- How The "Interpreter" Scam Brought 75,000 Iraqis And Afghans To America
How The “Interpreter” Scam Brought 75,000 Iraqis And Afghans To America
Authored by Daniel Greenfield via Sultan Knish blog,
The latest battle over Special Immigrant Visas pitted Stephen Miller, President Trump’s senior advisor, against the Pentagon. The military brass was lobbying for 6,000 special immigrant visas for Iraqis who worked for American forces in the country. These visas were once again billed as helping “interpreters”.
That’s a lot of interpreters considering that there were only 5,200 American troops in Iraq.
How could there be more Iraqi interpreters for American troops than there are troops?
The Special Immigrant Visa scam has been sold for over a decade using the same claim that it’s needed to save the lives of Iraqi and Afghan interpreters who are risking death by helping American soldiers.
In one decade, the United States has handed out 75,250 of these visas to Iraqi and Afghan employees, and their dependents. Between 2007 and 2017, they represented 1 percent of all immigrant visas.
The truth is that the military brass has wrongly used the incentive of Special Immigrant Visas to recruit local personnel and cut costs by promising them resettlement in the United States. Considering the costs of resettling even the nicest Iraqi or Afghan families, it would have been cheaper to pay each of them a six-figure salary. But that would have come out of the defense budget. The SIV scam passes the buck to local cities and states, to ordinary taxpayers and communities who have to hire interpreters who speak Pashto to interact with the children of the interpreters who are swamping local school systems.
One Iraqi or Afghan employee brings a lot more dependents and expenses with him. In 2017, the 4,677 Iraqi and Afghan employees brought 13,713 dependents with them for a total of 18,390 refugees.
Those were the worst numbers since before Obama took office.
While conventional refugee numbers have been slashed, the number of Special Immigrant Visas for Iraqis and Afghans drastically shot up because the Pentagon was getting its way on immigration. Few of these visas were for actual interpreters. That number tends to be capped at 50 a year. Most of the SIV applicants coming in had to have only worked for a few years in often vaguely defined capacities.
Some were actual interpreters. Many more were cultural advisors and linguists.
All they have to do is claim that they received threats over their work for the US or the ISAF, the multinational force in Afghanistan, and they are resettled in the United States as refugees.
While the media has repeatedly accused President Trump of stopping interpreters from coming to this country even though they, allegedly, risked their lives, the number of SIV visas for Afghans and Iraqis shot up from 10,681 in 2014, to 14,383 in 2016, to 18,390 in 2017.
That’s when Stephen Miller tried to slam on the brakes.
The media complains that visa processing isn’t fast enough. And that the lives of SIV applicants are at risk every day they’re living in their own country. But bypassing vetting puts American lives at risk.
As a measure of how bad the vetting is, Ali Yousif Ahmed Al-Nouri, the Emir of an Al Qaeda group in Fallujah, entered this country as a refugee and applied for disability. He then went to work as a military contractor on a California base, teaching soldiers deploying to Iraq about the local culture. That’s the typical sort of task that many SIV visas are provided for which require little more than English skills.
Was an Al Qaeda Emir employed by the US military in Iraq? Did Al-Nouri come here on an SIV visa? The answer is he probably did, but no one seems to be especially willing to ask or answer that question.
Bilal Abood came to the United States on an SIV visa. Like many SIV applicants, he had worked as a contract linguist in Iraq. Like most SIV applicants, he claimed to have faced threats because of his work.
Once in the United States, Abood began viewing ISIS beheading videos and tweeted, “I pledge obedience to the Caliphate Abu Bakr al-Baghdadi.” That was the leader of ISIS.
“The United States is the enemy of Allah,” he had said.
Jasim Mohammed Hasin Ramadon and Ali Mohammed Hasan Al Juboori, Mustafa Sataar Al Feraji, Ali Mohammed Hasan Al Juboori, and Yasir Jabbar Jasim, 5 Iraqis who who came to America on SIV visas, took part in the rape of an American woman in Colorado Springs who was abused so badly that there was blood splattered on the wall. Her mistake was sympathizing with the poor hapless refugees.
That’s our mistake as a country.
Ramadon, like the other SIV applicants celebrated by the media, had an NCO lobby for him. He appeared on Oprah, was featured in a book, and became a celebrity. Then he was hit with a restraining order for choking and threatening to kill his girlfriend. His crimes ended with the brutal rape of an older woman.
But the SIV lobby doesn’t care about the woman he nearly killed. Or the threat to Americans.
District Court Judge Tanya Chutkan, an Obama appointee involved in controversial decisions, like inventing a right to taxpayer-funded abortions for illegal migrants, ruled that the Trump administration must immediately start processing visa applications for SIV migrants and bring them to America.
Meanwhile the National Defense Authorization Act of 2020 provided 4,000 more SIV slots for Afghans.
Shutting down the SIV pipeline has been painfully difficult because the refugee program has broad bipartisan support from both Democrats and Republicans in Congress, and from military brass.
In this case, it’s actually the bureaucracy that has saved American lives by slowing SIV visa processing.
The United States has spent years figuring out exactly how to throw in the towel in Afghanistan through some sort of meaningless deal with the Taliban, even as we continue passing out SIV visas to Afghan employees in a country we may be leaving at any time. And we are handing out SIV visas like candy to Iraqis even though we have a very limited military presence there that is not expected to last for long.
But facts have never stopped the SIV express from barreling through America at an incredible cost.
85% of SIV recipients have received refugee resettlement benefits. Over 17,000 have been dumped in California, over 10,000 in Texas, and over 7,000 in Virginia. In Virginia, that meant that over 800 Iraqi children and almost 2,000 Afghan children became part of the system. In Northern Virginia, SIV holders increased tenfold and doubled in just one year, putting a potential terrorist population close to the center of government, to top terror targets, including the headquarters of the CIA in Fairfax County.
Meanwhile a GAO report found that 60% of SIV refugees were unemployed after three months and 94% were on food stamps.
70% of Iraqi SIVs were unemployed.
In one single year, SIV refugees racked up $80 million in federal aid from two agencies alone. That doesn’t account for some federal refugee assistance programs that go on for as long as 5 years.
How many American soldiers could have been trained to speak Arabic or Pashto for that money?
As their number has grown, so has the monumental expense of subsidizing them. In 2008, SIV refugees accounted for only 1% of resettlement assistance. By 2017, SIV refugees made up a quarter of costs.
After 75,000 Iraqi and Afghan SIV recipients, maybe it’s time that we shut down the SIV scam, instead of expanding it, as politicians from both parties and Pentagon brass, keep insisting that we must do.
We currently have 14,000 troops in Afghanistan and over 55,000 Afghans here through the SIV program. There are 5,200 American military personnel in Iraq and over 20,000 Iraqis through the SIV program in America. We’ve resettled enough “interpreters” to fill Kalamazoo, Wilmington, or Boca Raton.
America is all “interpreted” out.
The US Army began deploying the Machine Foreign Language Translation System (MFLTS) in 2011. Millions of dollars have been signed in contracts for MFLTS systems that can provide automatic translations of Arabic, Pashto, Urdu, and many other languages. The system was deployed in 2017.
MFLTS is no doubt inferior to living translators. But software doesn’t shoot our soldiers in the back, rape women in Colorado Springs, demand food stamps, swamp social services in Virginia, or join ISIS.
Tyler Durden
Sun, 02/23/2020 – 23:30 - "Sick People" – Russian Lawmakers Blast US For Nuclear War Exercise
“Sick People” – Russian Lawmakers Blast US For Nuclear War Exercise
US Defense Secretary Mark Esper participated in a war exercise late last week at the United States Strategic Command (USSTRATCOM) HQ in Omaha, Nebraska, which featured how the Pentagon would respond to a Russian nuclear attack on Europe, reported Defense One.
“We conducted a mini-exercise,” a senior defense official said, speaking on the condition of anonymity. “The scenario included a European contingency where you are conducting a war with Russia and Russia decides to use a low-yield limited nuclear weapon against the site on NATO territory, and then you go through the conversation that you would have with the secretary of defense and then with the president ultimately to decide how to respond.”
“During the exercise, we simulated responding with a nuclear weapon,” the official said.
News of the “mini-exercise” immediately traveled to Moscow. Russian lawmakers called the Pentagon’s nuclear war simulation completely outrageous:
Senator Sergei Tsekov called organizers and participants of the exercise “sick people,” telling RBC News on Saturday, that he was “very surprised, frankly, very much, that they are doing this and also declare it. Although, on the other hand, judging by their current state and current actions, why be surprised?”
Alexander Sherin, the deputy head of the Duma’s defense committee, told HCH news on Saturday that the US’ nuclear war simulation with Russia has several objectives:
“Firstly, the population is getting used to such an incredible scenario for resolving the conflict as a nuclear strike between the Russian Federation and the NATO bloc. Secondly, an attempt to intimidate the population of Europe and justify the presence of American bases in European countries as guarantors of security and defenders in the event of a nuclear attack from Russia,” Sherin said.
He said it would be foolish for Moscow to launch nuclear strikes on European countries because the fallout would flow back into Russia.
Sherin says the reason the US nonchalantly leaks its nuclear war exercises to the media is because it has never had a major war on its soil, unlike Europe and Russia.
The latest drill comes as President Trump’s gargantuan military budget of more than $740 billion has allocated a whopping $44 billion for nuclear weapons.
Peter Kuznick, the director of the American University’s Nuclear Studies Institute, told RT News there is no such thing of limited nuclear war.
Kuznick said how these things play out is that both sides will continue shooting atomic weapons at one another until the human civilization is completely wiped out.
The exercise comes weeks after we reported the US added a ‘low yield’ nuclear weapon to its submarine arsenal in a controversial first in decades.
Trump’s soaring military budget has led to the most significant increase in global military spending in more than a decade suggests governments across the world are preparing for the next big conflict.
Tyler Durden
Sun, 02/23/2020 – 23:05 - Bloomberg "Tried To Ruin Me For Speaking Out" On China
Bloomberg “Tried To Ruin Me For Speaking Out” On China
Authored by Leta Hong Fincher via The Intercept,
I am one of the many women Mike Bloomberg’s company tried to silence through nondisclosure agreements. The funny thing is, I never even worked for Bloomberg.
But my story shows the lengths that the Bloomberg machine will go to in order to avoid offending Beijing. Bloomberg’s company, Bloomberg LP, is so dependent on the vast China market for its business that its lawyers threatened to devastate my family financially if I didn’t sign an NDA silencing me about how Bloomberg News killed a story critical of Chinese Communist Party leaders. It was only when I hired Edward Snowden’s lawyers in Hong Kong that Bloomberg LP eventually called off their hounds after many attempts to intimidate me.
In 2012, I was working toward a Ph.D. in sociology at Tsinghua University in Beijing, and my husband, Michael Forsythe, was a lead writer on a Bloomberg News article about the vast accumulation of wealth by relatives of Chinese President Xi Jinping, part of an award-winning “Revolution to Riches” series about Chinese leaders.
Soon after Bloomberg published the article on Xi’s family wealth in June 2012, my husband received death threats conveyed by a woman who told him she represented a relative of Xi. The woman conveying the threats specifically mentioned the danger to our whole family; our two children were 6 and 8 years old at the time. The New Yorker’s Evan Osnos reports a similar encounter in his award-winning book, “Age of Ambition: Chasing Fortune, Truth and Faith in the New China,” when the same woman told Osnos’s wife: “He [Forsythe] and his family can’t stay in China. It’s no longer safe,” she said. “Something will happen. It will look like an accident. Nobody will know what happened. He’ll just be found dead.”
The experience was especially terrifying because it came just months after the murder of a British businessman, Neil Heywood, who was poisoned by the wife of a senior Chinese leader, Bo Xilai, according to Chinese state media. His body was reportedly discovered in a hotel in the southwestern Chinese city of Chongqing. While our family spent the kids’ summer vacation in 2012 outside of China, Bloomberg executives kept my husband busy in nonstop conference calls about how to maintain our security. I had recurring nightmares about my young children getting beaten up or killed. I desperately wanted to speak publicly about the death threats, feeling it would give us stronger protection, but Bloomberg News wanted us not to say anything about it while the company conducted its own internal investigation. I had been loyal to the company ever since my husband and I married in 2002, and I didn’t want to jeopardize his job. I stayed silent until October 26, 2012, when another (unrelated) story was published in defiance of the Chinese government. I decided to tweet that we had received death threats after the Bloomberg story on Xi Jinping.
Screenshot: Leta Hong Fincher
Within hours of my tweets — the original and my replies to questions — a Bloomberg manager called my husband and said, “Get your wife to delete her tweets.” I did not delete them, but I also did not tweet or speak publicly about the death threats again. I did not want to anger the company because we needed it to relocate us to Hong Kong, where our children would be safe. As we finished the remainder of our time in Beijing, applying for schools in Hong Kong and preparing for our move, I lived in constant fear. Would someone get to our children while they were on their way to or from school? Who was watching and listening to us? I obsessively pulled down all our window blinds at night in case Chinese security agents were watching us. I was careful not to speak loudly about our plans in our home or on my phone in case we were bugged.
