy Hospital Ship – the USS Comfort – that we’ve mentioned before has arrived in New York, per the NYP:
A mammoth floating Navy hospital that was sent to New York after 9/11 will lend a hand to the region once again — this time to help in the battle against the coronavirus.
President Trump on Sunday again touted the USNS Comfort and its sister ship, the USNS Mercy, which will be activated on the West Coast: “These two ships are incredible . . . They have a tremendous capacity.’’
With an interesting twist: The Comfort will treat non-coronavirus patients, relieving the immense pressure on the city’s hospitals during the mounting crisis.
* * *
Update (1930ET): We’ve had a few updates over the course of the day that probably are worth mentioning.
Across the US, more states are issuing mandatory quarantine orders. Ohio, Louisiana, and Delaware are ll ordering residents remain at home beginning on Monday to help stop the spread of the virus. The director of Ohio’s Department of Public Health signed the state’s order Sunday, and the shelter-in-place order goes into effect Monday night, and will continue until April 6, or possibly even longer.
The order will of course include ‘common sense exceptions’ the governor tweeted.
#StayHomeOhio: It does permit exceptions to staying home. Common sense exceptions: leaving for health and safety, for necessary supplies and services, for outdoor activity (walking your dog, going to a park — although playgrounds are closed).
Ohio has 250 confirmed cases of the virus, according to a Johns Hopkins University tracker, and it has had three deaths.
Louisiana issued a similar order on Sunday, which is set to take effect Monday evening and allows residents to leave their homes only for “essential needs.”
And Delaware Gov. John Carney issued an order Sunday evening mandating that all non-essential businesses, and all non-essential workers, close and stay at home for a few weeks.
* * *
Update (1430ET): The IOC has set a deadline of 4 weeks to make a decision on whether or not to postpone the Tokyo Games.
In other news, the UK death toll jump by roughly 60 cases to 281 overnight, according to the Department of Health and Social Care.
UPDATE on coronavirus (#COVID19) testing in the UK:
As of 9am on 22 March, a total of 78,340 have been tested:
72,657 negative.
5,683 positive.
281 patients who tested positive for coronavirus (COVID-19) have sadly died.
Update (1345ET): Senator Rand Paul of Kentucky has tested positive for COVID-19, according to media reports.
The Republican senator and perennial gadfly for both his Republican colleagues and Democratic opponents, the Kentucky senator is perhaps best known for being the son of legendary Libertarian, former presidential candidate and Texas Congressman Ron Paul, as well as for an incident where one of his neighbors back in Kentucky – a doctor, no less – lost his temper and straight up dropkicked the Senator over a lawncare-inspired property beef.
At least two members of the House have also tested positive, but Paul is the first member of the Senate.
Paul has a tendency for delaying critical legislation over issues of principle, since he’s one of the Senate’s last die-hard ‘deficit hawks’, a position that he still cares about from time to time, based, from what we can tell, on some arbitrary factor like which way the wind is blowing or possibly the tides, we’re not really sure.
Whatever it is that makes Paul tick, he’s probably going to be sidelined as the administration tries to push through pt. 2 of its economic aid package to stave off a brutal depression.
He expects to be back in the Senate after his quarantine period ends and will continue to work for the people of Kentucky at this difficult time. Ten days ago, our D.C. office began operating remotely, hence virtually no staff has had contact with Senator Rand Paul.
Rand Paul has Coronavirus. I’ll say it again: Rand Paul has Coronavirus. Again, in case there is any confusion: Rand Paul has Coronavirus. Rand Paul can’t currently fuck up this stimulus bill because once again, Rand Paul has Coronavirus.
Can’t say we blame them: Paul was the sole “no” vote on the $8.3 billion coronavirus spending bill the Senate passed earlier this month, the first part of what’s expected to be a three-party rescue package, two of which have been passed into law, and one still on the way as senators argue over how much money should be given away, and to whom.
* * *
Update (1330ET): After nearly two weeks of reporting one grim record after another, Italy has finally reported a drop in new cases on Sunday. During the day before, Italy confirmed 5,560 new cases of COVID-19 and 651 new deaths. That brings the country to a total of 59,138 cases, and 5,476 deaths. That’s a slower pace of increase than yesterday’s report, though Italy’s rate of spread is still nothing short of extraordinary, and in a few days, confirmed cases in the country will surpass China’s “official” total.
In Milan, the number of new cases recorded over the last 24 hours halved from the day before.
In other news, the IOC is holding an emergency board meeting on Sunday to discuss the future of the Tokyo Games, including an option to delay the event, according to Japanese media. It might take a month to reach a decision – but who knows when the leaks will begin. We suspect the Japanese press will be keeping a close eye on the behind-the-scenes talks.
Interestingly enough, American social-media companies including Facebook and Twitter have continued their bizarre practice of censoring virus-related news, even when it’s published by “reputable” mainstream media organizations like Bloomberg and the Wall Street Journal.
It looks like a Bloomberg article quoting SCMP warning that one-third of coronavirus cases may show no symptoms – making the virus immensely more difficult to track – has been censored.
* * *
Update (1240ET): Here are some more details from the second half of Cuomo’s Sunday press conference…
After insisting that nobody could say for certain how long the outbreak will last, Cuomo added that there was no reason to rush to grocery stores and start hoarding supplies, adding that all essential services will continue, even as some states’ are seeing critical toiletpaper shortages entering their second week.
“It’s going to be hard – no doubt – I’m not minimizing it and I don’t think you should either but it is going to be okay. The grocery stores are going to function…there’s going to be food…all essential services will be maintained.”
“There’s not going to be anarchy, there’s not going to be chaos…order will be maintained.”
Though thousands have died, Cuomo urged New Yorkers, and Americans, to try and find the strength within to make it through this crisis without putting the public welfare in jeopardy, like so many are still doing. Asked during the Q&A what he would do to stop New Yorkers from crowding into the city’s parks on a nice day, he said he would require the city to put together an action plan within a day , adding that even though he’s a life-long New Yorker, he doesn’t know the city’s operations well enough to tell them how to run the parks.
Adding to the chorus of prominent Democrats who are criticizing President Trump for not taking advantage of the Defense Production Act to coordinate a federal response to alleviate the shortage of critical medical supplies.
Instead of sitting around and complaining about how too much of the US supply chain is dependent on China, Cuomo urged Trump to use the DPA to develop a plan and tell factories how much of which critical items they should produce.
This way, Cuomo said, it will end the bidding wars between states that led to New York purchasing medical masks that typically cost well under a dollar for more than $6 a mask.
“I say forget the voluntary partnership – order the companies to produce it. Let the federal government do it so the private company doesn’t end up marketing with all these states that are competing. We paid 75 cents for a mask and now we’re paying $7 dollars. Why? Because California will pay $6…”Let the federal government just take the power of supply and distribution,” Cuomop said.
He added that during the testing ramp-up, it was better to give more power to the states to ramp up capacity because governors control labs and have resources to put toward this effort. But when it comes to production, supply chains are too distributed. The require coordination at the federal level.
The governor also detailed the state’s stockpile of essential medical equipment and hospital + ICU beds, which he said he is doing everything in his power to alleviate.
For some unknown reason, Sunday’s press conference contained none of the optimistic references toward the Army Corp of Engineers traveling through the state setting up staging areas, while the Navy sends a hospital ship to NYC.
