Jul 26

Today’s News 26th July 2021

  • The 'Incomplete' Map That Has China Fuming At NBC's Olympic Coverage
    The ‘Incomplete’ Map That Has China Fuming At NBC’s Olympic Coverage

    A mere two days into the Tokyo Summer Olympic games and geopolitical controversy centering on China has already erupted. Beijing has angrily denounced major US network NBC for displaying an “incomplete” map of the country, slamming it as the news channels attempt to “play political tricks” which has resulted in ‘hurt feelings’.

    NBC’s Opening Ceremony coverage on Friday featured a map generated on the screen as the Chinese team walked into the stadium which showed the outline of mainland China, but was lacking Taiwan and claimed possessions in the South China Sea. 

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    China’s foreign ministry issued its protest and denunciation via its Chinese consulate in New York which included explanation that “The map is an expression of the national territory, symbolizing national sovereignty and territorial integrity.”

    As it’s “incomplete,” China is now urging “NBC to recognize the serious nature of this problem and take measures to correct the error.”

    “Attempts to use the Olympic Games to play political ‘tricks’ and self-promotion to achieve ulterior motives will never succeed,” the statement added. The consulate stopped short of specifying exactly what was missing, but it’s clearly a reference to the most hotly contested territorial issue of the moment – Taiwan’s status. 

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    No doubt adding insult to injury was also NBC’s narration at the time the Chinese team was making their Olympic debut.. 

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    The NBC anchor pointed out that China remains under “international scrutiny from human right organizations”. She then went through the litany: Hong Kong, the treatment of Muslim Uighur minorities, and strained tensions with Washington – in a somewhat unusually specific list of grievances during what’s supposedly an ‘apolitical’ international athletic competition.

    Chinese state media was also quick to call it a violation of the spirit of the Olympic Charter…

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    NBC has made no indication that it plans to backtrack or refrain from using the map during its ongoing coverage. The disagreement comes just after China retaliated against US Hong Kong-related sanctions with its own targeted punitive measures, including against former Commerce Secretary under Trump, Wilbur Ross.

    Tyler Durden
    Mon, 07/26/2021 – 02:45

  • Nordstream 2's Hard Lesson In Reality For Everyone
    Nordstream 2’s Hard Lesson In Reality For Everyone

    Authored by Tom Luongo via Gold, Goats, ‘n Guns blog,

    For more than six years everyone who is anyone in a politically sensitive position in Europe and the U.S. has wrung their hands over the Nordstream 2 pipeline. From the moment it was announced the howls of pain could be heard all around the world.

    Those screams were the screams of people who had grown fat and rich on the status quo realizing their gravy train was over.

    Now the project is all but complete and the saga coming to an end we have a weak deal between all the major parties to keep some of that gravy train running. German Chancellor Angela Merkel and Joe Biden finally buried the hatchet over Nordstream 2.

    But the reality was that Nordstream 2 was always going to get completed. I’ve never wavered in my assessment of this.

    The reasons were myriad.

    The Germans need the gas.

    The Germans wanted another political cudgel to use over the recalcitrant Poland and the Baltics.

    The Germans need the gas.

    Former German Chancellor Gerhard Schroeder is a board member of the Nordstream 2 consortium who put the deal together.

    Oh, and the Germans need the gas.

    It wasn’t a tough set of equations to solve here. The major players are Russia, Ukraine, Germany, the U.S. Whose needs are fulfilled by Nordstream 2? Germany’s. Who controls the EU? The Davos Crowd through Germany. Who needs relatively cheap energy to keep popular revolts from overthrowing major governments? Davos.

    In the end economics and the reality of positive incentives always force a resolution on people determined to hold back the tide through regulation and arm-twisting creating perverse incentives. Believe me, there’s a broader lesson for all concerned here than just Nordstream 2.

    As to the pipeline itself, the main sticking point for many people in the U.S. was a combination of leftover Cold War policy of denying Russia any new pipelines into Europe and personal enrichment because of Ukrainian gas transit.

    But the events of the past decade and the existence of Nordstream 1 saw the dynamic in that relationship shift dramatically.

    The U.S clearly does not control the reins over European energy policy and hasn’t for a long time.