In August 2013, I finally relaxed as we flew out of Beijing and moved to a temporary apartment in Hong Kong. I thought that our yearlong nightmare had ended. But things would soon get even worse.
My husband had been working for many months on another investigative report for Bloomberg about financial ties between one of China’s richest men, Wang Jianlin, and the families of senior Communist Party officials, including relatives of Xi. Bloomberg editors had thus far backed the story. A Bloomberg managing editor, Jonathan Kaufman, said in an email in late September 2013, “I am in awe of the way you tracked down and deciphered the financial holdings and the players. … It’s a real revelation. Looking forward to pushing it up the line,” according to an account published by the Financial Times.
Then Bloomberg killed the story at the last minute, and the company fired my husband in November after comments by Bloomberg News editor-in-chief Matt Winkler were leaked.
“If we run the story, we’ll be kicked out of China,” Winkler reportedly said on a company call.
Mike Bloomberg, then New York City mayor and majority owner of Bloomberg LP, was asked on November 12, 2013, about reports that his company had self-censored out of fear of offending the Chinese government and he dismissed the question.
“Nobody thinks that we’re wusses and not willing to stand up and write stories that are of interest to the public and that are factually correct,” Bloomberg told a press conference.
Yet, days after Bloomberg made those comments to reporters in New York, Bloomberg lawyers in Hong Kong threatened to devastate my family financially by forcing us to repay the company for our relocation fees to Hong Kong from Beijing and the advance on my husband’s salary that we took out, leave us with no health insurance or income, and take me to court if I did not sign a nondisclosure agreement — even though I had never been a Bloomberg employee.
The law firm representing Bloomberg, Mayer Brown JSM, sent a letter to my lawyer on December 6, 2013, threatening a court injunction if I didn’t agree to their confidentiality terms within seven days.
I told my husband’s lawyer that I did not want to sign a gag order, so Bloomberg summoned me and my husband to a meeting on December 16 at Mayer Brown JSM’s office in central Hong Kong. We sat around a fancy conference table with some Bloomberg senior editors and Mayer Brown lawyers and spoke via videoconference with a lawyer from Willkie, Farr & Gallagher, representing Bloomberg in New York. My husband’s lawyer said that I did not possess any recordings or emails that might be damaging evidence about the company’s practices.
“But what about all the evidence that is in her head?” said the outsized man on the video screen. When Bloomberg’s lawyer in New York uttered those words, I suddenly pictured him holding a giant vacuum cleaner, trying to suck all the memories out of my brain. I told everyone that I needed to leave the room and I walked out of the building, determined to go down fighting.
On December 20, they sent a letter to my husband demanding that I sign a nondisclosure agreement. If I didn’t agree, we might owe the company thousands of dollars. I might even have had to pay Bloomberg’s legal bills. The thought of Bloomberg possibly ruining our family financially if I didn’t give in to their threats made me sick, but I was also infuriated that they had kept us in harm’s way after we received threats, forbidden me from speaking publicly about the death threats we received in Beijing, and now were trying to take away my freedom of speech forever.
It was only when I hired Snowden’s lawyers in Hong Kong — Albert Ho and Jonathan Man offered me a low rate because it was a “good cause” — that Bloomberg finally backed off. In the meantime, they had sent me several more threatening letters. One letter from Mayer Brown JSM on January 8, 2014, spelled out that “by virtue of the knowledge that she retains (in her head) of our client’s [Bloomberg’s] Confidential Information she has an ongoing duty of confidentiality to our client.” They demanded that I sign away my right to speak out about things such as “unpublished drafts of an article prepared for our client; documents concerning our client’s newsgathering, editorial processes and editorial judgment …; any emails and other communications (including oral discussions) between and among our client’s employees concerning our client’s newsgathering editorial processes and editorial judgment.”
Ho, a veteran Hong Kong pro-democracy legislator and activist who has been assaulted twice over the years, told me that if Bloomberg didn’t back down, we could hold a press conference to shame them. Fortunately, it didn’t come to that and in February 2014, Bloomberg finally stopped sending me legal threats. I returned to Tsinghua University to finish my Ph.D. and published my first book about women in China. My husband joined the New York Times, re-reported the entire story on the Chinese businessman, Wang, which Bloomberg claimed was “not ready for publication,” and his story was published on the front page of the New York Times in late April 2015.
I never wanted to seek publicity about Bloomberg’s threatening behavior and was genuinely terrified of financial ruin, so in spite of preserving my freedom of speech, I have never written about my experience before. I am speaking out now because unlike so many other women, I am not bound by a nondisclosure agreement. Given the large number of women silenced by NDAs, it’s clear that there has been an environment of sexism at Bloomberg’s company. Bloomberg managers and lawyers treated me as though I were a piece of company property, an appendage of my husband, using intimidation and threats to try to bully me into submission. I agonized over whether to sign the NDA and I remember feeling physically suffocated, as though my mouth were stuffed with cotton balls. I haven’t met any of the other women, but I imagine that they, too, may have experienced the same terror of being threatened by a multibillion-dollar corporation, which could ruin their lives if they did not comply. Even now, I am nervous about the consequences of speaking out. But the more of us speak out, the stronger we are.
Tyler Durden
Sun, 02/23/2020 – 22:40 - "Range Beyond 1,000 Miles" – Leaked Images Reveal US Army Super Cannon
“Range Beyond 1,000 Miles” – Leaked Images Reveal US Army Super Cannon
We noted last Oct. the US Army was developing a “powerful cannon that can fire a projectile over a distance of more than 1,150 nautical miles,” or about the distance from New York City to Tennessee.
The Strategic Long-Range Cannon (SLRC) is a “game-changing” weapon to counter China and Russia at great distances enters the first round of live-testing in 2023.
Over the weekend, Defense Blog published a piece detailing how the Army “accidentally revealed the first images” of the new super cannon during a US-UK Modernization Demonstration Event.
The alleged pictures of the new cannon were shared by the US Army CCDC Army Research Laboratory at an event on Feb. 20 at Aberdeen Proving Ground, Maryland.
“The @USArmy hosted a US-UK Modernization Demonstration Event Feb. 20 at @USAGAPG to identify capability collaboration to the British Army. Officials from @ArmyFutures @USArmyCCDC , the centers and the lab, briefed interoperability to minimize risks of #modernization divergence.,” @ArmyResearchLab tweeted.
Other photos posted on Twitter detailed how the projectile can travel more than 1,000 nautical miles. Here’s one of the leaked images:
And another:
It seems that the GI. Joe brand owned by the toy company Hasbro has already created a futuristic toy called the “Thurnderclap,” which looks very similar to the super cannon.
However, super cannon is nothing new. The V-3 was a German World War II large-caliber cannon that filed projectiles upwards of 102 miles.
A bloated national defense budget has given the Army the ability to develop their wildest weapons – such as a super cannon. More government waste as war spending will bankrupt the nation.
Tyler Durden
Sun, 02/23/2020 – 22:15 - Political Bias And Anti-Americanism On College Campuses
Political Bias And Anti-Americanism On College Campuses
Authored by Walter Williams, op-ed via Townhall.com,
A recent Pew Research Center survey finds that only half of American adults think colleges and universities are having a positive effect on our nation. The leftward political bias, held by faculty members affiliated with the Democratic Party, at most institutions of higher education explains a lot of that disappointment. Professors Mitchell Langbert and Sean Stevens document this bias in “Partisan Registration and Contributions of Faculty in Flagship Colleges.”
Langbert and Stevens conducted a new study of the political affiliation of 12,372 professors in the two leading private and two leading public colleges in 31 states.
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For party registration, they found a Democratic to Republican (D:R) ratio of 8.5:1, which varied by rank of institution and region.
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For donations to political candidates (using the Federal Election Commission database), they found a D:R ratio of 95:1, with only 22 Republican donors, compared with 2,081 Democratic donors.
Several consistent findings have emerged from Langbert and Stevens’ study. The ratio of faculty who identify as or are registered as Democratic versus Republican almost always favors the Democratic Party. Democratic professors outnumber their Republican counterparts most in the humanities and social sciences, compared with the natural sciences and engineering.
The ratio is 42:1 in anthropology, 27:1 in sociology and 27:1 in English. In the social sciences, Democratic registered faculty outnumber their Republican counterparts the least in economics 3:1. The partisan political slant is most extreme at the most highly rated institutions.
The leftist bias at our colleges and universities has many harmful effects. Let’s look at a few.
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At University of California, Davis, last month, a mathematics professor faced considerable backlash over her opposition to the requirement for faculty “diversity statements.”
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University of California, San Diego, requires job applicants to admit to the “barriers” preventing women and minorities from full participation in campus life.
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At American University, a history professor recently wrote a book in which he advocates repealing the Second Amendment.
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A Rutgers University professor said, “Watching the Iowa Caucus is a sickening display of the over-representation of whiteness.”
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University of California, Berkeley, professor and former Secretary of Labor Robert Reich chimed in to say: “Think about this: Iowa is 90.7% white. Iowa is now the only state with a lifetime voting ban for people with a felony conviction. Black people make up 4% of Iowa’s population but 26% of the prison population. How is this representative of our electorate?”
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A Williams College professor said he would advocate for social justice to be included in math textbooks.
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Students at Wayne State University no longer have to take a single math course to graduate; however, they may soon be required to take a diversity course.
Then there’s a question about loyalty to our nation.
Charles Lieber, former chairman of the Department of Chemistry and Chemical Biology at Harvard, was arrested earlier this year on accusations that he made a materially false, fictitious and fraudulent statement about work he did for a program run by the Chinese government that seeks to lure American talent to China.
He was paid $50,000 a month and up to $158,000 in living expenses for his work, which involved cultivating young teachers and students, according to court documents. According to the Department of Justice, Lieber helped China “cultivate high-level scientific talent in furtherance of China’s scientific development, economic prosperity and national security.”
It’s not just Harvard professors.
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Newly found court records reveal that Emory University neuroscientist Li Xiao-Jiang was fired in late 2019 after being charged with lying about his own ties to China. Li was part of the same Chinese program as Lieber.
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A jury found a University of California, Los Angeles, professor guilty of exporting stolen U.S. military technology to China. Newsweek reported that he was convicted June 26 on 18 federal charges.
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Meanwhile, NBC reported that federal prosecutors say that University of Texas professor Bo Mao attempted to steal U.S. technology by using his position as a professor to obtain access to protected circuitry and then handing it over to the Chinese telecommunications giant, Huawei.
The true tragedy is that so many Americans are blind to the fact that today’s colleges and universities pose a threat on several fronts to the well-being of our nation.
Tyler Durden
Sun, 02/23/2020 – 21:50 -
- "Tsunami-Like" Coronavirus Floods South Korea With New Cases; Europe Begins To Isolate Italy: Live Updates
“Tsunami-Like” Coronavirus Floods South Korea With New Cases; Europe Begins To Isolate Italy: Live Updates
Summary:
- In a report that was 4 hours “late”, China reported an additional 409 coronavirus cases across the entire nation, and 150 additional deaths as of February 23 compared to 648 additional cases and 97 deaths on February 22; this brought total China cases to 77150 and total deaths 2592
- China’s Hubei province said it has 398 New Coronavirus Cases As Of Feb 23 and 149 New Coronavirus Deaths.
- South Korea raised its national threat level to “red alert” for the first time since the H1N1 swine flu outbreak in 2009. The total number of confirmed cases in the country reached 763, a jump of 161 overnight, and a 25-fold increase in the past week.
- The Italian government said it has 152 confirmed cases, up from three in a matter of days. Three people have died. Authorities have locked down about a dozen small towns and canceled events across the north, including Venice’s Carnival.
- Iran has confirmed eight deaths related to the coronavirus, the most outside of China, media reported Sunday. South Korea confirmed its seventh death.
- 4 more cases confirmed in UK
- 200 Israelis quarantined
- Japan confirms more cases; Japanese Emperor expresses hope for Tokyo Games
- Trump says US has everything ‘under control’ as he asks Congress for more money
- EU’s Gentiloni says he has ‘full confidence’ In Italian health officials
- Turkey, Pakistan close borders with Iran as confirmed cases soar
- Global Times says virus may not have originated at Hunan seafood market
- Axios reports shortages of 150 essential drugs likely.
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Update (2200ET): In a release that was about 4 hours late, China’s Hubei province said it has 398 New Coronavirus Cases As Of Feb 23 and 149 New Coronavirus Deaths. Overall, China reported an additional 409 coronavirus cases across the entire nation, and 150 additional deaths as of February 23 vs. 648 additional cases and 97 deaths on February 22. This brings the total number of cases across China to 77,150, and total deaths to 2592.
None of these numbers are even remotely credible any more, and serve merely the propaganda purpose of giving the impression that Beijing is winning the war against the spread of the Coronavirus, when in reality nobody has any idea anymore what is going on on the ground in China, and is why workers refuse to show up to their place of business. Consider this: two days ago, WaPo reporters pointed to a clear case of manipulation where the authorities suppressed the true number of cases.
Authorities in Hubei province reported good news Thursday: There were only 349 new coronavirus cases the previous day, the lowest tally in weeks. The bad – and puzzling – news? Wuhan, the capital of Hubei, reported 615 new cases all by itself.