* * *
Update (1150ET): Gov. Andrew Cuomo’s daily press briefings have become high-priority events as the coronavirus outbreak spreads across the US. After winning early approval from the FDA to ramp up testing in state labs, Cuomo’s star has risen alongside the state’s tally of positive tests.
He and Trump appeared to have declared a truce, with the two men acknowledging their intention to cooperate, and as the White House shifts its focus to passing the critical second installment of its economic rescue package, which is expected to include rescue packages for small businesses and helicopter money for individuals.
Cuomo started the press conference by chiding New Yorkers, primarily those in the city, who took advantage of nice weather over the past few days to crowd into the city’s parks, inadvertently helping to spread the virus.
At one point, Cuomo declared that the city had confirmed 374 deaths, taking the assembled reporters by surprise. The statement was soon corrected, as a graphic on the screen displayed the updated national death toll, meaning that 14 more Americans had succumbed to the virus over the last few hours.
Across the state, Cuomo reported 4,812 new cases, bringing the total to 15,168, with 9,045 of those in NYC.
These new numbers have brought the US total to just shy of 30k.
As Trump continues to battle with the FDA, Cuomo said New York will start implementing the trial drugs to treat Coronavirus and that they have acquired 70,000 Hydroxychloroquine, 10,000 Zithromax, and 750,000 Chloroquine from the Federal Government.
The governor then launched into a breakdown of the data that researchers have collected so far. Of those who have passed away from COVID-19-related complications, 70% are either 70 or older. Of those who passed that were under the age of 70, 80% had underlying health issues.
Though young people have a higher chance of survival, “young people can get it, young people can get sick, young people can transfer it,” Cuomo said.
But just because an individual catches the virus, and meets the high-risk criteria, doesn’t mean they’re doomed, Cuomo explained.
“But even within that population the capacity of our health care system can save those lives it doesn’t mean that just because you’re 80 and you have an underlying health condition, you must pass away,” he said. Nothing is pre-ordained, and New York State’s health-care system has the capacity to save the lives of people whose lives are seriously imperiled by the infection.
The fear, as Cuomo explained, is that the virus makes it to places like nursing homes, and other places where concentrations of high-vulnerability people.
The importance, as has been said many times before, is that the government tries to smooth the ‘peak’ of the outbreak – which Cuomo’s models projected would arrive in roughly 45 days – as much as possible, given the shortage of beds, ICU beds and critical medical equipment, which Cuomo is scrambling to buy up for New York State, taking Trump’s advice to do what states can to secure equipment to heart.
“Up to 80% of the population will get this virus. We will try to slow the spread but it will spread,” Cuomo said.
As far as addressing how long the outbreak will last, and how long some level of movement restrictions might be in place, Cuomo said nobody can say for certain, adding that it could be 9 months, or possibly even longer.
“It is going to be 4 months, 6 months. 9 months – once they really changed the trajectory – which we have not done yet – 8 months. Were in that range. Nobody has a crystal ball, nobody can tell you,” Cuomo said.
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Update (1100amET): NY Gov Andrew Cuomo is delivering his daily press conference. Watch live below:
The surge in newly confirmed cases in the US and Europe continued overnight, as roughly 7,000 new cases were reported in the US, according to Johns Hopkins data, vaunting the US total above 25k while most Americans were asleep.
According to the latest numbers, as of 11amET on Sunday, 26,747 Americans have tested positive for COVID-19. 340 have died (and some of these were posthumously diagnosed).
New York State, where the Army Corp of Engineers has arrived to start outfitting school gyms and other buildings into COVID-19 hospitals, the picture of the outbreak continues to expand as testing capabilities in the state rapidly accelerate. 9 million New Jerseyans are now under ‘shelter in place’ restrictions following the mandatory lockdown order signed by Gov. Phil Murphy last night, although it’s still not exactly clear how the order will be enforced. In Connecticut, Gov. Ned Lamont has asked residents to stay at home and ordered non-essential businesses – including restaurants, gyms, theaters and the like – to close.
And globally, the total number of cases has passed 315,000, and is rapidly closing in on 320,000. We’ll likely hit 350,000 by noon on Monday.
Across Europe and the Middle East, governments tightened travel restrictions and lockdowns, even as the WHO whined that these measures were now somehow not enough to contain the outbreak , when this very same organization for weeks denied that border closures were necessary to stop the spread in an obvious sop to the NGOs Chinese backers.
Following in Italy’s footsteps, one week after Spain adopted nationwide lockdown measures and as the number of cases soars to 28,572, with 1,720 deaths, Spanish media says the government of PM Pedro Sanchez is planning to ask Congress to approve the nationwide lockdown for an additional 15 days.
Afghanistan, Kosovo and Romania all reported their first confirmed deaths from COVID-19 on Sunday, while Albania closed flights as the virus continues to spread north through the Balkans from Greece, which has been turning away asylum seekers as it struggles to suppress its domestic outbreak.
After invoking the Defense Production Act last week, one of the most useful tools in the White House arsenal, granting Trump the power to act unilaterally and marshal the nation’s factories to the “war” effort, the president has yet to use the power, even as Democratic leaders like Nancy Pelosi and Chuck Schumer hammer him on the delay.
As it turns out, Trump might have a point. Though FEMA Administrator Peter Gaynor contradicted Trump during an appearance Sunday on CNN’s “State of the Union”, saying the administration hadn’t yet ordered factories to produce critical medical supplies, as Trump had claimed earlier in the week. But he clarified that the only reason Trump hasn’t actively used the power is because companies are voluntarily taking these steps so as to deter the administration from seizing control of their operations. He described the act as “leverage”.
Gaynor added that companies and countries around the world are offering help and support to the US.
With multiple officials making the Sunday show rounds, Treasury Secretary Steven Mnuchin once again upped the ante of the administration’s ‘helicopter money’ stimulus package (now that the Fed’s balance-sheet expansion is back in full swing and the administration is preparing to issue 50-year bonds to back the stimulus), raising the amount to be doled out to individuals to $3,000. As we observed yesterday, the stimulus-bill figures continue to climb faster than the number of confirmed cases.
It’s unclear when – or even if – the plan will make it into law, but Mnuchin said it’s intended to sustain out-of-work Americans and suffering small-businesses for the next 10-12 weeks.
And with 7k new cases confirmed since VP Pence announced to the world last night that he had tested negative, and hundreds of thousands more layoffs announced overnight, we suppose it’s only fitting.
Last night, Italy shuttered much of the country’s industrial production (at least whatever was still operating) in a desperate attempt to contain the outbreak as it extends its national lockdown in the face of lackluster results. In Jordan, meanwhile, authorities are responding with a heavy hand, warning residents they will risk a year in jail if caught outside without permission.
Which approach do you think would work better in the US?
Whatever happens, any NYC-based bankers growing bored with their doomsday stash and willing to splurge on some high-quality meats can get takeout from Peter Lugar’s.
Deutsche Bank: Helicopter Money Will Be “Disastrous” And Will Lead To Hyperinflation, “Buy Gold”
“Consensus reality is like paper money. It has no value except everyone believes in it. It has no real value, only pretend value, which is fine as long as everyone keeps pretending.”
“As helicopter money becomes increasingly inevitable, the big news is that we are calling for the thawing of the Ice Age after the next recession – whenever that arrives.”