    The Davos Crowd controls U.S. policy over Europe and damn near everything else at this point, especially with Biden sporifying in the White House and Obama pulling all the strings behind the scene.

    That anti-pipeline policy was powerful when the U.S. called the shots in its relationship with Europe. Trump tried to reassert U.S. dominance over Europe and beginning to be successful. But Merkel and others simply waited for his term to end, hoping their incessant meddling in his presidency would weaken him.

    Because of the times and Trump’s excellent media instincts and unwillingness to be publicly shamed, he only grew stronger. So they had to depose in the most nakedly brutal way imaginable. However, his opposition to Nordstream 2 forced a lot of people to expose themselves over their corruption in Ukraine. Davos called in nearly every marker they had to bury Hunter Biden’s corruption.

    At the same time Hunter was nothing more than a distraction to keep people from looking deeper at Mitt Romney, Speaker Nancy Pelosi and Poppy Eyed Adam Schiff, all of whom have interests in Ukraine continuing to transit gas through the old leaky Soviet pipelines.

    The reason Nordstream 2 got finished is because Davos finally acceded to reality that it lost in Ukraine.

    That’s what the Biden/Putin summit was about (among other things).

    In the past, when Davos had its sights set on Ukraine to take it away from Russia through a terrible offer of EU membership in 2013, new pipelines into Europe were actively blocked, e.g. Southstream. U.S. Cold War policy and their goals converged.

    In the case of SouthStream, the U.S. was made out to be the bad guy putting the final pressure on Bulgaria to stop the project. The truth was the EU kept changing the rules on Gazprom in order to lock them into a long-term relationship which the EU would consistently hold the regulatory whip hand over and use to dictate prices once they had their monopsony in place.

    At least that was the plan.

    When that plan failed and Putin cancelled Southstream, disallowed Ukraine’s admittance into the EU — which former President Viktor Yanukovich was never serious about — and blocked the full takeover of the country by backing the independence of both the Donbass and Crimea, Nordstream 2 was put on offer.

    This was a desperation move. Plain and simple.

    Now Gazprom had all the leverage in new Ukraine gas transit talks. Putin froze the conflict in Ukraine. The current gas transit deal is all in Gazprom’s favor. It will be again in 2024 when it ends then.

    This reality forced Davos to back Germany over the pipeline otherwise Germany would no longer be able to run its economy and leverage that to lord over the rest of Europe. Davos’ control over Europe rests on Germany’s economic and political strength within in the bloc. Period. Without that the EU splinters rapidly.

    This is why Tump was such a real problem. Once he was removed and order restored from their perspective they made one last attempt to test Russia’s resolve in Ukraine. They got a firm, if not stern, Russian “Nyet,’ and then sent Biden over to Geneva to sue for peace after he made it kinda look like he wasn’t rolling over.

    And that peace was a face-saving way out of the mess in Ukraine; the face-saving ‘deal’ that allows the U.S. to look like it forced Germany to recompense Ukraine for potential future revenue losses which was agreed to by a lame duck Merkel and Biden this week.

    The deal is a joke. The boys at The Duran covered it beautifully last night. It’s nothing more than a slush fund to ensure a couple of billion dollars continues moving through the right people’s hands while it has the political veneer of ‘green’ energy investment in Ukraine to appease the locals.

    It’s a typically cynical deal by Merkel as she throws Ukraine further under the bus, tries to threaten Russia with something Germany will never do — not buy gas from them — and ensure that the American politicians with the most to lose are insulated from further scrutiny.

    The reality is, as Gazprom deputy chairman Alexander Medvedev said back in 2018, all the wrangling over Nordstream 2 is silly. Germany and Europe are going to need Nordstream 3. There’s plenty of gas demand in Europe to go around.

    And in case anyone hasn’t been watching, natural gas prices are signaling that we’re in for a lot more than just a tranistory rise in energy prices.

    Natural gas is looking to close July at more than $4.00 / mcf for the first time since the cold weather spike during the nasty 2018 winter which saw even the obnoxiously belligerent British buy tankers of Russian gas to keep people from freezing.

    Natural gas prices haven’t been sustainably above $4.00 / mcf since 2014. And this price spike is happening during the summer, not the winter when gas demand is highest. This is yet another reason why Germany simply could not afford to lose Nordstream 2.