And then there was the Hunan doctor who said he had treated no less than 50 patients with coronavirus on the same day official data reported just one new case.
惊恐：湖南中医药大学第二附属医院的这位医生一天确诊50个冠状病毒患者，累到浑身湿透，没力气说话…… pic.twitter.com/kMh2Wl2Zl2
— 实话实说 (@jMcSVGx9oRuiEir) February 22, 2020
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Update (2015 ET): The epidemic in South Korea is accelerating exponentially, with the country reporting 161 additional virus cases, bringing the total of 763, a 25-fold increase in cases in one week, along with two more deaths bringing the death toll there to seven. The Kospi is continuing its decline and is down 3.0% and approached the 2100 level on the downside.
More ominously, the number of cases under inspection is nearly 10,000.
Earlier in the day, S.Korea elevated the virus alert level to “red”, the highest in its four-tier system. According to Yonhap, in escalating the virus alert level, President Moon said, “a few days from now is a watershed moment.” In the first 30 days, S. Korea seemed to have been effectively combating the Covid-19. But within the past few days, the number of confirmed cases spiked, first linked to a religious sect and now starting to spread across the country. Yet, the city of Daegu and the Gyeongbuk area have a higher concentration of virus cases – representing 84% of the total number of infections – than other regions. Tied to this, the Korea Centers for Disease Control and Prevention (KCDC) estimates 329 cases, accounting for more than half of the total cases, to be related to the church services.
Medics in protective gear spray disinfectant at a market in the South Korean city of Daegu on Sunday The following chart shows the geometric spread of new cases in several countries, including Italy, Japan, South Korea and Iran.
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Update (1915ET): Austria’s state railroad has halted at least three trains traveling from Italy via the Brenner Pass in response to a rash of virus cases in its southern neighbor, officials said.
Meanwhile, Hong Kong warned that the “Tsunami-like” event from the virus in Hong Kong is devastating businesses already hobbled by months of anti-government protests. As Bloomberg notes, unlike in the U.S. and rival Singapore, businesses in Hong Kong don’t have recourse to any corporate rescue procedure. The lack of a proper legal framework for bankruptcy protection means companies are forced into liquidation, according to Johnson Kong, the president of the Hong Kong Institute of Certified Public Accountants.
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Update (1820ET): White House trade adviser Peter Navarro says the crisis shows, “not surprisingly,” that the U.S. has offshored too much of its supply chain. Navarro expressed confidence on Fox’s Sunday Morning Futures, saying the “American economy is exceedingly strong and not particularly vulnerable to what happens in China.” He emphasized his goal to bring more of the U.S. supply chain home. “A lot of it is in China, some of it is in India, some in Europe, but we’ve got to get that back on shore,” he said.
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Update (1615ET): The Italian government said it has 152 confirmed cases, up from three in a matter of days. Three people have died. Authorities have locked down about a dozen small towns and canceled events across the north, including Venice’s Carnival. Italian authorities reported cases in three regions: 110 in Lombardy; 21 in Veneto and nine in Emilia Romagna. Of those, 25 are in intensive care.
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Update (1415ET): The Epoch Times Jennifer Zeng reporting once again that the crematoriums in Wuhan are working overtime.
50-60 K people in hospitals in #Wuhan, out of 18 cremators at a crematorium, 3 were burned out due to overuse. Other 15 in operation 24/7. Many families died out.
希望之声 ：武汉居民惊曝医院住5、6万人 18个火化炉烧坏3个 – https://t.co/Of7fzmiDLM— 曾錚 Jennifer Zeng (@jenniferatntd) February 23, 2020
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Still believe those official numbers?
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Update (1345ET): G-20 finance ministers and central bankers who met in Riyadh yesterday for the latest G-20 summit said their countries stand ready to take action if the outbreak drags on the global economy. At this point, a massive hit to global GDP is looking inevitable.
Meanwhile, Bloomberg reports that Zhou Dewen, the chairman of the Small and Medium Business Development Association in the city of Wenzhou, believes the coronavirus outbreak is the worst public health crisis he’s seen in his 40 years since China started its economic liberalization.
In fact, he said, it is “the most severe” of any crisis in the 40 years since China embarked on major economic reforms. He sees not a double but a “triple whammy,” factoring in the economic slowdown the country was experiencing even before the trade conflict and the virus.
That sounds about right. And now we’re finding patients can go 27 days without showing symptoms.
* * *
Update (1230ET): The number of new coronavirus cases in Japan has risen to 135, while 57 new ‘Diamond Princess’ cases have been confirmed days after hundreds were released from a two-week quarantine. As we mentioned earlier, a third passenger has also died, according to Japan’s NHK.
One of the cases, according to the Japan Times, is a woman who was reportedly let off the cruise ship as the quarantine ended. Of course, every expert in the world including the CDC warned Japan that this would happen since health officials didn’t seem to have m much of an after-care plan. Alas, here we are.
Three boys who have been confirmed to be infected with the virus are now Japan’s youngest cases. They include a preschooler in Saitama and two brothers in a Hokkaido elementary school. It’s the first time people under the age of 10 have caught the virus in Japan. While the younger boy had recently traveled to Wuhan with his father, authorities have no explanation for how the two brothers in Hokkaido became infected.
Emperor Naruhito cancelled a public event on Sunday, and also reportedly expressed some alarm about the virus and the Tokyo Olympics. Naruhito, who turned 60 on Sunday, ascended to the throne last spring after his father became the first Japanese emperor in 2 centuries to abdicate.
He said he was looking forward to this summer’s games, adding that the ’64 Tokyo games were a special memory in his childhood, Reuters reports.
“This new coronavirus is a concern. I would like to send my sympathies to those who are infected and their families,” he said.
“At the same time, my thoughts are with the efforts of those who are treating them and working hard to prevent the spread of the infection. I hope their efforts will bear fruit soon.”
Tokyo will host the Summer Olympics from July 24 for the second time, and Naruhito said the first Tokyo games, held in October 1964 when he was four years old, were one of the highlights of his childhood.
The Tokyo Olympics are the major barometer right now. If they get cancelled, then the world will know: This outbreak is out of control.
* * *
Update (1220ET): Let’s check in with one country that we neglected to mention earlier in today’s roundup of outbreak-related news.
Haaertz reports that 200 Israelis are under quarantine after nine Korean tourists tested positive for the virus following a return trip from Israel. Yesterday, Tel Aviv issued travel warnings for South Korea and Japan (they’ve also barred foreigners who’ve recently been to either country from entering Israel).
Those under quarantine include people who came into contact with the Koreans.
* * *
Update (1145ET): Italian authorities have confirmed a third coronavirus-linked death in northern Italy. Officials confirmed that 50,000 remain under lockdown across 12 villages in the north.
As a reminder, Italy’s first cases surfaced in early February, when a Chinese couple on vacation in Rome fell ill. Now, priests celebrating mass on Sunday across Italy have been ordered by the bishops to make a few changes to procedure, for safety’s sake.
Bishops in several dioceses in northern Italy issued directives that holy water fonts be kept empty, that communion wafers be placed in the hands of the faithful and not directly into their mouths by priests celebrating Mass and that congregants refrain from shaking hands or exchanging kisses during the symbolic Sign of the Peace ritual.
* * *
Update (1130ET): The BBC reports that four of the 32 British passengers aboard the ‘Diamond Princess’ cruise ship that have been taken to the quarantine at Arrowe Park have tested positive for the virus, the UK’s Chief Medical Officer said.
This brings the UK’s total case number to 13.
* * *
Bernie Sanders has won the Nevada caucus, and coronavirus outbreaks are taking root in a handful of countries outside China, threatening a genuine pandemic and threatening to pop the market’s dismissive bubble by proving unequivocally that this is not ‘just another flu’.
We’re starting our Sunday roundup with South Korea which, along with Italy and Japan, is one of a handful of countries outside China that is genuinely in crisis. On Sunday, the South Korean government raised the national threat level to “red alert”, its highest threat level (like, North Korean troops on the move to Seoul-level) after 169 new cases were confirmed on Sunday, raising the national toll total to 602.
South Korean President Moon Jae-in warned on Sunday that the outbreak had reached a “critical watershed” moment, and that “the next few days will be a very important critical moment.” He then asked health authorities to take “unprecedented, powerful” steps to contain the virus – and it appears they’re already starting to do just that, as the FT reports.
As one can see from this chart, the bulk of new cases confirmed over the weekend have been in the ex-China, ex-Diamond Princess category:
The Italian government is taking similar steps after confirming 133 cases, up from just three less than 72 hours ago. In that time, Italy has become host to the largest coronavirus outbreak outside Asia.
As Rome scrambles to contain the outbreak, authorities on Sunday banned all public gatherings, including Venice’s famed carnival celebrations that honor the beginning of Lent. The last two days of the carnival have been cancelled as fashion week in Milan was also cancelled, forcing the cancellation of the famed Giorgio Armani show, which had been scheduled for Sunday afternoon.
Carnivale drew tens of thousands of revelers to the region which unfortunately is home to one of several clusters of outbreaks in Northern Italy.
While Italy’s impoverished south has so far done little to prepare for the outbreak, in the north, museums, schools, universities and other public venues will be closed in Venice, as well as the rest of the Veneto region, through March 1.
According to ABC, three patients in Venice have tested positive for the COVID-19 virus, all of them in their late 80s and who are hospitalized in critical condition.
Most of Italy’s cases are clustered in the north, where the most extreme lockdowns are being implemented. 25 cases have been isolated in Veneto, and the rest in Lombardy, with authorities still unable to track down the source of the virus. The first case was discovered last week when an Italian man in Codogno in his late 30s became seriously ill.
In Turin, the biggest and most economically vital city of the Piedmont region, three cases have now been diagnosed, and a family of three are being tested, according to authorities.
“The health officials haven’t been yet able to pinpoint Patient Zero,”Angelo Borrelli, head of the national Civil Protection agency, told reporters in Rome.
Initially, authorities believed this man was infected by an Italian friend with whom he had recently dined, and who also had just returned from Shanghai. When the friend tested negative for the virus, attention turned to several Chinese who live in town and who frequent the same restaurant. Regional Gov. Attilio Fontana said they tested negative, too.
And they’re still not sure if he’s ‘patient zero’.
Across Italy, millions of Italians are preparing to be on lockdown for weeks, as many are hoarding essential supplies.
If legitimate, some signs of panic buying in Milan’s supermarkets. And new travel attire too! #COVID19italia https://t.co/Kh1uZqi5lG
— News from Italy (@newsfromitaly) February 23, 2020
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With 90 confirmed cases in Lombardy, the region has closed schools and universities, sporting events, other public events – and even catholic mass.
More bad news out of Hubei followed on Sunday, as Wuhan’s Union Jiangbei Hospital confirmed the death of a 29-year-old doctor. That’s the second death of a young doctor in Hubei in a matter of days (another doctor died late last week). Their deaths have stirred up memories of Dr. Li, a martyr of the virus and symbol of Beijing’s missteps.
As we noted last night, Hubei reported ~600 new cases on Saturday but nobody really believes the Chinese numbers anymore.
As Beijing tries to convince the world and its population that everything is under control, European Commission finance chief Paolo Gentiloni said the EU recently delivered 25 tonnes of protective equipment to China to help it contain the outbreak.
Looking inward, Gentiloni warned there is “no need to panic” about the outbreak in Italy, even though 2 people have died and more than 100 have been confirmed to be infected. “The EU has full confidence in the Italian authorities and the decisions they are taking,” he said.
“We share concern for possible contagion, but there is no need to panic.”
We suspect he will soon eat those words.
As the Trump administration confronts the unavoidable reality that it badly miscalculated by bringing those 14 sick passengers on the evacuation flight with ~300 seemingly healthy Americans from the Diamond Princess, Japanese officials confirmed on Sunday the third death among the ~2,600 passengers who traveled on the ship (along with another 1,000+ crew).
The ‘Diamond Princes’ remains the largest outbreak outside mainland China – but South Korea has probably already surpassed it, health authorities just haven’t been able to test sick patients fast enough.
Meanwhile, President Trump assured the public that the virus is “under control” in the US just as he reportedly asked Congress to authorize federal funds to combat the virus as the CDC warns only three states are truly prepared. This after 25 Senate Dems sent him a letter demanding that he act – a superficial political ploy – some are worried that the $1 billion Trump is asking for is ‘too small’. Seems to us that it makes sense to start small, then increase the ask as the situation evolves.
Elsewhere in the US, reports on Sunday claimed 325 People in Michigan were being monitored, all of whom had recently been to mainland China, according to local health authorities.
Nearly all of South Korea’s coronavirus cases have been linked to two clusters at a church in southern city of Daegu and a nearby hospital in Cheongdo County – though cases have popped up seemingly without explanation, a phenomenon that is unnerving health officials around the world (Japan has faced a similar problem).
Yonhap reports scenes familiar to those who watched Wuhan’s initial virus response: Exhausted health-care workers sleeping on benches outside hospitals.
The South Korean government has declared ‘special management zones’ in both areas – a kind of voluntary lockdown order. From what observers can tell, it seems to be working, because Daegu’s streets are abandoned, according to seemingly every report.