Now that helicopter money has finally arrived, and bizarrely has brought with it that blast-from-the-past idiocy that is the trillion-dollar coin – which does nothing more than remind the population that money, like any other consensus construct, is just an illusion and depends on “faith and credit” and an increasinlgy grotesque one at that reliant on such “in your face” gimmicks as minting platinum coins to bailout the world – the discussions of what the monetary endgame (with even deflation god Albert Edwards admitting that his iconic “Ice Age” is about to melt under the red-hot heat of paradropped cash) will look like have begun in earnest.
Doing it part to kindle this debate, no pun intended, are Deutsche Bank strateigst Oliver Harvey and Robin Winkler who have published a report covering the two aspects of the helicopter money debate. And since we are confident that readers can find the happy ending version on countless other pro-paradrop forums, typically those run by socialist “island-dwelling traders” who have never actually traded (and their drug-delivery skills it turns out were also dismal) and who have no concept of how money or credit actually works, we will focus on the one that captures accurately what will happen on short notice: hyperinflation.
So for everyone curious what the hyperinflationary endgame looks like, here it is, courtesy of DB’s Oliver Harvey.
Helicopter money would make the coronavirus a lot worse
The economic policy response to the coronavirus looks very similar to the last financial crisis. Central banks have responded with liquidity for the private sector through swap lines with banks and purchases of commercial paper from corporates and have lowered the cost of money through interest rate cuts and quantitative easing. Governments are announcing sizeable fiscal packages which will provide businesses and households with direct cash injections. Today, for example, the German government pledged EUR 100bn, or 3% GDP. The US has announced a similar sized fiscal stimulus. Some have called for the government to go further, and act as a buyer of last resort for businesses, for example.
The problem is that this crisis is very different from 2008, or for that matter 1929, where much of today’s macro playbook was written. 2008 was a classic demand shock caused by a loss of confidence in the banking sector. In a demand shock, fiscal and monetary tools should be used aggressively to bring confidence back. In Paul Krugman’s classic formulation of the Washington Baby Sitters Co-operative, for example, prospective babysitters were worried about using up their supply of baby-sitting tokens to go out because babysitting opportunities were becoming scarcer. This led to further scarcity in babysitting opportunities. The cycle was only broken by the Co-Operative issuing more baby-sitting tokens, which led to babysitters feeling confident about spending them again. This is a neat analogy for how monetary stimulus helps during a credit crunch.
Coronavirus is not a demand shock, however. It is first and foremost a supply shock which is now spilling over to demand. Consumers did not initially stay away from shops and restaurants because they were worried about their future economic prospects, but because governments told them to stay at home. Holidays are not being canceled to shore up household finances but because countries have closed their borders. Workers have not been furloughed from factories because of insufficient orders but because employers are worried about the risk of spreading disease. It is of course true that the mass unemployment caused by these measures will result in a dramatic drop in aggregate demand. It is also true that the confidence effects caused by such measures is likely to result in cash hoarding by households and businesses – indeed such behaviour is in evidence in markets at the moment. But this is the second order response to a first order shock to aggregate supply.
Understanding this has very important implications for the policy response to the coronavirus. It should worry us that policymakers and academics think providing massive stimulus is the solution. This is because policymakers appear to be attempting to shift demand back to where it was a couple of months ago, at the same time as holding supply fixed. To put it another way, if the government tries to keep spending at levels before lockdowns began, while at the same time keeping lockdowns in place, there will be simply more money chasing after significantly fewer goods and services. The result of this will be inflation, and a lot of it.
This might seem like an absurd argument given that market inflation expectations – the price of inflation linked bonds – have fallen since the crisis began. But, it is perfectly consistent to say that even though this crisis ultimately originated with a supply shock, the market has up until now expected demand to fall somewhat more in response. What matters is that at present supply is inelastic – unlike in traditional Keynesian formulations – because while the government might be handing out $100 dollar bills it won’t be allowing workers to work regular days, restarting flights or reopening factories until the virus subsides.
In figures one and two we present a graphical representation of this argument. Figure one shows a stylized version of the present equilibrium. The demand curve has shifted left and become vertical (inelastic). The demand curve has shifted left to a greater extent, meaning that the present equilibrium is likely to be slightly deflationary (p2 and i2). In figure two, the effect of fiscal and monetary stimulus shifts the demand curve back towards its position before coronavirus but the supply curve remains fixed (p3 and i2). The result is a higher price level.
Those worried about deflation might argue that given bleak economic prospects, cash handouts will just end up being saved by workers and businesses. But saving is all about expectations. The moment people believe prices will begin to rise in the shops for essential goods, workers will start spending those handouts. Unless the volume of goods and services available to buy increases again, this will in turn translate directly into higher prices.
A similar point can be made about the labour market. There are a limited amount of jobs that can be done from home. According to our DB dig suvey, for example, suggests that only 55% workers will be able to work from home (figure 3). This means the supply of labour has been restricted by the coronavirus. Keeping employees in their jobs, and paying them the same wages, for doing nothing – as the Governor of the Bank of England has suggested – will result in a massive rise in unit labour costs. Presumably the government will compensate employers for doing so. But again, this money has to go somewhere – namely higher prices. In effect, there has been a huge upward shift in the Phillips curve.
Two caveats are important. As the coronavirus has created a massive credit crunch due to the sudden evaporation of corporate revenue, it is appropriate for the government to provide enough liquidity for businesses to keep them afloat for the duration of the crisis. These businesses were profitable before restrictions were imposed and can be again when they are eventually lifted. Similarly, it is justified for the government to mitigate the impact on living standards for the recently unemployed through benefit payments. As we acknowledged, the shock to demand is likely to have been greater than the shock to supply at this stage.
What would be disastrous is if governments embarked on New Deal style spending program via monetary financing at a time when it is imposing stringent supply constraints on the economy. The result may be hyperinflation, and end up doing more harm to people’s living standards than nothing at all.
In the wake of the 2008 financial crisis, those that warned about the inflationary risks of QE and fiscal expansion were given a tough time by most professional economists – and rightly so. They predicted that inflation would result out of an expansion of the monetary base when the economy was suffering from a deficit in aggregate demand. Perhaps scarred by their experience, or perhaps due to the distressing human tragedy that is currently unfolding, they have been notably quiet this time around. That is unfortunate because, as the saying goes, policymakers always solve for the last crisis.
We are worried that the real pain trade for markets – and the economy – is the long awaited return of inflation.
A good hedge would be to buy gold, as well as inflation linked bonds in the US and Euro Area, which are currently trading at all time lows
In the months since the COViD-19 pandemic began, governments around the world have been utilizing a wide range of technological devices to enforce quarantines. Advanced surveillance and tracking have been made possible by cellphone data, CCTV cameras, and drones.
Surveillance drones were used during the lockdown in China to monitor neighborhoods to ensure that residents were staying indoors. Drones were also used to spray disinfectants during the outbreak as well.
The World Health Organization (WHO) has urged additional governments to use similar tactics to enforce quarantines. Police in Spain have been using drones to patrol the streets and order citizens to stay home during the lockdown.
Police in Spain have been using drones to check the streets for anyone ignoring Spanish orders to stay home during the coronavirus outbreak
Most Americans doubted that these types of measures would happen at home, but police in California have already announced a plan to use drones equipped with cameras and loudspeakers to enforce the recently imposed quarantine orders.
In Chula Vista, a town just outside of San Diego, police purchased at least two drones from the Chinese company DJI for $11,000 each.
Vern Sallee, one of the city’s police captains, told the Financial Times that the drones could be used to “disperse crowds” without the need for a human officer to be involved.
“We have not traditionally mounted speakers to our drones, but . . . if we need to cover a large area to get an announcement out, or if there were a crowd somewhere that we needed to disperse – we could do it without getting police officers involved,” Sallee said.
“The outbreak has changed my view of expanding the program as rapidly as I can,” he added.
Sallee also suggested that the drones could be used to give homeless people updates or orders about the pandemic, since many of them may not have access to the Internet and may be unaware of the current situation.
“We need to tell them we actually have resources for them—they are vulnerable right now. It might be impractical or unsafe for our officers to be put into those areas,” Sallee said.
Spencer Gore, chief executive of Impossible Aerospace, a California-based maker of high-performance drones used by first responders, admitted that the idea “seems a little Orwellian,” but insisted that it could “save lives.”
“What we saw in China, and what we’re probably going to see around the world, is using drones with cameras and loudspeakers to fly around to see if people are gathering where they shouldn’t be, and telling them to go home,” Gore said.
As President Trump says he tested negative for coronavirus, the COVID-19 pandemic raises the fear that huge swaths of the executive branch or even Congress and the Supreme Court could also be disabled, forcing the implementation of “continuity of government” plans that include evacuating Washington and “devolving” leadership to second-tier officials in remote and quarantined locations.
But Coronavirus is also new territory, where the military itself is vulnerable and the disaster scenarios being contemplated — including the possibility of widespread domestic violence as a result of food shortages — are forcing planners to look at what are called “extraordinary circumstances”.
Above-Top Secret contingency plans already exist for what the military is supposed to do if all the Constitutional successors are incapacitated. Standby orders were issued more than three weeks ago to ready these plans, not just to protect Washington but also to prepare for the possibility of some form of martial law.
According to new documents and interviews with military experts, the various plans – codenamed Octagon, Freejack and Zodiac – are the underground laws to ensure government continuity. They are so secret that under these extraordinary plans, “devolution” could circumvent the normal Constitutional provisions for government succession, and military commanders could be placed in control around America.
“We’re in new territory,” says one senior officer, the entire post-9/11 paradigm of emergency planning thrown out the window. The officer jokes, in the kind of morbid humor characteristic of this slow-moving disaster, that America had better learn who Gen. Terrence J. O’Shaughnessy is.
He is the “combatant commander” for the United States and would in theory be in charge if Washington were eviscerated. That is, until a new civilian leader could be installed.
‘We’re in territory we’ve never been in before’
What happens, government expert Norman Ornstein asked last week, if so many members of Congress come down with the coronavirus that the legislature cannot meet or cannot muster a quorum? After 9/11, Ornstein and others, alarmed by how little Washington had prepared for such possibilities, created a bipartisan Continuity of Government Commission to examine precisely these and other possibilities.
It has been a two-decade long futile effort, Ornstein says, with Congress uninterested or unable to either pass new laws or create working procedures that would allow emergency and remote operations. The rest of the federal government equally is unprepared to operate if a pandemic were to hit the very people called upon to lead in an emergency. That is why for the first time, other than planning for the aftermath of a nuclear war, extraordinary procedures are being contemplated.
In the past, almost every imagined contingency associated with emergency preparedness has assumed civil and military assistance coming from the outside. One military officer involved in continuity planning calls it a “cavalry” mentality: that military assistance is requested or ordered after local civil authority has been exhausted.
“There might not be an outside,” the officer says, asking that she not be named because she is speaking about sensitive matters.
In recognition of the equal vulnerability of military forces, the Pentagon has instituted unprecedented restrictions on off-base travel. Last Wednesday it restricted most overseas travel for 60 days, and then on Friday issued supplemental domestic guidance that essentially keeps all uniformed personnel on or near military bases. There are exceptions, including travel that is “mission-essential,” the Pentagon says.
Mission essential in this regard applies to the maze of more than a dozen different secret assignments, most of them falling under three larger contingency plans:
CONPLAN 3400, or the military’s plan for “homeland defense,” if America itself is a battlefield.
CONPLAN 3500, “defense support of civil authorities,” where the military assists in an emergency short of armed attack on the nation.
CONPLAN 3600, military operations in the National Capital Region and continuation of government, under which the most-secret plans to support continuity are nested.
All of these plans are the responsibility of U.S. Northern Command (or NORTHCOM), the homeland defense military authority created after 9/11. Air Force General O’Shaughnessy is NORTHCOM’s Colorado Springs-based commander.
On February 1, Defense Secretary Mark T. Esper signed orders directing NORTHCOM to execute nationwide pandemic plans. Secretly, he signed Warning Orders (the WARNORD as it’s called) alerting NORTHCOM and a host of east coast units to “prepare to deploy” in support of potential extraordinary missions.
Seven secret plans – some highly compartmented – exist to prepare for these extraordinary missions.
Three are transportation related, just to move and support the White House and the federal government as it evacuates and operates from alternate sites.
The first is called the Rescue & Evacuation of the Occupants of the Executive Mansion (or RESEM) plan, responsible for protecting President Trump, Vice President Mike Pence, and their families–whether that means moving them at the direction of the Secret Service or, in a catastrophe, digging them out of the rubble of the White House.
The second is called the Joint Emergency Evacuation Plan (or JEEP), and it organizes transportation for the Secretary of Defense and other national security leaders so that they can leave the Washington area.
The Atlas Plan is a third, moving non-military leaders – Congressional leadership, the Supreme Court and other important figures – to their emergency relocation sites. Under Atlas, a still- secret bunker would be activated and cordoned, with government operations shifting to Maryland.
The three most compartmented contingencies – Octagon, Freejack, and Zodiac – call upon various military units in Washington DC, North Carolina and eastern Maryland to defend government operations if there is a total breakdown.
The seventh plan – codenamed Granite Shadow – lays out the playbook for extraordinary domestic missions that involve weapons of mass destruction.(I disclosed the existence of this plan in 2005, and its associated “national mission force”–a force that is on alert at all times, even in peacetime, to respond to a terrorist attack or threat with the nuclear weapon.)
Most of these plans have been quietly activated during presidential inaugurals and State of the Union addresses, the centrality of the weapons of mass destruction scenario seen in the annual Capital Shield exercise in Washington. Last year’s exercise posited a WMD attack on Metro Station. Military sources say that only the massive destruction caused by a nuclear device – or the enormous loss of life that could be caused by a biological agent – present catastrophic pressure great enough to justify movement into extra-Constitutional actions and extraordinary circumstances plans.
“WMD is such an important scenario,” a former NORTHCOM commander told me, “not because it is the greatest risk, but because it stresses the system most severely.”
According to another senior retired officer, who told me about Granite Shadow and is now working as a defense contractor, the national mission force goes out on its missions with “special authorities” pre-delegated by the president and the attorney general. These special authorities are needed because under regulations and the law, federal military forces can supplant civil authority or engage in law enforcement only under the strictest conditions.
When might the military’s “emergency authority” be needed? Traditionally, it’s thought of after a nuclear device goes off in an American city. But now, planners are looking at military response to urban violence as people seek protection and fight over food. And, according to one senior officer, in the contingency of the complete evacuation of Washington.