As the public searches for somebody to blame for the outbreak, the public fury appears to be pointed at the cult-like church where a ‘super-spreader member who thought she just had a bad cold infected dozens of others, kicking of the outbreak in earnest.
Rumors and reports are circulating claiming the church isn’t cooperating with the South Korean government.
Shincheonji cult is the epicenter of the breakout in Korea. The church is not cooperating and is not giving the list of members who were in Daegu.
9,336 members were tested and 1,261 see suspected if carrying the virus. This cult needs to be shutdown.https://t.co/urr2aRdcYK
— DJ Jino (@jinoreacts) February 23, 2020
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But nowhere outside of Hubei is the outbreak worse than in Iran. The country’s utter lack of health-care resources combined with a bitter and oppressive regime already struggling with an US-manufactured economic crisis and a leadership that just accidentally killed ~200 innocent people, including dozens of students, has left it completely vulnerable.
Alarmed by their neighbors’ outbreak, Turkey and Pakistan have closed their borders with Iran in an effort to stop the spread.
In just a matter of days, the death toll in Iran has climbed to 8 on Sunday. Assuming a mortality rate of 2%, that would imply Iran had ~400 cases one month ago when these patients were likely infected. That means there could be thousands of cases roaming around the country already. The biggest clusters so far have been reported in Qoms and in Tehran, the capital. In response, all schools in Tehran have been shuttered until further notice, and the government is telling citizens to avoid any gatherings or leaving their homes at all, if possible.
As medical workers literally throw everything they have at the virus, using AIDS drugs that have been found to be effective as well as therapies that work on flu patients, Axios reports that the global outbreak could soon cause shortages of 150 prescription drugs.
Before we go, we’d like to point out one interesting piece that we found in the Global Times – literally the most unlikeliest of places. As Beijing begins to push a narrative blaming the US for the outbreak (we know, we know), Chinese propaganda is already sowing the seeds of doubt. The virus didn’t originate in the Hunan seafood market where an illegal wildlife trade helped it pass from bats or snakes to humans. No, it was ‘introduced’ to workers at the market via human-to-human transmission via an unknown third party.
This according to Chinese “researchers”.
So much for Mike Bloomberg’s insistence that nothing can stop the inexorable march of globalization.
In 2016 when we started the populist revolution against globalism many people didn’t even know what that actually meant
China is now unintentionally revealing the dirty truth of globalism to a massive audience
— Jack Posobiec 🇺🇸 (@JackPosobiec) February 23, 2020
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We’ll see about that.
Tyler Durden
Sun, 02/23/2020 – 21:28 - In a report that was 4 hours “late”, China reported an additional 409 coronavirus cases across the entire nation, and 150 additional deaths as of February 23 compared to 648 additional cases and 97 deaths on February 22; this brought total China cases to 77150 and total deaths 2592
- High-Income Taxpayers Now Confronted At Home By IRS Agents
High-Income Taxpayers Now Confronted At Home By IRS Agents
The IRS announced Wednesday that it would increase at-home visitations to high-income taxpayers who haven’t filed tax returns on time.
Remember when the IRS under the Obama administration targeted conservative groups? Now it appears this anti-wealth attitude extends to anyone earning over $100,000 that hasn’t filed a return since 2018 or prior years.
During an at-home visit, IRS agents will inform the non-compliant taxpayer how to file returns and show them a pathway of regaining compliant status.
Uncle Sam wants his goddamn money!
“The IRS is committed to fairness in the tax system, and we want to remind people across all income categories that they need to file their taxes,” said Paul Mamo, Director of Collection Operations, Small Business/Self Employed Division. “These visits focusing on high-income taxpayers will be taking place across the country.”
Visitations have already started this month and will continue through March for severe cases of high-income taxpayers not filing.
In the last year, the agency started aggressively targeting low-income families who neglected to pay their taxes. These struggling folks in the “greatest economy ever” are barely surviving on depressed wages, insurmountable debts, and soaring housing and healthcare inflation, have no money left over to pay taxes.
If you’re rich or poor and haven’t paid your taxes in the last several years, watch out because Big Brother is now dispatching its agents to hunt you down.
And in case an agent confronts a non-compliant taxpayer – they will offer several options if the tax bill cannot be paid in full, such as a payment plan. But if a non-compliant taxpayer declines to pay, the IRS will inform the individual that they will pursue them in court.
Land of the free? Not when it comes to debt…
And here’s the most bizarre move the IRS made before they launched a massive campaign across the country to confront rich and poor non-compliant taxpayers. The agency bought 5,000 guns, some automatic weapons, and 5 million rounds of ammunition.
“Among the agencies being supplied with night-vision equipment, body armor, hollow-point bullets, shotguns, drones, assault rifles, and LP gas cannons are the Smithsonian, U.S. Mint, Health and Human Services, IRS, FDA, Small Business Administration, Social Security Administration, National Oceanic and Atmospheric Administration, Education Department, Energy Department, Bureau of Engraving and Printing and an assortment of public universities,” said john Whitehead via The Rutherford Institute.
The militarization of the IRS?
Seriously, why do IRS agents need AR-15 rifles? To collect all the money that is owed, of course!
Tyler Durden
Sun, 02/23/2020 – 21:25 - Chinese Workers Refuse To Go Back To Work Despite Beijing's Demands
Chinese Workers Refuse To Go Back To Work Despite Beijing’s Demands
When we commented earlier that the coronavirus pandemic means that the vast majority of Chinese small and medium enterprises (SMEs) have at most 2-3 months of cash left, a potentially catastrophic outcome that will not only crippled China’s economy but its $40 trillion financial system, we summarized the circular quandary in which Beijing finds itself, to wit:
… unless China reboots its economy, it faces an economic shock the likes of which it has never seen before in modern times. Yet it can’t reboot the economy unless it truly stops the viral pandemic, something it will never be able to do if it lies to the population that the pandemic is almost over in hopes of forcing people to get back to work. Hence the most diabolic Catch 22 for China’s social and economic system, because whereas until now China could easily lie its way out of any problem, in this case lying will only make the underlying (viral pandemic) problem worse as sick people return to work, only to infect even more co-workers, forcing even more businesses to be quarantined.
Shockingly (or perhaps not at all in light of China’s tremendous human rights record), Beijing has picked output over life expectancy, and in a furious scramble to restart its economy, which as we showed earlier remains flatlined…
… according to most high-frequency metrics, it has been “advising” people to get back to work, even as new coronavirus cases are still coming in, in the process threatening to blow out the current epidemic with orders of magnitude more cases as places of employment become the new hubs of viral distribution.
As Bloomberg picked up late on Sunday, following what we said earlier namely that “local governments around the country face a daunting question of whether to focus on staving off the virus or encourage factory reopenings” China’s central and local governments are one again easing the criteria for factories to resume operations “as they walk a tightrope between containing a virus that has killed more than 2,400 people and preventing a slump in the world’s second-largest economy.” This schizophrenic dilemma for a government which faces two equally terrible choices, was best summarized by the following two banners observed in China:
- Banner 1 says: “If you go out messing around now, expect grass on your grave to grow soon.“
- Banner 2 says, “Sitting at home eats up all your have, hurry up go out & find a job.”
Indeed, a perfectly schizophrenic message from the government to the people:
Banner 1 says: “If you go out messing around now, expect grass on your grave to grow soon.“ Banner 2 says, “Sitting at home eats up all your have, hurry up go out & find a job.” The slogan changes as frequently as they change the criteria for #COVID19 diagnosis. #coronavirus pic.twitter.com/2VnB5jZ0zz
— 曾錚 Jennifer Zeng (@jenniferatntd) February 23, 2020
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And yet, even with both options equally terrible, Beijing also has no choice but to pick one. As a result, as Bloomberg writes, “the rush to restart has been propelled by China’s leader Xi Jinping and top leaders, who are urging companies to resume production so the country can continue to meet lofty goals for growth and economic development in 2020.”
Regular Zero Hedge readers know the rest: with most of Chinese economic output paralyzed, officials in China’s provinces have taken up Xi’s call, with one region after another relaxing rules that had kept more than half the nation’s industrial base idle following the Lunar New Year holiday.
So as China undergoes a wholesale push to reboot its economy, there is certainly some success. AS Bloomberg notes, “about 600 kilometers east of the virus epicenter of Wuhan, vendors and customers at the Yiwu wholesale market in Zhejiang province are having their body temperature tested at the entrances after the vast complex that wholesales manufactured goods reopened on Tuesday, three days earlier than expected. Power demand has also started to pick up in China, with six major generators reporting that coal consumption – while still below pre-holiday levels – rose 7% on Feb. 20 from the previous day.”
Well, “pick up” may be a bit of an exageration but here it is: the smallest possible increment, yet still more than 50% below where it was on previous years, suggesting China’s economy is running at half of its capacity, which in GDP terms means an epic collapse, a lifetime away from the traditional 6%-7% Y/Y increase.
Ultimately, the core problem China is facing as we explained earlier today, is one of trust: trust by workers that their employers, and certainly the government, has their best interest in mind when it is urging everyone to get back to work. Or lack thereof.
“Our factory is still missing quite a lot of workers, so we can only resume limited production,” said Dong Liu, vice president of a textile manufacturer in Fujian, southeastern China, that employs more than 400 workers. Dong said he applied to the government on Feb. 17 to restart and the inspector came the next day and gave permission. “More and more factories are allowed to reopen this week,” he said, although as they reopen, they find the problem mentioned before: nobody is gullible enough to go back to work. After all why risk it if a return to the place of work with the pandemic still raging means a material chance of a death sentence?
Naturally, China’s massive population – while bombarded by propaganda on a daily basis – is hardly naive, and is very well attuned to what is really going on. And what is going on is that China’s economy has ground to a halt because nobody trusts the government anymore!
Even Bloomberg admits it: “the push to get production rolling again risks a renewed spread of the virus, about which much is still not yet known” (it’s certainly not known where it came from after Chinese scientists disproved the widely held propaganda narrative that it miraculously emerged from some bat at the Wuhan seafood market during the peak of bat hibernation season).
“A peak may come at the end of this month for the whole country but it won’t necessarily indicate a turning point,” Zhong Nanshan, a respiratory disease expert who led research into a treatment for SARS, told reporters in Guangzhou earlier this week. “The epidemic could have a new peak after people travel back to work.”
The last sentence is predicated on two major assumptions:
- that workers will decide they want to return to work; and
- that they will consider the outsized risk to their lives from returning to work as lesser than the threat to their livelihood from not receiving a salary.
And what happens if they all refuse to come back? What if China, sick of the lies and fabrications of its government, creates the largest, if completely unexpected, labor union in history and one which refuses to work and demands handouts from the government until the coronavirus pandemic is well and truly halted, something which can not be ascertained for a long, long time in light of the government’s flagrant and ongoing lies?
Meanwhile, the government schizophrenic, contradictory instructions continue:
“Every day several government departments send representatives to spot check our efforts to curb the virus,” said Melissa Shu, the company’s export manager. “They come from the district government, the center for disease control, the city government, at different times of day and check if we disinfect in time, whether we test the temperature of workers, whether workers have masks, whether one person has a separate lunch seat, whether lunch is properly arranged, etc, etc.”
Shu said at lunchtime, workers need to sit at least one meter apart (about three feet).
“As a result, we can’t ask all the workers to come to work even when they’re in town ready to work,” she said, adding that the plant has about 40-50 staff working in rotation, about half the number employed before the virus.
Ironically, some Chinese factories already have plenty of space, thanks to the long-running trade war with the U.S.
“Compared with the virus, that was much worse” said Hui Zhuo, founder of a wooden furniture manufacturer in Zhongshan, in the Pearl River Delta. “We’ve cut a lot of workers in the last two years — so I’m not too worried this time because the space in my factory is big enough to avoid being crowded.”
And speaking of trade war, if the long-running feud between the US and China wasn’t enough for Chinese customers to seek alternative supply chains, the coronavirus fiasco is sure to be the tipping point:
In the longer term, the outbreak is likely to exacerbate the damage wrought on China’s factories by the trade war. For some overseas customers in fast-moving industries like fashion, the factory shutdown amid the virus has been another wake-up call that may spur them to reduce their reliance on Chinese suppliers.
“I think for the next season or the next year’s goods, retailers would be looking at sourcing more from other countries,” said AJ Mak, CEO of Chain of Demand, which provides artificial-intelligence systems to retailers in Asia and the U.S. to predict product demand. “I think those conversations which started from the trade war would be definitely accelerated.”
The irony is that by the time most Chinese workers do return to their jobs, those jobs may not exist anymore.
Meanwhile China’s push to salvage its growth targets won’t be complete until the virus is fully under control – something that is impossible to predict, and will in fact be delayed the more China pushes to restore full factory staffing:
“When can everyone come back to work? No one knows,” said Shu at the Zhenjiang LED factory. “Logistics is still not yet fully resumed, inter-city transportation is still restricted. Only after the epidemic is fully controlled, we can truly return to normal work and life.“
What we do know, is that for now, when given the choice of the carrot or the stick, Chinese employers and the government are picking the carrot… for now. As China’s Global Times reported, fabrication giants such as Apple supplier Foxconn have rolled out incentives to encourage workers to return to their posts amid the coronavirus pandemic. In fact, the company’s factory in Zhengzhou said it would award 7000 yuan to back-to-work staff and give bonuses in stages to workers who clock in for up to 55 days.