Under Defense department regulations, military commanders are authorized to take action on their own – in extraordinary circumstances – where “duly constituted local authorities are unable to control the situation.” The conditions include “large-scale, unexpected civil disturbances” involving “significant loss of life or wanton destruction of property.” The Joint Chiefs of Staff codified these rules in October 2018, reminding commanders that they could decide, on their own authority, to “engage temporarily” in military control in circumstances “where prior authorization by the President is impossible” or where local authorities “are unable to control the situation.” A new Trump-era Pentagon directive calls it “extreme situations.” In all cases, even where a military commander declares martial law, the directives say that civil rule has to be restored as soon as possible.
“In scenarios where one city or one region is devastated, that’s a pretty straightforward process,” the military planner told me.
“But with coronavirus, where the effect is nationwide, we’re in territory we’ve never been in before.”
Supreme Court Justices Neil Gorsuch and Brett Kavanaugh attend the State of the Union address in the chamber of the U.S. House of Representatives at the U.S. Capitol Building on February 5, 2019 in Washington, DC.POOL/GETTY
An extended period of devolution
Continuity of government and protection of the presidency began in the Eisenhower administration with the possibility emerging that Washington could be obliterated in an atomic attack. The need to plan for a nuclear decision-maker to survive even a direct attack led to the building of bunkers and a maze of secret procedures and exceptions, many of which are still followed to this day. Congress was also folded in – at least Congressional leadership – to ensure that there would always be a Constitutional successor. And then the Supreme Court was added.
Before 9/11, continuity and emergency programs were broadened beyond nuclear war preparedness, particularly as hurricanes began to have such devastating effects on modern urban society. And because of the advent of pandemics, broadly beginning with the Avian Influenza, civil agencies responsible for national security, such as the Department of Health and Human Services, which is the lead agency to respond to coronavirus, were also brought into continuity protection.
Despite well-honed plans and constant testing over 30 years, the attacks of September 11, 2001 severely tested all aspects of continuity movement and communications. Many of the procedures written down on paper were either ignored or thrown out the window. As a result, continuity had a second coming, billions spent by the new Department of Homeland and the other national security agencies to ensure that the Washington leadership could communicate and move, a whole new system established to be ready if a terrorist attack came without warning. Bunkers, many shuttered at the end of the Cold War, were reopened and expanded. Befitting the panic at the time, and the atomic legacy, the most extraordinary planning scenario posited a terrorist attack that would involve an improvised nuclear or radiological dispersal device in a major American city.
The terrorist attack scenario dominated until 2006, when the disastrous government response to Hurricane Katrina in New Orleans shifted federal government preparedness to formally adopt an “all-hazards” system. Civil agencies, the 50 states and local communities – particularly large cities – all began to synchronize emergency preparedness with common protocols. U.S. Northern Command was created to harness military assistance in domestic disasters, it’s three overarching contingency plans the product now of 15 years of trial and error.
Government at all levels now have extensive “continuity” programs to respond to man-made and natural disasters, a national response framework that has steadily grown and taken hold. This is the public world of emergency response, ranging from life-saving efforts to protect and restore critical infrastructure, to drills that practice the evacuation of key officials. It is a partnership created between federal government agencies and the States, carefully constructed to guard the rule of law.
In July 2016, Barack Obama signed the classified Presidential Policy Directive 40 on “National Continuity Policy,” establishing “essential functions” that government agencies were tasked to protect and retain. At the highest level were the National Essential Functions, those that posit “the continued functioning” of government under the Constitution. In order to preserve Constitutional rule, agencies were ordered to have not just a line of succession but also one of “devolution,” a duplicate chain of individuals secreted outside Washington available in a catastrophic emergency. Federal Continuity Directive 1, issued just days before Donald Trump became president, says that devolution has to establish “procedures to transfer statutory authority and responsibilities” to this secondary designated staff to sustain essential functions.
“Devolution may be temporary, or may endure for an extended period,” the directive states. And it further directs that the devolution staff be located at “a geographically dispersed location unaffected by the incident.” Except that in the case of coronavirus, there may be no such location. This places the plans for the extraordinary into completely uncharted territory, planners not just considering how devolution or martial law might work in a nationwide disaster but also how those earmarked to implement these very plans have to be sequestered and made ready, even while they are equally vulnerable.
NORTHCOM stresses in almost everything it produces for public consumption that it operates only in “support” of civil authorities, in response to state requests for assistance or with the consent of local authorities. Legally, the command says, the use of federal military forces in law enforcement can only take place if those forces are used to suppress “insurrection, domestic violence, unlawful combination, or conspiracy.” A second test also has to be met, that such disturbances “hinders the execution of the laws of that State, and of the United States within the State,” that is, that the public is deprived of its legal and constitutional protections. Local civil authorities must be “unable, fail, or refuse” to protect the civilian population for military forces to be called in, Pentagon directives make clear.
Hurricane Katrina forced the federal government to shift from a terrorism scenario to an “all-hazards” system. A family on their porch in the Treme area of New Orleans, which lies under several feet of water after Katrina hit on August 29, 2005.RICK WILKING/REUTERS
Since Hurricane Katrina in 2006, no emergency has triggered any state to even request federal military aid under these procedures. Part of the reason, the senior officer involved in planning says, is that local police forces have themselves become more capable, acquiring military-grade equipment and training. And part of the reason is that the governors have worked together to strengthen the National Guard, which can enforce domestic law when it is mustered under state control.
But to give a sense of how sensitive the employment of military forces on American soil is, when the New York National Guard arrived in New Rochelle last week, even though they were operating under the control of the governor, Mayor Noam Bramson still found it necessary to assure the public that no one in military uniform would have any “policing function.”
Local authorities around America are already expressing worries that they have insufficient equipment, particularly ventilators, to deal with a possible influx of coronavirus patients, the number of hospital beds fewer than the potential number of patients that could need them. And brawls have already broken out in stores where products are in short supply. The worst case is that shortages and violence spreads, that the federal military, isolated and kept healthy behind its own barricade, is called to take over.
Orders have already gone out that Secretary of Defense Esper and his deputy, David Norquist, remain physically separated, to guard against both of them becoming incapacitated. Other national security agencies are following suit, and the White House continuity specialists are readying evacuation should the virus sweep through the Executive Mansion.
The plans state that the government continues essential functions under all circumstances, even if that is with the devolved second string or under temporary military command. One of the “national essential functions”, according to Federal Continuity Directive 1 is that the government “provid[e] leadership visible to the Nation and the world … [while] maintaining the trust and confidence of the American people”
The question is whether a faceless elite could ever provide that confidence, preserving government command but also adding to public panic. That could be a virus too.
BofA Calls For “War-Time Measures”, Urges Near-Total Fed Takeover Of Capital Markets
Last Sunday, when the Fed threw what appeared to be the kitchen sink at crashing markets, cutting rates to 0%, unveiling a $700BN QE (since expanded to include another $100BN in MBS), and enhancing G-5 central bank FX swap lines (since expanded to include numerous non-G5 banks), many wondered why the Fed withheld the one instrument considered critical in restoring market stability, preventing the commercial paper market from seizing up and preventing mutual fund runs, namely a commercial paper backstop facility. Then, just 48 hours later, the Fed did just that as stocks continue to plunge, and even though the Fed has since unveiled even more Lehman-era anti crisis measures, it has now become apparent that merely redoing what the Fed did in 2008 won’t be enough. Trying to one-up itself, and reverse the market panic, on Friday morning the Fed also announced a municipal bond bailout by including munis to the MMLF, yet even that was not sufficient to prevent stocks from crashing on quad-witching Friday.
So here we are late on Sunday night, with S&P futures just shy of limit down, waiting for Congress to pass a massive multi-trillion bailout legislation with Democrats and Republicans putting on a good show of sticking to their ideological talking points and roadblocking the bill’s passage even though everyone knows it will pass, the only question is how much more pain will markets take before this too shall pass.
And yet, to some – such as Bank of America which was most vocal in demanding a commercial paper facility last weekend (which now seems like years ago) – not even a massive bailout package passed by Congress, one that would grant the Fed de facto powers to buy corporate bonds, will be enough.
Instead, as BofA’s rates strategist Marc Cabana writes, there is “growing potential for the Fed to step up its already impressive policy response as lender of last resort.” Specifically, in the coming days and weeks BofA sees a growing likelihood of:
Adoption of UST yield curve targeting
Full and unlimited backstop to the Agency MBS market
Addressing regulatory constraints that have plagued intermediation of Fed repo
Re-launch of a new TALF-like program offering senior funding on ABS, CMBS, CLOs, longer-dated munis, and investment grade corporates
Provide guidance on the potential resolution plan for any failing entities to avoid fire sales of less liquid, riskier assets such as high yield debt, mezzanine structured product tranches, CRTs, and MSRs. Hurdles for this may prove high.
In short, BofA agrees with Zoltan Pozsar, who last week once again assessed the damage and said that the Fed will effectively have to backstop everyone and everything, in declaring a virtually total takeover of capital markets by the Fed, which is now in critical triage mode, designed to prevent further asset losses which from this point on, would have dire social and perhaps civilizations implications, potentially even the civil war that Time Magazine one mocked us for predicting back in 2010 when we said that the Fed has put the US on collision course with armed social conflict.
And so, with days, if not hours left for capital markets them before the Federal Reserve effectively takes over all risk assets, here is BofA’s note urging the Fed to go all the way, which we deem is a fitting eulogy for the free markets and capitalism.
Without further ado, here is Marc Cabana’s note explaining why “Bolder Fed Action is Likely”, by which he means the total takover of capital markets by a group of academics who have never even held a real job in their lives:
Time to unleash the Fed’s full arsenal
What has started out as a health care crisis has quickly spiraled into an economic one and risks quickly becoming a housing/financial crisis. The Federal Reserve has sounded the battle cry, with Chair Powell’s guidance to “act as appropriate” followed by an emergency 50bp rate cut on 3 March 2020. This has been followed by quick action to meet the market’s most immediate needs, in a series of steps detailed in Table 1. Scheduled asset purchases have been significantly upsized as the week progressed to stem market volatility and contain the impact of deteriorating market liquidity and forced selling.
Despite the impressive list of Fed actions last week, ongoing rate and spread volatility are amplifying the already high systemic risks:
MBS investors who hedge rates, such as REITs, are finding themselves selling at distressed levels to fund margin calls on their rate hedges
Fed funding for Treasuries and MBS is not being intermediated by dealers to customers
nearly unlimited Agency and Treasury repo are effectively pushing on a string as dealer balance sheets remain constrained by regulations
Dealers are effectively prevented from entering into a riskless transaction of passing repo on to customers as their balance sheets balloon
Investors who fund overnight, or whose repo term matures, may find themselves forced to sell as dealer balance sheets are constrained.
To keep the situation from escalating further, and avoid the continued haphazard upsizing of daily QE purchases, we believe the Fed put needs to be made explicit, unlimited in quantity, and with a well-defined strike. To that end further “war-time” measures are needed. We believe it is time for the Fed to unleash its full arsenal to prevent these conditions worsening. We think it possible the Fed takes several additional measures in coming days or weeks, including:
Federal Reserve undertakes Yield Curve Control (YCC) by defining yield targets across the UST curve, standing ready to buy in unlimited quantities of Treasuries at those yields irrespective of settle date or off-the-run status. This can support the coming record fiscal stimulus too, although communication would need to be clear to ensure dollar reserve status is not jeopardized. We think such as measure would be very effective at reducing current Treasury illiquidity and would like only need to be temporary in nature
Just like QE1 was temporary, just like QE2 was temporary; just like QE3 was termporary; just like the QE4 bailout of repo was temporary, etc, etc, etc…
Yield targets can change over time, and the Fed would need to be sensitive to any breakeven inflation widening as signal over debt monetization controls. Fed YCC can be scaled back gradually as the markets stabilize and, we believe, will ultimately result in a smaller Fed balance sheet than the current policy. We discuss the historical precedent for this during WW2, rationale for YCC today, implementation criteria, and considerations.
Eliminate limits on Agency MBS daily purchase amount, and instead lock in MBS basis versus the yield target defined under YCC. For example the Fed could offer to buy each TBA daily at a fixed price in unlimited quantity. Prices would be published daily, with initial levels set to a reasonably wide spread, for example spot. The Fed would stand ready to buy for all settlement dates, using rolls to carry adjust as needed.
So why exactly would we need markets at this point?
With potentially unlimited purchases, dollar rolls can get squeezed if investors find themselves short bonds on TBA settle. To alleviate, the Fed would need to report daily or even intraday what they bought. Also, just like with the early days of QE3, the Fed can occasionally roll its TBA purchases forward to ensure orderly markets.
Eliminate regulatory limits associated with riskless dealer balance sheet exposures, similar to MMLF. Regulatory limits that could be eased include cash reserves held at the Fed or repo loans secured by collateral that is pledged to, and funded by the Fed. These exposures should not count for purposes of capital or liquidity regulations, and should not count negatively toward SLR or any other ratio or stress test. We believe such regulatory relief would go a long way to address funding and liquidity issues witnessed in USTs and MBS. It would also help stabilize specified pools, which is what most MBS investors hold, giving some investors the option to fund losses rather than forcing sales, or ensuring ongoing funding for prospective buyers.
To support liquidity in asset classes where the Fed does not offer repo, we see a growing likelihood of a substantial TALF-like facility being re-introduced. Offering non-recourse term repo that is not mark-to-market would effectively limit downside to investors with respect to potential liquidity events, and would be applicable to AAA, or at even most investment grade assets, with ratings determined as of the onset of this crisis.
This facility could face investors directly, or if #3 above is implemented, then dealers could intermediate. Asset classes could span structured products such as ABS, CMBS, CLOs, but also corporate debt and munis. Term would likely be commensurate with asset maturity, i.e. measured in years, not months. Cost and allowed leverage could be similar to TALF, or L+100, prohibitive enough to curb usage once markets stabilize.
The Fed could gear up for potential resolution planning associated with financial entity failures. The scepter of potential disorderly liquidations is impacting liquidity, creating a vicious spiral. For riskier and less liquid assets such as MSRs and CRTs not covered under the Fed repo or TALF, Maiden Lane-type facility can be created to absorb remaining illiquid assets to prevent fire-sale liquidation. Perhaps some sort of PPIP-like structure could be utilized where money managers will effectively set prices and co-invest with the government on favorable terms. Admittedly, the hurdle for this is high.