Apple supplier #Foxconn‘s factory in Zhengzhou said it would award 7000 yuan to back-to-work staff and give bonuses in stages to workers who clock in for up to 55 days. Foxconn rolled out incentives to encourage workers to return to their posts amid the #COVID19: media reports pic.twitter.com/glx55EEPC1
— Global Times (@globaltimesnews) February 23, 2020
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So far such “carrot” approaches have failed to yield results, which leads us to think that a far worse eventuality is next: the stick.
And if China’s population was already furious at the inept response to the coronavirus pandemic, the information blackout, the self-serving lies by the communist party over the past two months, and the general lack of respect for ordinary people by China’s billionaire oligarchs, one can only imagine what happens to the mood across China’s workforce – the largest in the world – once the entire nation becomes one giant gulag, where everyone is forced to work for the greater good, or else…
Tyler Durden
Sun, 02/23/2020 – 20:55 - 10-Year Treasury Yield Plunges To Just 1 Basis Point Away From Recession "Tipping Point"
10-Year Treasury Yield Plunges To Just 1 Basis Point Away From Recession “Tipping Point”
After more than a month of shocking complacency (because what, central banks will somehow print antibodies and “fix” the covid pandemic which will restore collapsing global supply chains?) traders are “suddenly” realizing that the coronavirus outbreak contains a significant likelihood of impact to the global economy and the potential to become a black bat, pardon, black swan type event. An event which could quickly spiral into a US – and global – recession.
How to determine if a recession is coming? One place to watch is the NY ‘sFed recession probability indicator, which is a function of the slope of the curve between 3m bills and the 10y rate and was developed using a logistic regression technique. As BofA writes, going back to 1960, there have been 8 recessions, but comparisons with the last 3 recession are likely more relevant. Chart 1 shows that within a 12-month window prior to each of the last 3 recessions, the probability exceeded 30%. If we look at all 8 recessions since 1960, we find that the critical 30% threshold remains relevant back to 1969 (7 recessions), but provided a false positive in 1967 and was not reached in the 1960 recession.
Yet while a 30% recession probability is still a gray zone, once the NY Fed’s indicator reached a level of 40% it has not provided any historical false positives.
Why is this notable? Because in the Fed’s framework, the 40% level corresponds to a slope of -45bp between 3m bills and the 10y rate.
Looking at the current cycle, not only is the current probability above 30%, but it was above 40% in August of 2019, when the world was flooded with recession fears and sent a record $17 trillion in global sovereign debt into negative yielding territory. The probability indicator declined post-August as the Fed’s 3 cuts steepened the curve, but given the current reading – and the August reading – versus the critical 30% level of the past 3 recessions, BofA warns that we “have to view the recession outcome as significant enough to consider hedging against.”
Furthermore, when looking for recession proxy signals, BofA focuses squarely on the probability of a zero lower bound (i.e. fed funds rate cut to 0%) in 18 months (this is shown in chart 2 below). With this approach, BofA obtains roughly one in three chance of seeing the Fed at the ZLB by mid-2021, corroborating the above.
What does all this mean for the 10Year Treasury as a recessionary signal?
According to BofA, recent mini-cycle troughs have coincided with bottoms on 10y Treasury yields around 1.4% (as shown in chart 3 below for The Conference Board Leading Indicators and 10yT yields since the great recession).
More importantly, breaking through this “tipping point” level requires more than 50% probability priced for the Fed cutting rates back to 0%! This means that breaking 1.4% in an on-hold context for the Fed creates a significant inversion of the curve, pushes recession signals higher, and pressures a further inversion of the FF1/FF6 spread which we found in Pricing cuts ahead of the Fed to have no false positives for Fed cuts following a -30bp inversion (currently -16bp).
As of open of trading on Sunday evening, the implied 10Y yield is 1.41%, or just 1 basis point above this critical “tipping point” below which trapdoors to both a recession and the Zero Lower Bound are open.
What this means in practical terms from a duration perspective is that “the market may gap lower on a break below 1.4% for the 10Y Treasury”, as this corresponds to phase transition higher in recession probabilities and a clear challenge to the on-hold Fed stance, “particularly as convexity flows add to what would likely be a broader risk-off move. “
Finally, while the threshold for cuts is high – especially if a slowdown is driven by pandemic fears – and considering the Fed’s recent rhetoric which has sought to allay expectations of a rate cut as soon as June, once the Fed commits to cuts, BofA finds it unlikely that they will be the insurance style of 2019, and instead the Fed will proceed to cut all the way to zero to avert the coming recession. For the curve, this implies some scope for further bull flattening, but limited beyond 1.4% in the 10Y, as the Fed is likely to be more significantly priced in beyond this level.
And while BofA goes on to list several ways to hedge this eventuality, the simple take home here is that if the 10Y tips below 1.40%, it will proceeds to plunge straight down, which in turn will force the Fed to change its “reaction function” again, and announce that an aggressive rate cut phase is coming, one which will be meant to offset what the market is now saying is a virtually assured recession. It also means that anyone hoping the Fed will further taper its QE4 in coming months is in for a rude awakening.
Tyler Durden
Sun, 02/23/2020 – 20:44 - Pizza Hut's Largest Franchisee Is On The Brink Of Bankruptcy
Pizza Hut’s Largest Franchisee Is On The Brink Of Bankruptcy
NPC International, better known as Pizza Hut’s largest franchisee, is on the brink of bankruptcy.
The company is reportedly exploring restructuring options for its more than 1,200 Pizza Hut locations and 400 Wendy’s locations. The franchise secured $35 million in loans earlier this year to help bolster its liquidity, but also recently defaulted on $800 million of its $1 billion in debt, according to Restaurant Dive.
NPC reportedly skipped loan payments and entered into a forebearance agreement with lenders to allow time to weigh options for restructuring. The company is working with advisers at Greenhill & Co., AlixPartners LLP and Eldridge Industries LLC to weigh its restructuring options.
A bankruptcy could help the company re-negotiate agreements with landlords and the company is reportedly still weighing options that will keep it out of court.
The company’s woes are partially attributable to lack of delivery, which is a consumer trend that other fast food companies have been able to embrace with services like Uber Eats and DoorDash. The company has also experienced headwinds from rising food and labor costs – and domestic same store sales that slipped 2% during Q4.
Chris Tuner, Yum Brands CFO, said last week: “There is potential for choppiness in near-term results of Pizza Hut U.S., primarily related to our largest franchisee.”
The chain has tried to adapt to other ideas, like self-service pickup cubbies and in-store kiosks. Pizza Hut is considering rolling these ideas out to all stores, pending the results of a pilot test in two Texas restaurants. Meanwhile, Yum Brands has leveraged a delivery partnership with Grubhub to try and compete with other delivery names and competitors like Domino’s.
Pizza Hut announced last year it could temporarily close up to 500 underperforming restaurants for remodeling.
Recall, just weeks ago, we reported about the epidemic of small restaurants going bankrupt due to lack of traffic in areas where they are situated.
In that piece, that noted that names like Bar Louie and American Blue Ribbon Holdings, which owns Village Inn and Bakers Square, both filed for bankruptcy earlier this month and that both both cited lower foot traffic in the U.S. as the reason for their downfall.
Bar Louie’s Chief Restructuring Officer Howard Meitiner said at the time: “This inconsistent brand experience, coupled with increased competition and the general decline in customer traffic visiting traditional shopping locations and malls, resulted in less traffic at the company’s locations proximate to shopping locations and malls.”
Tyler Durden
Sun, 02/23/2020 – 20:35 - The Atlantic: Trump Is Going To Cheat
The Atlantic: Trump Is Going To Cheat
Authored by Jeff Charles via LibertyNation.com,
It isn’t even March yet, and progressives are already making their excuses for why they may lose to Trump in 2020. In a piece written for The Atlantic, Sarada Peri – a former senior speechwriter for President Barack Obama – launched the latest in a long line of arguments explaining why their loss would be unfair.
The piece, titled “Trump Is Going to Cheat,” is the usual Democratic fare.
The author insists that the president is going to somehow use underhanded means to sway the election in his direction. Unfortunately for her, the argument doesn’t pass the smell test.
President Trump Is Going To “Lie” To Win In 2020
Peri begins by pointing out that the Democrats are currently in a heated contest to determine which one of them is the most electable. It doesn’t take long, however, for her to identify the real challenge any nominee will face: “He or she will need to run against a president seemingly prepared, and empowered, to lie and cheat his way to reelection.”
The author claims that President Trump would seek another win by lying and saying “absolutely anything necessary to attract and maintain support.” She also points to the so-called list of Trump’s lies as president. If the newspaper responsible for this particular curation is to be believed, he has rattled off over 15,000 since taking office. Of course, even a cursory glance shows that most of the statements in the fib collection are either Trump’s opinions, hyperbole, or even simple mistakes.
Moreover, the notion that the Democrats — and their close friends and allies in the press — are somehow the epitome of honesty is laughable given their constant caterwauling about Russiagate conspiracy theories. But, according to Peri, President Trump is going to do far worse when it comes to winning in November.
Trump Is Going To “Cheat!”
Just in case bending the truth a little doesn’t quite cut it, the president will find a way to cheat, somehow. Peri is sure of it. She recalls an observation made by journalist Katy Tur during a discussion about the challenges involved in covering the president:
“She said that what made covering Trump as a reporter and running against him as a candidate so difficult was the way that scandals stuck—or didn’t stick—to him. Hillary Clinton’s use of a private email server as secretary of state was like a stain on her shirt that people couldn’t get past, because it was the only mark on an otherwise clean shirt. But Trump had so many stains that ‘you couldn’t tell if it was a stained shirt or if it was just supposed to be that way.’”
The author goes on to cite the controversy over Trump’s phone call with Ukrainian President Volodymyr Zelensky as an example of how he will break the rules to defeat his opponent. Of course, she forgets to mention that the Democrats failed to prove that Trump’s motivation in his dealings with Ukraine was specifically to hurt former Vice President Joe Biden.
Peri also seems to forget the fact that Hillary Clinton’s campaign brazenly paid money to have a former British spy dig up dirt on Trump using Russian and Ukrainian sources. A little bit of “good for me, but not for thee,” perhaps? But that’s not the worst of it. It seems employing the Democrats’ tactic of using foreign powers to gain an edge in the election isn’t the only card up Trump’s sleeve.
Trump Will Use Media To Cheat!
In her effort to convince readers that Trump will use unfair means to keep his position in the Oval Office, Peri makes one of the most laughable arguments a progressive could suggest in this type of conversation: She blames the media. That’s right — she actually complains that right-wing media would support Trump and influence the masses:
“Perhaps the most troubling form of cheating is the most diffuse, and therefore the hardest to grasp. Trump’s reelection campaign, abetted by right-wing media and companies like Facebook that have absolved themselves of any democratic responsibility, is waging a disinformation war modeled on the efforts of dictators and unprecedented in its scale. As reported by this magazine, the campaign is prepared to spend $1 billion to harness digital media to the president’s advantage, including bot attacks, viral conspiracy theories, doctored videos, and microtargeted ads that distort reality.”
Trump Ain’t Leaving!
Just when you think the author’s arguments couldn’t get any more ridiculous, she makes her final assertion: If Trump’s lying and cheating don’t secure his position, he will simply refuse to leave. Now, she is not the first to put forth such a silly idea, but, as proof, she cites the fact that he has made jokes about remaining in office past his term.
“He retweeted Jerry Falwell Jr.’s suggestion that he ought to have two years added to his term and ‘joked’ about staying in office longer than eight years,” she wrote.
“If he loses in November, the litigious showman might claim that the election was rigged against him and theatrically contest the results in court.”
The Democrat Delusion
According to Google, the definition of the word “delusional” is as follows:
“Characterized by or holding idiosyncratic beliefs or impressions that are contradicted by reality or rational argument, typically as a symptom of mental disorder.”
Peri’s piece is chock full of the delusional talking points the corporate press has bandied about since Trump took office. But it is far more than that. It is a stellar example of a tactic that is all too relevant nowadays: Always accuse your opponent of that which you are doing.
Most of the accusations that one hears from Peri and her ilk have a ring of familiarity to them – but that’s because they describe the behavior and tactics the left tries to use against Trump…
And as The Wall Street Journal’s Editorial Board notes,
Democrats now know how millions of Republicans felt in 2016. A populist with devoted plurality support charges through the primary and caucus states, racking up delegates against multiple “establishment” candidates who all want to be the last alternative standing. Before the media knew it, Donald Trump could not be stopped.
…
Democrats are waking to the prospect of a nominee who wants to eliminate private health insurance, raise taxes on the middle class, ban fracking and put government in charge of energy production, make college a taxpayer entitlement, offer free health care to illegal immigrants, raise spending by $50 trillion, and tag every down-ballot Democrat with the socialist label.
Tyler Durden
Sun, 02/23/2020 – 20:10 - "Big Hit" – Xi Warns Of Economic Fallout From Covid-19 Outbreak
“Big Hit” – Xi Warns Of Economic Fallout From Covid-19 Outbreak
China’s top leader, Xi Jinping, told officials at a Communist Party meeting on Sunday that the Covid-19 outbreak is a “big test” for the country, and policy adjustments would cushion the economy for a downturn. Xi acknowledged “obvious shortcomings in response to the epidemic,” warning that short-term financial stress could be imminent.
We’ve noted on several occasions that China’s economy is completely paralyzed.
Just take a look at Goldman’s Adam Gillard’s recent commodity report that suggests full country apparent demand is down a massive -66% y/y.
Or better yet, Nomura’s Chief China economist Ting Lu noted that China’s Emerging Industries PMI (EPMI), which gauges momentum in the country’s high-tech industries and is closely correlated with official manufacturing PMI slumped to 29.9 in February (from 50.1 in January!).
So, it’s apparent that the closely followed China manufacturing PMI could print in 30-40 range this month, suggesting the current growth slump triggered by the virus is collapsing the Chinese economy.
Xi said Sunday the “the epidemic situation is still severe and complex, and prevention and control work is in the most difficult and critical stage.”
He warned:
“The outbreak of novel coronavirus pneumonia will inevitably have a relatively big impact on the economy and society.”
Beijing has deployed several rounds of monetary policy to support the economy, as a twin shock (demand and supply) is having devastating impacts on first-quarter growth.
Xi said low-risk provinces should restart production monetarily, areas with medium-level risks should restart production on an orderly timeline, and high-risk regions should focus on virus containment strategies.
For more color on China’s plunging economic output, we noted last week several “alternative” economic indicators such as real-time measurements of air pollution (a proxy for industrial output), daily coal consumption (a proxy for electricity usage and manufacturing) and traffic congestion levels (a proxy for commerce and mobility), concluding that China’s economy appears to have ground to a halt.
These observations were subsequently reaffirmed when we showed that steel demand, property sales, and passenger traffic had all failed to rebound from the “dead zone” hit during China’s Lunar New Year hibernation.
No matter the policy support Beijing deploys to stabilize the economy, economic paralysis is already visible, with 750 million people in lockdown, where people are becoming irritable at Beijing’s now openly over propaganda to downplay the epidemic. The shuttering of factories will lead to countless workers being fired and companies running out of funds, as the next big bankruptcy wave will hit smaller to medium-sized operations. To make matters worse, the price of food is surging for the most volatile combination possible, a collapse of the economy mixed with social unrest, one which, if not arrested soon could lead a new violent phase in the virus outbreak.
Putting it all together, the most significant economic shock to hit China’s economy in nearly a decade is unfolding, and it could also tilt the global economy into recession.
For weeks, investors have been gobbling up stocks, convinced that more stimuli from Beijing could force a V-shaped rebound in China’s economy in Q2 – but as the pandemic spreads across the world, now shutting down parts of South Korea, Japan, Iran, and Italy, the whole containment narrative has broken down – and the global economy could be nearing a prolonged period of below-trend growth.
Tyler Durden
Sun, 02/23/2020 – 19:45 - "It Will Be Really, Really Bad": China Faces Financial Armageddon With 85% Of Businesses Set To Run Out Of Cash In 3 Months
“It Will Be Really, Really Bad”: China Faces Financial Armageddon With 85% Of Businesses Set To Run Out Of Cash In 3 Months
For the past two weeks, even as the market took delight in China’s doctored and fabricated numbers showing the coronavirus spread was “slowing”, we warned again and again that not only was this not the case (which recent data out of South Korea, Japan and now Italy has confirmed), but that for all its assertions to the contrary, China’s workers simply refused to go back to work (even with FoxConn offering its workers extra bonuses just to return to the factory) and as a result the domestic economy had ground to a halt as we described in:
- China Has Ground To A Halt: “On The Ground” Indicators Confirm Worst-Case Scenario
- China Is Disintegrating: Steel Demand, Property Sales, Traffic All Approaching Zero
- Terrifying Charts Show China’s Economy Remains Completely Paralyzed
Unfortunately, it’s not getting any better as the latest high frequency updates out of China demonstrate:
Also unfortunately, it is getting worse, because as we explained several weeks ago, China is now fighting against time to reboot its economy, and the longer the paralysis continues, the more dire the outcome for both China’s banks and local companies. And since it is no longer just “scaremongering” by “conspiracy blogs”, but rather conventional wisdom that China may implode, here is a summary of how the narrative that “it will all be over by mid-March” is dramatically changing.
Let’s start with Chinese businesses: while China’s giant state-owned SOEs will likely have enough of a liquidity lifeblood to last them for 2-3 quarters, it is the country’s small businesses that are facing a head on collision with an iceberg, because according to the Nikkei, over 85% of small businesses – which employ 80% of China’s population – expect to run out of cash within three months, and a third expect the cash to be all gone within a month.
Should this happen, not only will China’s economy collapse, but China’s $40 trillion financial system will disintegrate, as it is suddenly flooded with trillions in bad loans.
Take the case of Danny Lau who last week reopened his aluminum facade panel factory in China’s southern city of Dongguan after an extended Lunar New Year break. To his shock, less than a third of its roughly 200 migrant workers showed up.
“They couldn’t make their way back,” the Hong Kong businessman said. Most of his workers hail from central-western China, including 11 from Hubei Province, the epicenter of the coronavirus outbreak that has killed more than 2,000 people. Many said they had been banned from leaving their villages as authorities race to contain the epidemic.
Lau’s business had already been hurt by the 25% tariff on aluminum products the U.S. imposed in its tit-for-tat trade war with China. Now he worries the production constraints will give American customers another reason to cancel orders and switch to Southeast Asian suppliers. The virus is making a bad situation “worse,” he said.
Lau is not alone: this same double blow is hitting small and midsize enterprises across China, prompting a growing chorus of calls for the government to step in and offer lifelines. The stakes could not be higher: These smaller employers account for 99.8% of registered companies in China and employ 79.4% of workers, according to the latest official statistics. They contribute more than 60% of gross domestic product and, for the government, more than 50% of tax revenue. In short: they are the beating heart of China’s economy.
Companies like Lau’s that have resumed some production are the lucky ones. Many factories and other businesses remain completely stalled due to the virus. Many owners have no other choice but pray that things return to normal before they careen off a financial cliff.
Chinese street vendor transacting at more than an arm’s length basis. And here is the stark reality of China’s T-minus 3 months countdown: 85% of 1,506 SMEs surveyed in early February said they expect to run out of cash within three months, according to a report by Tsinghua University and Peking University. And forget about profits for the foreseeable future: one-third of the respondents said the outbreak is likely to cut into their full-year revenue by more than 50%, according to the Nikkei.
“Most SMEs in China rely on operating revenue and they have fewer sources for funding” than large companies and state-owned enterprises, said Zhu Wuxiang, a professor at Tsinghua University’s School of Economics and Management and a lead author of the report.
The problem with sequential supply chains is that these also apply to the transfer of liquidity: employers need to pay landlords, workers, suppliers and creditors – regardless of whether they can regain full production capacity anytime soon. Any abrupt and lasting delays will wreak havoc on China’s economic ecosystem.
“The longer the epidemic lasts, the larger the cash gap drain will be,” Zhu said, adding that companies affected by the trade war face a greater danger of bankruptcy because many are already heavily indebted. “Self-rescue will not be enough. The government will need to lend help.”
So where are we nearly two months after the epidemic started? Wwll, as of last Monday, only about 25% of people had returned to work in China’s tier-one cities, according to an estimate by Japanese brokerage Nomura, based on data from China’s Baidu. By the same time last year, 93% were back on the job.
And making matters worse, as we first noted several weeks ago, local governments around the country face a daunting question of whether to focus on staving off the virus or encourage factory reopenings, as the following tweet perfectly captures.
Banner 1 says: “If you go out messing around now, expect grass on your grave to grow soon.“ Banner 2 says, “Sitting at home eats up all your have, hurry up go out & find a job.” The slogan changes as frequently as they change the criteria for #COVID19 diagnosis. #coronavirus pic.twitter.com/2VnB5jZ0zz
— 曾錚 Jennifer Zeng (@jenniferatntd) February 23, 2020
https://platform.twitter.com/widgets.js
As long as the national logistics network “is still in shambles,” Nomura’s chief China economist, Lu Ting said, there might be little to gain from rushing restarts, whereas “the cost of a rebound in infections might be quite high.” He expects economic activity to pick up again in a couple of months, although the longer Beijing fails to confidently put an end to the pandemic, the longer it will take for activity to return to normal. Meanwhile the 3 month countdown clock is ticking…
Don’t tell that to Zhou Dewen, the chairman of the Small and Medium Business Development Association in the city of Wenzhou, who knows this and agrees that this crisis is worse than SARS. Far, far worse. In fact, he said, it is “the most severe” of any crisis in the 40 years since China embarked on major economic reforms. He sees not a double but a “triple whammy,” factoring in the economic slowdown the country was experiencing even before the trade conflict and the virus.
Wenzhou, on the coast of Zhejiang Province, was the first city outside Hubei put into full lockdown in an attempt to stop the pathogen. As of last week, Zhou said, only factories that produce medical supplies had been allowed to resume work.
“What entrepreneurs need is confidence,” Zhou said. “But first they need to survive.” He is hoping the government will offer fiscal support and tax breaks to buy more time for small businesses. Some local governments have already responded to such pleas by waiving electric bills and delaying taxes, social security payments and loans. But for some businesses, such relief measures are little consolation.
Worse, last Sunday the communist party’s mouthpiece, the Global Times, suggested that instead of waiting for fiscal bailouts, Beijing will have no choice but to cut spending and unleash austerity, a move that would have catastrophic consequences for China. But even if Beijing does ease fiscally, it is unclear just what it can do short of printing money and handing it out to everyone. “A tax reduction doesn’t help if you don’t even have income,” said Zhu, who must somehow scrape together around 700,000 yuan ($100,000) for rent and the salaries of about 40 employees.
Zhu reckons her company will lose about 3 million yuan in profit over the two months. Besides the postponements, couples that were looking at wedding options before the outbreak have put their planning on hold. There is little room, it seems, to think about love in the time of the coronavirus.
“This is the most difficult time I have ever experienced” after 11 years of running the company, Zhu said. The worst part might be the uncertainty: She has no idea when the authorities might lift the ban or whether she can make it that long. “All of this is unknown to us,” Zhu said.
She is not alone: Wu Hai, owner of Mei KTV, a chain of 100 Karaoke bars across China, took to the nation’s premier outlet of discontent, social media platform WeChat, to voice his despair. KTV’s bars have been closed by the government because of the virus, choking off its cash flow. The special loans from the authorities will be of little help and no bank will provide a loan without enough collateral and cash flow, he said on his official WeChat account earlier this month. On WeChat , Wu gave himself two months before he has to shutter his business.
* * *
It’s not just Japan’s flagship financial publication and owner of the Financial Times, the Nikkei, that is dramatically changing the narrative away from “all shall be well.” In its headline article today, Bloomberg writes that “Millions of Chinese Firms Face Collapse If Banks Don’t Act Fast” and described the plight of Brigita, a director at one of China’s largest car dealers, who is also running out of options. Her firm’s 100 outlets have been closed for about a month because of the coronavirus, cash reserves are dwindling and banks are reluctant to extend deadlines on billions of yuan in debt coming due over the next few months. There are also other creditors to think about.
“If we can’t pay back the bonds, it will be very, very bad,” said Brigita, whose company has 10,000 employees and sells mid- to high-end car brands such as BMWs. She asked that only her first name be used and that her firm not be identified because she isn’t authorized to speak to the press. With much of China’s economy still idled as authorities try to contain an epidemic that has infected more than 75,000 people, millions of companies across the country are in a race against the clock to stay afloat.
The irony, of course, is that all this is happening even as China has in fact eased dramatically in recent weeks, from cutting rates, to engaging in a barrage of mini stimulus measures, to injecting massive amounts of liquidity, to cutting taxes, to supporting virus-stricken companies…
… to flooding the economy with a record 5 trilion in loans and shadow debt in the last month.
Yet while China’s government has cut interest rates, ordered banks to boost lending and loosened criteria for companies to restart operations, many of the nation’s private businesses say they’ve been unable to access the funding they need to meet upcoming deadlines for debt and salary payments. Without more financial support or a sudden rebound in China’s economy, some may have to shut for good.
“If China fails to contain the virus in the first quarter, I expect a vast number of small businesses would go under,” said Lv Changshun, an analyst at Beijing Zhonghe Yingtai Management Consultant company.
Said otherwise, unless China reboots its economy, it faces an economic shock the likes of which it has never seen before. Yet it can’t reboot the economy unless it truly stops the viral pandemic, something it will never be able to do if it lies to the population that the pandemic is almost over in hopes of forcing people to get back to work. Hence the most diabolic Catch 22 for China’s social and economic system, because whereas until now China could easily lie its way out of any problem, in this case lying will only make the underlying (viral pandemic) problem worse as sick people return to work, only to infect even more co-workers, forcing even more businesses to be quarantined.
Some, like Bloomberg, blame the banks.