Some ass-kissing of Cabana’s former employer follows, along side the hilarious admission that “post-crisis regulations to improve bank capital and liquidity were meant to ensure a repeat of 2008 would not happen. However, what is exposed now is that leverage and liquidity risk had simply shifted away from banks to other sectors of the economy and investor universe…”
The Fed has done a tremendous amount over the past 1.5 weeks but we expect there will be additional changes in coming days or weeks. Post-crisis regulations to improve bank capital and liquidity were meant to ensure a repeat of 2008 would not happen. However, what is exposed now is that leverage and liquidity risk had simply shifted away from banks to other sectors of the economy and investor universe. The corporate sector became more levered, with holdings at money managers that have quickly become sellers, as credit risk spiked and redemptions surged. mREITs, another levered sector, have been sucked into this vortex. With banks already full on liquid assets this unfortunately leaves the Fed as the only game in town, in our view.
Now if only there were those who had warned for years and years about this “totally unexpected” shifting of leverage and liquidity away from banks to the corporate sector, and instead of being mocked relentlessly by pathological permabull cretins who couldn’t see the future beyond their EOD P&L, were actually listened to. Alas, that did not happen, and now taxpayers who indirectly funded all those $4 trillion in corporate buybacks over the past decade will be the same useful idiots who will be forced to double down and bailout these same “systematically important” companies like cruise lines and movie theaters.
Then, when that fails, the Fed’s takeover of capital markets will go from “near-total” to “total” as the Fed starts openly buying equities to prevent the final stock market crash in one final system-saving gamble. And then, when that also fails as it has over in Japan, well that will be game over for Western civilization as we know it.
Update (2130ET): After a day of further discussions and comments, it would appear that Canada is not convinced their athletes will be safe unless the Olympics is delayed and is therefore not sending any athletes to the games.
The Canadian Olympic Committee and Canadian Paralympic Committee will refuse to send athletes to the Tokyo Olympics if the event is not postponed. The 2020 Games are currently set to begin on July 24.
Team Canada will not send athletes to Games in summer 2020 due to COVID-19 risks
The Canadian Olympic Committee (COC) and Canadian Paralympic Committee (CPC), backed by their Athletes Commissions, National Sports Organizations and the Government of Canada: have made the difficult decision to not send Canadian teams to the Olympic and Paralvmpic Games in the summer of 2020.
The COC and CPC urgently call on the International Olympic Committee (IOC), the International Paralvmpic Committee (IPC) and the World Health Organization (WHO) to postpone the Games for one year and we offer them our full support in helping navigate all the complexities that rescheduling the Games will bring_ While we recognize the inherent complexities around a postponement, nothing is more important than the health and safety of our athletes and the world community_
This is not solely about athlete health – it is about public health. With CON-ID-19 and the associated risks: it is not safe for our athletes. and the health and safety of their families and the broader Canadian community for athletes to continue training towards these Games. In fact it runs counter to the public health advice which we urge all Canadians to follow
The COC and CPC reviewed the letter and news release sent Sunday by the IOC.. 1,Ve are thankful to the IOC for its assurance that it will not be cancelling the Tokyo 2020 Games and appreciative that it understands the importance of accelerating its decision-making regarding a possible postponement.
We also applaud the IOC for acknowledging that safeguarding the health and wellness of nations and containing the virus must be our paramount concern. We are in the midst of a global health crisis that is far more significant than sport
The COC and CPC would like to thank our athletes: partners and the Canadian sport community for their patience and for lending us their voices during these unprecedented times_ We remain hopeful that the IOC and IPC will agree with the decision to postpone the Games as a part of our collective responsibility to protect our communities and work to contain the spread of the virus.
This move by the Canadians is likely to force the hand of the rest of the G-& and soon enough, Japan will be forced to postpone or cancel.
* * *
The International Olympic Committee has set a deadline of four weeks to make a decision on whether they will postpone the 2020 games in Tokyo due to the Chinese coronavirus pandemic, according to the BBC.
The move comes after most prominent teams across from various countries have demanded a delay – including the US track and field team, the US swim team – which asked for a one-year delay, and the country of Brazil.
The U.S. swimming and track and field teams are two of America’s most successful Olympic teams, and their popularity is one of the main reasons Comcast Corp.’s NBC agreed to pay $2.6 billion every four years to broadcast the games, significantly more than any other global media company. At the 2016 Summer Games in Rio, they accounted for more than half of the country’s 121 medals, and 29 of the 46 golds. –National Post
According to Ransquawk, organizers are considering a delay of up to two years, though they are hopeful it will only be a 45-day postponement. Japan has already spent $12 billion (USD) on preparations, while reports have suggested up to $3 billion of sponsorship revenue may be at rosk.
Other plans being considered involve holding the games without spectators, and/or scaling back the games.
Some organisers are pushing for a decision to be made quickly, warning that cancellation fees could rise the longer the decision is pushed-back. -Ransquawk
IOC president Thomas Bach said on Friday that “different scenarios” are being considered for the first time – including a ‘scaled-down’ event.
UK Athletics chairman Nic Coward recently suggested that the Olympics should be postponed, while Brazil, Norway and Slovenia’s Olympic committees have also urged the IOC to take action and put the Games back to next year. –BBC
“I do think they will be postponed, it’s inevitable. Every day is the Olympic Games,” said four-time Olympics gold medalist on Canada’s ice hockey team, and a member of the IOC. “Every day athletes cannot train, workout, it’s a day they cannot prepare.”
We suspect they won’t need four weeks to make their decision.
As a result of the coronavirus outbreak, and the ensuing lockdown, the commercial property market has essentially frozen.
Buildings that were used for all types of purposes: offices, diners, restaurants, hotels – they’ve all been shut down. And industries like the travel industry are forgoing $1.4 billion per week in revenue, according to Bloomberg.
The shutdown is also having an effect on apartment buildings and industrial properties. Nothing is off limits, and it’s sending the commercial property market into chaos.
Alexi Panagiotakopoulos, partner at Fundamental Income, a real estate strategy firm, said: “On the investor side, there’s widespread panic. There’s downward pressure on every aspect of every asset class.”
And there’s no way to value a market when you don’t have a bid and an offer – and you’re not sure when the market will “re-open”. Further, there’s no way to try and model the future value of such properties when everyone is unsure of what the real estate landscape will look like when everything is said and done.
Scott Minerd, chief investment officer at Guggenheim Partners said: “There will likely be long-lasting changes.”
It’s estimated that investment activity in the space could fall by 45% this year, which would be further than post-9/11 or the 2008 financial crisis.
The drumbeat of large deals has already gone silent. For example, Bloomberg reports that the Canada Pension Plan Investment Board’s planned sale of a 50% stake in the 900 million pound Nova development in London’s Victoria district collapsed on Friday. Similarly, Singapore-based ARA Asset Management Ltd., which was lined up to purchase the pension fund’s half of Nova, has balked on the deal.
Viacom also announced last week that it’s suspending its plans to sell the Black Rock building in Manhattan because potential buyers can’t visit the property. Simon Property Group’s proposed acquisition of Taubman Centers, Inc., is also now up in the air.
More than $13 billion in funds in the UK has been frozen in property funds while appraisers warn that the virus makes it impossible to assess their value. China’s office market has been devastated with plunging rents and spiking vacancy rates, which could climb as high as 28% next year in Shanghai, according to estimates.