As a group, Chinese banks had offered about 254 billion yuan in loans related to the containment effort as of Feb. 9, according to the banking industry association, with foreign lenders such as Citigroup Inc. also lowering rates. To put that into perspective, China’s small businesses typically face interest payments on about 36.9 trillion yuan of loans every quarter.
In an emailed response to questions from Bloomberg News, ICBC said it has allocated 5.4 billion yuan ($770 million) to help companies fight the virus. “We approve qualified small businesses’ loan applications as soon as they arrive,” the bank said
Alas, it is not that simple: as we explained two weeks ago in “China’s Banks Face $6 Trillion Coronavirus Cataclysm If Epidemic Is Not Contained Soon“, China’s banks are rapidly retrenching well-aware that they face an explosion in bad debt as the bulk of Chinese companies face collapse. As such, it makes little sense for them to throw good money after bad, and instead most are hunkering down in anticipation of the coming shock.
Indeed, as even Bloomberg concedes, banks are hardly any better off themselves: “Many are under-capitalized and on the ropes after two years of record debt defaults. Rating firm S&P Global has estimated that a prolonged emergency could cause the banking system’s bad loan ratio to more than triple to about 6.3%, amounting to an increase of 5.6 trillion yuan.”
The bottom line is that for both companies and their bank lenders (and sources of potential rescue financing), there is one commodity in very short supply: trust. Trust that the counterparty will do the right thing; trust that the government will treat everyone fairly instead of just bailing out a handful of connected politicians. Trust, which in China in general has been lacking for years, as the formerly communist country succumbed to crony hypercapitalism with Chinese characteristics, one in which knowing who to bribe and who to lie to meant the difference between success and failure. Trust was never cultivated. And now that lack of trust is about to cost China dearly.
In any case, the lack of far more funding means that China’s smaller businesses whose revenue have suddenly collapsed, have just weeks if not days of liquidity left. Brigita, whose firm owes money to dozens of banks, said she has so far only reached an agreement with a handful to extend payment deadlines by two months. For now, the company is still paying salaries. But those will stop too.
And that’s when the real crisis begins as hundreds of millions of workers suddenly find themselves unemployed.
For some the crisis has already begun. Wang Qiang, a 23-year-old migrant worker, has been unable to find work in Shenzhen after three weeks of searching. On top of the limited factory job openings, the Nikkei notes that he faces another major obstacle: his identification labels him a native of Hubei.
His home province, where the virus originated, accounts for the vast majority of the 74,000-plus mainland infections and most of the deaths. “The labor dispatch companies told me that the factories don’t want people from Hubei,” he said. The fact that he did not go home for the Lunar New Year holidays seems to make no difference.
Wang spends his nights sleeping on the floor of an uncompleted building. “I’ll wait and see if the situation gets better when companies restart work on Feb. 24.”
In a few short hours Wang will be greatly disappointed. He won’t be the last one, however, and if China’s doesn’t find some miraculous solution to the current coronavirus crisis, in two months China will face a financial, economic and social cataclysm the likes of which it has never seen in its modern history.
Tyler Durden
Sun, 02/23/2020 – 19:44 - World's Biggest Oil Hedge Fund Plunges 8% In January Following Two Years Of Losses
World’s Biggest Oil Hedge Fund Plunges 8% In January Following Two Years Of Losses
Back in 2008 Forbes Magazine placed Pierre Andurand in its list of the top 20 highest-earning hedge-fund managers. That was the year after the French commodity trader co-founded the hedge-fund BlueGold with $300 million AUM. In June of 2008, just before oil crashed, BlueGold’s returns were described by the New York Post as “eye-popping” and “monstrous”. although it was a very different story just a few months later when oil plunged from $145 to $40. In any case, riding the dramatic recovery in the price of oil from 2009 to 2011 helped BlueGold cement its position as one of the largest oil-focused hedge funds, with AUM hitting $2.4 billion after returning 210% in 2008, 55% in 2009, 13% in 2010, and -34% in 2011.
Then, after BlueGold shuttered in April 2012, Andurand launched a new hedge fund: Andurand Capital, which once again invested mostly in oil but also has a secondary focus on other commodities such as metals and as of May 2018, the firm managed $1.2bn in assets.
And while Andurand timed the 2014 oil crash perfectly, returning 38% the year when the near OPEC-breakup sent oil plunging from above $100 to $30, it has been a challenging time for the commodity investor who turned bullish on oil in 2016, only to suffer a very choppy oil market for the past several years. So choppy, in fact, that after two years of losses, Andurand suffered another dramatic loss in January, when oil prices once again tumbled, this time on fears the coronavirus was hurting global economic growth, which in turn hit demand for oil and roiled global commodity markets.
The furious January drop was so unexpected that the Andurand Commodities Fund, dubbed by Bloomberg as “one of the oil market’s last remaining hedge funds”, plunged 8.4% last month, according to Bloomberg. The loss was the fund’s biggest monthly decline since October 2018 when it plunged 21% as global stocks swooned amid fears the Fed was hiking rates into a recession. Last month’s loss followed two prior painful years for Andurand who was down 7.1% in 2019 and 20% a year earlier.
So is another name for “brilliant hedge fund investor” just “that guy who uses a ton of leverage to boost his beta” and picked the right side of the coin toss? What about picking the wrong side for three years in a row? If so, one wonders if an even better description for someone like Andurand is just “lucky”, something has has not been for the past three years when he desperately hoped that oil prices would skyrocket higher even as China’s economic slowdown meant that oil demand would suffer so much even OPEC now agrees.
As Bloomberg notes, oil had its worst start to a year since 1991 on concern the spread of the coronavirus will curb demand in China for energy. Brent fell 16% in January as China, the world’s largest oil importer, locked down its cities in a bid to prevent the spread of the virus.
According to various sources from Goldman to commodities trading giant Vitol, the market is facing a 200 million-barrel demand loss in the first quarter, culminating in a 4 million-barrels-a-day decrease in China currently as the virus hits economic activity and restricts travel.
Tyler Durden
Sun, 02/23/2020 – 18:55 - Syria Stands As A Mega-Embarrassment For America
Syria Stands As A Mega-Embarrassment For America
Authored by Bruce Wilds via Advancing Time blog,
For a long time, America has tried to ignore and distance itself from its role in making Syria the disaster it is today. Syria stands as a mega-embarrassment that shines a spotlight on America’s failed foreign policy. To say President Obama blew it is an understatement. His inexperience took us down a rabbit hole with each turn revealing more ugliness than the one before. Both Obama and Trump pledged to reduce America’s role in Afghanistan and Iraq but it has proven easier said than done, it has also had massive far-reaching ramifications.
Aleppo Is Just One Of The Many Cities Destroyed
By reassuring and almost encouraging the people of Syria to rise up and overthrow their brutal leader Obama started a series of events that has taken countless lives and destroyed millions of others. Three of the most damaging developments flowing from this are the development of ISIS, the flow of millions of refugees into Europe, and the bombing and destruction of cities and innocent civilians.
Continued violence in the region over the last decade has spurred the destabilizing mass migration of millions of people from the area.
Many people do not realize the formation of ISIS is rooted in this mess and flowed out of America’s meddling. A failed attempt to build an army to fight Syrian President Bashar al-Assad backfired. A report published by Reuters claimed that 200 men were trained and that over 1200 were to be added in a plan to prepare to free Syria from the rule of President Bashar but General Ibrahim al-Douri. who had been on the US most-wanted list since the second Gulf War took over control. This left the group with a problematic leader and a huge war chest at his disposal. Most of the money had come from US allies, including Kuwait, Qatar, and Saudi Arabia, all are Sunni-based countries that originally supported ISIS.
The Middle East Is Ready To Kill
For years, day after day, week after week, month after month, the American people have busied themselves with ignoring the Pandora’s box of misery Obama opened and unleashed is his arrogance. Please don’t take this as an Obama bashing, he didn’t do it alone. The same old group of clowns that have infected American foreign policy for years weighed in and helped bring us to where we are today. America simply can’t mind its own business.
While it could be argued a great deal of this is a continuation of President Bush’s folly, anyone making such a case should concede that Obama widened the conflict destabilizing the situation even more. In 2011, he and then-Secretary of State Hillary Clinton decided to undertake a “military intervention ” in Libya. Years later in a 2016 Fox interview, Obama said the handling of the military intervention in Libya was his “worst mistake” Today, oil-rich Libya is a violent mess split between rival governments, each backed by an array of foreign countries jockeying for influence and control of Libya’s resources. According to a statement from the UN, the failed country is continuing its long efforts to reach a lasting cease-fire.
Looking back at President Obama’s legacy in early 2017, The Guardian reported that in 2016 alone, the Obama administration dropped at least 26,171 bombs. Most of these air attacks were in Syria and Iraq but US bombs were also dropped in Afghanistan, Libya, Yemen, Somalia, and Pakistan. All seven of these countries have populations where a majority of the people are Muslim. as for the numbers of civilians killed by these bombs it could be in the thousands. We will never know because both the administration and mainstream media remained nearly silent about the civilian toll of the administration’s failed interventions.
Returning to the issue of Syria, currently, around a million Syrians have their backs against the wall in the northern Syrian province of Idlib. The UN Office for the Coordination of Humanitarian Affairs reports the number of civilians displaced since December 1 at 700,000. These civilians are trapped, the population is caught under the bombs of a three-way war which now involves the Syrian-Russian alliance fighting Turkey, as well as Turkish proxy jihadists as well as terror group Hayat Tahrir al-Sham.
The Syrian and Russian armies are bombing these people while Turkey refuses to let them cross the border partly because once there they become Turkey’s problem. Adding to the problem is that the European Union has signaled they don’t want them either. The situation has degraded into an almost bizarre state where America and the Trump administration are backing Turkey and its President Tayyip Erdoğan. This is definitely not a marriage made in heaven. Over the last few years, Turkey has bashed the Kurds and played Russia against America while constantly leaning on Greece and the Euro-zone.
People Have Fled To Horrible Camps
Those that have fled the fighting are suffering horrible conditions. A YouTube video is linked to the picture to the right. Clicking on the picture brings up drone footage showing the horrible conditions in a refugee camp covered in snow. Snow blankets the countryside while mothers and their children live in flimsy tents without heat or enough to eat.
Living in the mud, cold and hungry without proper sanitation is far from ideal. The children have no real schools and people have little to do except to suffer. To make matters worse the men have little or no work or any way to make money. Life in the refugee camps is a case of just trying to survive until things get better. It is important to remember most of these were happy middle-class people simply wanting to go about their lives before we stirred the pot.
I started writing about Syria back in 2012. At the time I predicted the country had passed the tipping point and was facing a civil war. That was at a time forces were lining up to supply weapons to both sides of the Syrian conflict. This fueled the fire and turned the Syrian people into pawns in a very dangerous and deadly game. As in Libya, a parade of foreign countries jockeying for influence and control have poured weapons and fighters into the area and it is the people of the region that are paying the price.
Was their government perfect? No, but they were not living under the conditions under which they are currently forced to exist. To make matters worse the vice is expected to tighten. Syria is only one example of how meddling in the affairs of other countries has consequences. Unfortunately, America’s history of intruding in the affairs of others has been widespread. To say these people face a bleak future is most likely an understatement because the world is doing little to help them. It could be said that with friends like us these counties don’t need more enemies.
Tyler Durden
Sun, 02/23/2020 – 18:30 - Futures Plunge, Gold Soars As Covid-19 Contagion Craters Complacency
Futures Plunge, Gold Soars As Covid-19 Contagion Craters Complacency
After a weekend in which attention is now firmly focused on the accelerating spread of the coronavirus outside of China (whose epidemic numbers have become a bigger joke than the country’s GDP), with Italy now a supercluster of new cases that has sealed off Northern Italy and threatens to shut down Schengen…
…traders are back to their desks and for once, it appears they are realizing that central bankers can’t print their way out of this particular pandemic mess.
US equity futures are accelerating their catch down to reality…
Dow Futures are down 400 points…
Spot gold is up over 2%, breaking $1680…
WTI Crude is also plunging, back to a $51 handle…
And after JPY’s recent collapse, Nikkei futures are down 500 points in early trading…
And therefore, as always, The BoJ is out with its standard boiler-plate – we’ll puke more money and buy more of everything – plan…
The Bank of Japan will be fully prepared to take necessary action to mitigate the impact of the coronavirus on the world’s third-largest economy, its Governor Haruhiko Kuroda said. Kuroda said there was no major change to the BOJ’s projection that Japan’s economy would keep recovering moderately thanks to an expected rebound in global growth around mid-year.
He also repeated the view that, while the central bank stands ready to ease monetary policy further “without hesitation”, it saw no immediate need to act.
But Kuroda said the BOJ would scrutinize developments on the virus outbreak carefully, since the damage to Japan’s economy could be profound if the epidemic is prolonged and disrupts supply chains.
First of all, just how is printing money going to fix the virus; and second, what is this “moderate recovery” he is talking about after the -1.6% GDP print?!
Finally, we do note that Japan is closed for the Emperor’s Birthday celebration so markets are especially illiquid… and cash bond trading remains closed. However, 10Y bond futures are surging, implying a 1.41% yield…
Nevertheless, it appears, as we noted above, investors are starting to wake up to the fact that central bankers can’t print vaccines… and you can only swallow so many blue pills before the red one becomes too tempting.