REITs in the U.S. have been destroyed. Names like Brookfield Property Partners, which made a $15 billion bet on malls in 2018, expects “severe consequences” in coming weeks. The company’s CEO says it has $6 billion in undrawn credit lines and cash.
Matthew Saperia, an analyst at Peel Hunt, commented on the potential threat to landlords: “The implications could be far-reaching, but quantifying these is highly speculative at present.”
As the uncertainty grows, the level of credit available begins to shrink. Financing has dried up for hotel, mall and senior living projects and it’s estimated that up to 15% of loans on commercial property could default over the next couple of years if the recession continues. The value of commercial mortgage-backed securities is collapsing…
Mark Fogel, CEO of Acres Capital, commented: “Nobody knows where deals will be priced and nobody knows just how long this issue is going to affect the world and how much it’ll affect the underlying collateral.”‘
And Minerd believes there won’t be a “back to normal” once this is all over: “I think there’s going to be a permanent change. People are more comfortable at home. Why do they need to commute?”
Health professionals are increaingly sounding the alarm over the U.S. healthcare system, warning that the coronavirus outbreak could quickly overwhelm unprepareed hospitals without swift action to provide equipment to nurses and doctors.
“This is a nationwide problem, even on the private side,” an anonymous doctor toldNBC News.
“No clinic in this country, or hospital for that matter, is going to have enough equipment.”
NBC News reported that around 250 doctors and nurses responded to an informal survey request and painted a bleak picture of a healthcare system already on the verge of collapse with at least a month to go before coronavirus cases peak in the U.S.—citing in particular a lack of personal protective equipment (PPE).
Nearly all who responded said there were shortages of PPE in the hospitals, outpatient clinics and offices where they worked.
Many reported being forced to ration or reuse supplies, including surgical and N95 masks, for fear of running out. Many also said they were facing shortages of basic sanitary supplies, including hand sanitizer and disinfectant wipes.
One Philadelphia doctor interviewed by NBC News said her husband—also a doctor—is on the frontlines in the city.
“I am so scared,” she said. “I can’t even begin to tell you.”
Calls for the federal government to step in and order manufacturers to produce equipment increased Friday, with the union National Nurses United issuing a demand for immediate action to protect healthcare workers.
“We need to act now and act fast,” Bonnie Castillo, National Nurses United executive director, said in a statement.
“Priority number one is to protect the health and safety of our nurses and health care workers so that they can continue to take care of patients and keep our communities as healthy as possible through this pandemic. If our health facilities no longer stay as centers of healing and instead turn into disease vectors, many more people will needlessly suffer from this terrible disease.”
It’s not just PPE. Testing kits are near-impossible to obtain for hospitals and health professionals, leading to difficult decisions on who to treat, when to treat them, and how to track the virus. In Los Angeles County, health officials are instructing doctors and nurses “to test patients only if a positive result could change how they would be treated.”
A front-line healthcare provider who was not authorized to speak to the media and requested anonymity said county doctors are interpreting Thursday’s letter and other advice coming from senior L.A. County public health officials to mean they should only test patients who are going to be hospitalized or have something unique about the way they contracted the virus.
They are not planning to test patients who have the symptoms but are otherwise healthy enough to be sent home to self-quarantine — meaning they may never show up in official tallies of people who tested positive.
The coming crisis, as one nurse in Michigan told NBC News, is the result of a societal failure to prioritize public health.
“I don’t feel like my hospital is failing us,” said the nurse. “It’s the whole system that’s failing us.”
“Doesn’t Even Look Real” – Los Angeles Morphs Into “Ghost Town” Amid COVID-19 Outbreak
Last week we documented how the Seattle Metropolitan Area morphed into a ghost town amid the Covid-19 outbreak.
Now, the staff at the Los Angeles Times has taken out their quadcopter to record how strict distancing measures in the Los Angeles Metropolitan Area have changed the everyday life for millions of people.
Traffic on the 110 Freeway, heading north out of Downtown Los Angeles is usually jam-packed with cars, but with Gov. Gavin Newsom requesting all Californians to “shelter-in-place,” highways in the area have virtually no vehicles on them.
With nonessential gatherings banned, residents are limited to leaving their homes. Places like Pershing Square in Downtown Los Angeles is now closed off to the public.
All nonessential businesses across the state have been forced to close, which includes shopping malls and entertainment centers. LA Times’ staff snapped a picture of an empty parking lot at the Westfield Topanga & The Village shopping mall.
The potential of gaming platforms as revolutionary comms has been pondered for decades.
In his young adult novel Little Brother, author Cory Doctorow imagined teenagers using their video game systems to connect to an encrypted network to evade draconian government agencies in the wake of a terror attack and in For The Win, Doctorow explored the virtual economy of MMORPGs and their potential as an organizing mechanism against corrupt state power.
Enter one of the more interesting real-life examples of a video game platform being repurposed to fight fascist state censorship. Reporters Without Borders has tapped Minecraft to develop its new project The Uncensored Library, which is a virtual hub where users can access censored journalism from around the world.
Developed as a synergistic effort by the German branch of Reporters Without Borders, the German marketing agency DDB, and the UK design company Blockworks, The Uncensored Library is not a gamification of press freedoms but rather part of a series of projects based on using alternative platforms and collaborative 3D design to fight censorship.
Reporters Without Borders specifically sought out a company that could leverage the global engagement of Minecraft, which is so ubiquitous that it would be virtually impossible for a nation’s government to shut its servers down. DDB senior creative Tobi Natterer found in his research that countries with particularly draconian press censorship – Russia, Egypt, Mexico, Saudi Arabia, Vietnam, etc. – have extremely active gaming communities.Minecraft is the largest of those communities and it happens to allow gamers to write books in-game.
“Inside [those books],”explained senior interactive producer Robert-Jan Blonk, who worked on the library, “you can find articles and information about the journalists that are being censored in their own countries. We share these stories through the books that live in that library, and people can just openly read them, because even in the countries… where these journalists are from, you’re able to play Minecraft.”
The Uncensored Library features special sections for certain countries like Egypt, where there are virtually no press freedoms. The library features articles from Egypt that you simply can not find anywhere else except inside the Minecraft server. In Mexico, where journalists and dissidents face routine assassination from both the government and cartels, there is widespread self-censorship that is based on fear.
“In the Mexico room we built memorials to 12 Mexican journalists who have been murdered,” said James Delaney, managing director at Blockworks.
“Because of the explicit danger to journalists in Mexico, there are a lot of issues they won’t talk about because it’s too dangerous.”
The game includes a pedestal for the work of murdered journalist Javier Valdez Cárdenas.
Behind the library’s neo-classically iconic statue of a fist holding a pen and museum-like wings of book collections, there is a world map inscribing Reporters Without Borders’ Press Freedom Index, which ranks 180 countries based on their press censorship. The rankings factor in everything from executed journalists to the online censorship of articles, algorithmic censorship of keywords and even blocking VPNs, such as in China and Russia.
The Uncensored Library is getting plenty of attention in countries that do not blatantly censor the press, of course. The map has clocked 23,000 downloads globally and the official server has drawn 17,000 unique visitors.
For platform-specific info on how to access the library, Gizmodo offers a breakdown.
For a virtual tour of the Uncensored Library, check out the video below:
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