Time for a phone call…
Tfw futures are down over 1% pic.twitter.com/ZERqmvPAVi
— TheCreditBubble (@TheCreditBubble) February 23, 2020
Tyler Durden
Sun, 02/23/2020 – 18:28 - China's 'Fake' Coronavirus Numbers Exposed: Doctor In Hunan Confirms 50 New Cases, Only One Reported
China’s ‘Fake’ Coronavirus Numbers Exposed: Doctor In Hunan Confirms 50 New Cases, Only One Reported
In one of many shocking videos circulating on Twitter, a recent clip of a doctor in Hunan that was widely shared by credible journalists covering the outbreak has caught our attention because it supports our theory – which has become increasingly widely adopted among the western press – that Chinese health officials are seriously undercounting the number of cases and deaths.
惊恐：湖南中医药大学第二附属医院的这位医生一天确诊50个冠状病毒患者，累到浑身湿透，没力气说话…… pic.twitter.com/kMh2Wl2Zl2
— 实话实说 (@jMcSVGx9oRuiEir) February 22, 2020
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As the Washington Post wrote in a piece published earlier this week: “Chinese leaders and state media strike a coordinated note this week about the government’s ability to contain the outbreak, inconsistencies and sudden changes in official data are leaving experts — and journalists — struggling to plot meaningful trends, or even place any confidence in the figures coming from government.”
The WaPo reporters pointed to a clear case of manipulation where the authorities suppressed the true number of cases.
Authorities in Hubei province reported good news Thursday: There were only 349 new coronavirus cases the previous day, the lowest tally in weeks.
The bad – and puzzling – news? Wuhan, the capital of Hubei, reported 615 new cases all by itself.
Hubei authorities have changed their criteria for counting cases three times over the past week or so.
Hubei officials explained that they deducted cases that have not been confirmed through genetic tests from their total reported number of cases. Since this mistake was very, very public, we also reported on it.
But we’ve been reporting on this for weeks. The mainstream press in the US has since caught on, as the WaPo post shows. As its reporters claim, though there is no obvious smoking gun, most experts still believe China is underreporting cases based on mathematical algorithms and other methods used to project the rate of infection.
There is no smoking gun suggesting that Chinese officials fabricate numbers – at least not since late January. But many researchers say the official figures probably underestimate the true numbers because of limited testing capacity and the prevalence of cases with mild or no symptoms. That is why having case numbers collected with consistent methodology would help scholars chart the general contours, if not the precise values, of how the epidemic is unfolding.
We could go back all the way to the first “shift” in China’s reporting methodology on Feb. 12, when officials reported the first major spike in cases, shaking market confidence in the process, until Beijing axed two senior local officials in one of many obvious scapegoatings by Beijing.
China’s numbers have consistently kept the fatality rate from the virus at around 2%. But given the exponential rate of spread outside China, and evidence that it acted too late with its quarantine’s to really blunt the outbreak, some suspect that this number, too, will rise once researchers get a fuller picture of what’s happening on the ground.
Tyler Durden
Sun, 02/23/2020 – 18:05 - Obama DHS Whistleblower Found Dead On Side Of California Highway, Police Rule Suicide
Obama DHS Whistleblower Found Dead On Side Of California Highway, Police Rule Suicide
Department of Homeland Security (DHS) whistleblower Philip Haney was found dead on the side of a desolate California highway on Friday with a single gunshot would to the head, according to local authorities.
Haney’s death has been ruled a suicide by an Amador County coroner, who noted that a firearm was observed next to the 66-year-old, who was found lying next to his vehicle.
“Upon their arrival, they located and identified 66-year-old Philip Haney, who was deceased and appeared to have suffered a single, self-inflicted gunshot wound. A firearm was located next to Haney and his vehicle. This investigation is active and ongoing. No further details will be released at this time,” reads the report.
New: Official statement from Amador County Sheriff on the death of Philip Haney rules his shooting death a suicide pic.twitter.com/S2hNMW4Hbs
— Jack Posobiec 🇺🇸 (@JackPosobiec) February 23, 2020
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So, Haney supposedly parked his car on the side of the road and shot himself in the head just after 10 a.m. on Friday. And while his death is clearly suspicious to some, it should be noted that his wife, Francesca, passed away eight months ago in June 2019 following a battle with cancer. The couple had one daughter named Sara, an ordained minister who previously served as the chaplain for the Cobb Detention Center according to Francesca’s Facebook page (via Heavy).
Haney lived in Plymouth, California – approximately 40 miles east of Sacramento.
He notably authored “See Something, Say Nothing: A Homeland Security Officer Exposes the Government’s Submission to Jihad,” a scathing criticism of the Obama administration’s handling of radical Islamic terrorism. In 2016, he testified that the Obama administration could have prevented the Pulse nightclub shooting in Orlando, Florida if they had not acted in favor of “political correctness.”
Haney, who retired in 2015, studied Arabic culture and language while working as a scientist in the Middle East before becoming a founding member of the Department of Homeland Security in 2002 as a Customs & Border Protection (CBP) agriculture officer.
After serving as an armed CBP officer, he was promoted to its Advanced Targeting Team. He specialized in Islamic theology and the strategy and tactics of the global Islamic movement. –Fox News
Haney, a founding member of DHS, described his work at the agency like dealing with bugs – saying he “followed the trail and found the nest.”
News of Haney’s death rocked those who knew him.
“Somebody I deeply respected and considered a friend Phil Haney – a DHS whistleblower during the Obama Admin was apparently killed yesterday in Southern California,” wrote journalist Sara Carter in a Saturday tweet. “Pray for his family and pray they find the person who murdered him. Still trying to get confirmation on details.”
Somebody I deeply respected and considered a friend Phil Haney – a DHS whistleblower during the Obama Admin was apparently killed yesterday in Southern California. Pray for his family and pray they find the person who murdered him. Still trying to get confirmation on details
— Sara A. Carter (@SaraCarterDC) February 22, 2020
Tyler Durden
Sun, 02/23/2020 – 17:44 - The Bogus Big Brother-Big Tech Brawl Over Backdoors
The Bogus Big Brother-Big Tech Brawl Over Backdoors
Authored by Bill Blunden via TheAmericanConservative.com,
The law can already get into your phone anytime. But Apple needs you to think it isn’t helping them…
In the wake of this year’s Munich Security Conference, members of the European Union are pushing back against warnings by the United States about networking gear sold by Chinese telecom giant Huawei. American officials have alleged that Huawei can covertly access its equipment through backdoors designed for law enforcement, and voiced concerns about the risk associated with installing hardware that could give the Chinese government the ability to remotely monitor or even disable other nation’s networks.
The insistence of countries like Britain and Germany on integrating technology from a police state directly into their digital infrastructure is definitely curious. But it’s not like supply chain subversion hasn’t already transpired on an industrial scale. For example, we know now, thanks to a recent Washington Post report, that during the early days of the Cold War, the Central Intelligence Agency succeeded in secretly compromising encryption technology used by over 120 different countries. For years, American spies were tapping lines and pilfering secrets from all over the globe.
Back to 2020. American officials are sounding alarms about Huawei having backdoors, though that hasn’t stopped them from supporting U.S. law enforcement getting their own access to everyone’s data whenever they want. But theirs is a “noble” cause: high ranking members of the political establishment are warning that they won’t be able to protect us against terrorists, drug cartels, and child pornographers unless Silicon Valley allows in American security services.
The tech industry has responded by assuming a defiant stance that seems to side with user privacy. Yet history informs us that this Manichean soap opera is not always what it appears to be. Concealed behind the headlines is a choreographed routine in which executives and politicians confront each other across the table while secretly shaking hands underneath.
The “Going Dark” Narrative
At the core of the matter is encryption technology. This past summer, Attorney General William Barr complained that encryption “allows criminals to operate with impunity, hiding their activities under an impenetrable cloak of secrecy.” Such that the government’s ability to discern illegal conduct online is “going dark.” The Five Eyes intelligence alliance (consisting of the United States, the United Kingdom, Canada, Australia, and New Zealand) publicly proposed weakening cryptographic protocols so they could engage in “lawful interception” of digital communications.
Upping the ante, in December, Senator Lindsey Graham issued an ultimatum to business leaders at a Judiciary Committee hearing. He asserted that “this time next year, if you haven’t found a way that you can live with it, we will impose our will on you.” Graham has begun drafting a bill to this end.
It goes without saying that the tech industry opposes this strategy of government-imposed backdoors. That’s mainly because security boosts brand, and that in turn boosts sales. Not to mention that standing up to the big bad government provides street cred and scads of free publicity. When Barr presented his case for mandated backdoors, Facebook replied that his scheme “would be a gift to criminals, hackers and repressive regimes.” Apple likewise protested that “Backdoors can also be exploited by those who threaten our national security and the data security of our customers…encryption is vital to protecting our country and our users’ data.”
Of course, there’s something missing from this debate. Something that merits careful attention.
Strong Crypto as a Speed Bump
It just so happens that strong encryption isn’t the cure-all that it’s cracked up to be. This is an inconvenient truth that’s confirmed on a daily basis. For example, in mid-October of 2019, the Department of Justice announced the takedown of a massive online repository of child pornography. The portal resided on the dark net, leveraging both the Tor anonymity suite as well as Bitcoin to conceal the identities of its user base. Yet in spite of these countermeasures, federal agents unearthed terabytes of evidence. The ensuing crackdown led to charges against more than 300 people.
And this isn’t the first time the feds succeeded in collectively unmasking large swathes of presumably nameless users. In 2015, the Federal Bureau of Investigation launched Operation Pacifier, which used a “court-approved network investigative technique” (e.g. hacking) to track down and arrest over 350 members of yet another website that was hosting child pornography.
Suddenly the dark net doesn’t seem so dark.
The public record indicates that there’s a whole industry devoted to sidestepping device encryption, catering primarily to the intelligence community. Companies like Israel’s NSO Group have garnered substantial media attention. The NSO Group has openly boasted that “it developed a hacking tool that can break into just about any smartphone on Earth.”
Please rewind and ponder the implications of that previous sentence. Then perhaps reassess the risk associated with allegedly secure messaging software like WhatsApp or seemingly impregnable devices like the iPhone. Glenn Greenwald himself may be having second thoughts after Brazilian security services intercepted messages he exchanged with hackers.
There are countless vendors in this space, companies like Hacking Team and Gamma International whose surveillance tools have garnered media attention. Wade around in this shadowy milieu long enough and the underlying subtext becomes clear: encrypt confidential data all you want; it doesn’t matter if someone can hack your computer and make off with the data inside.
Backdoors and Backroom Deals
These spyware companies thrive because the backdoors that everyone is arguing about are already out there, wide open in the field. They exist in the form of plausibly deniable technical flaws, aka bugs. These bugs are legion because market incentives favor low costs over security. And also because industry titans like RSA have been known to secretly cooperate with spy chiefs while vocally rebuffing their agendas in the press.
During the crypto wars of the 1990s, the president of RSA proudly announced that “for almost 10 years, I’ve been going toe to toe with these people at Fort Meade. The success of this company is the worst thing that can happen to them. To them, we’re the real enemy, we’re the real target.” Pay no heed to the backdoor that they planted for the NSA.
Sound familiar? That’s the kayfabe in action. Feud in public and fraternize in private. Coquettishly wink at spies while making noise for rubes.
Apple has likewise shown a propensity for quiet cooperation. A couple of years ago, they decided against encrypted iCloud backups after the FBI balked. And when the FBI initially requested help accessing the iPhone used by one of the San Bernardino shooters, Apple was perfectly happy to help them so long as the FBI quietly submitted the request under seal. Only after the request went public did Tim Cook adopt a more antagonistic posture. For users in Russia, Apple discreetly adjusted its maps and weather apps so that Crimea appears to be a part of Russian territory.
Pity the Overworked Bureaucrat
This obviously raises a question. With the abundant supply of commercial tools and the ongoing success against dark nets, why are officials so keen to paint their investigative programs as “going dark”?
One answer pivots on the nature of bureaucracies, a world where budgets are fixed and overworked apparatchiks are under pressure from above to get results with limited resources. In a nutshell, state-sanctioned backdoors are convenient. They don’t require the resources necessary to launch and maintain an extended hacking campaign. Clandestine cyber ops can involve multiple teams of technical specialists working around the clock in conjunction with field officers and support staff. Faced with a towering case load and impatient bosses, the typical civil servant will understandably opt for whatever solution makes their job easier.
To use an analogy, why spend hours to break into a bank vault, lugging around heavy equipment and making a huge mess, when you can nonchalantly walk up and swing it open with the factory-enabled bypass combination?
Legally mandated cryptographic backdoors are the path of least resistance, a surveillance geodesic compliments of the justice system. While you can’t necessarily fault government officials for wanting to take the easy route, it’s important to recognize when they’re wielding imperfect metaphors to justify their demands. Thanks to clandestine arrangements, perpetually buggy code, and cheap gear, American security services aren’t going dark anytime soon.
Tyler Durden
Sun, 02/23/2020 – 17:40
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