    They’ll not only need Nordstream 2 and likely 3 but also those LNG terminals that Merkel promised Trump as a sop to get him to back off on the pipeline. Trump, for all of his faults, understood Merkel well enough to know she wasn’t offering anything she wasn’t already prepared to do alreaady.

    Trump’s pressure on the project was existential for Europe given Merkel’s (and Davos’) disastrous decision to shutter all nuclear power in Germany. The EU going forward is a massive energy importer. The offshore gas fields of the Netherlands and Norway are drying up faster than anyone wanted to admit until recently.

    And at the heart of Davos’ Great Reset is the imposition of their new more enlightened communism than that of the brutal Slavs and the sub-human Chinese. It is this Euro-centric arrogance and, frankly, racism that drives them.

    The fact is most of Europe is going to have to face the reality that their great social welfare systems which so many younger Americans have been propagandized into thinking are sustainable are actually on life support. They’ve always been on a ventilator.

    And that ventilator has been cheap, locally produced oil and gas, which is ending.

    Why do you think Davos is so hostile to oil and gas? It has absolutely zero to do with Climate Change and saving humanity from itself. They hate what they no longer have. The hard lesson for a lot of Millennials and frankly stupid Greens who can’t think beyond first order effects is the same one the Soviet Union had to face.

    Communism doesn’t work even if you subsidize the bejeesus out of it through energy exports and hand out ‘free stuff’ from the profits to everyone to mask the costs. In short, incentives matter. Perverse incentives just hollow out the productive class, in Marxist terms, the bourgeoisie, and ensure the collapse of the economy through the inability to rationally calculate costs. Some guy named Mises worked this out in 1922, here we are a century later having to explain the basics of human action over and over again.

    And Davos can’t run their new technocratic dystopia if they don’t have control over the input price of energy in their home turf, Europe. The Soviet Union lasted as long as it did because of Russia’s vast oil and gas reserves. Europe is trying to implement a more perfect Soviet Union while simultaneously sending real energy costs skyrocketing.

    This is truly a case of people thinking they are so clever they sell themselves the dumbest ideas imaginable.

    Nordstream 2 will likely see Gazprom undercut the global price for gas, helping to offset the EU’s disastrous regulatory scheme which creates a structural disadvantage for German companies. Moreover, since they are trapped at negative nominal yields and are desperate to maintain the façade of a strong euro to keep sovereign debt yields low, there is no hope or help from what should be the natural ebb and flow of exchange rates.

    So, rock meet hard place. Something had to give and in this case the U.S. gave up on Nordstream 2 and Davos is going to find out really soon that no matter how many palms you grease, how much Kompromat you generate on important people, perverse incentives are the root cause of all human organizational failure.

    That’s likely the hardest lesson of all here. Davos blew up the world economy by vandalizing the middle classes of the first (and second) world, in the process mangling the capital investment cycle into energy which is now coming back to haunt them as prices rise alongside public unrest.

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    Tyler Durden
    Mon, 07/26/2021 – 02:00

  • Greenwald: FBI Using Same Fear Tactic From First War On Terror, Orchestrating Its Own Terrorism Plots
    Greenwald: FBI Using Same Fear Tactic From First War On Terror, Orchestrating Its Own Terrorism Plots

    Authored by Glenn Greenwald via substack,

    Questioning the FBI’s role in 1/6 was maligned by corporate media as deranged. But only ignorance about the FBI or a desire to deceive could produce such a reaction.

    The narrative that domestic anti-government extremism is the greatest threat to U.S. national security — the official position of the U.S. security state and the Biden administration — received its most potent boost in October 2020, less than one month before the 2020 presidential election. That was when the F.B.I. and Michigan state officials announced the arrest of thirteen people on terrorism, conspiracy and weapons charges, with six of them accused of participating in a plot to kidnap Michigan’s Democratic Governor Gretchen Whitmer, who had been a particular target of criticism from President Trump for her advocacy for harsh COVID lockdown measures.

    The headlines that followed were dramatic and fear-inducing: “F.B.I. Says Michigan Anti-Government Group Plotted to Kidnap Gov. Gretchen Whitmer,” announced The New York Times. That same night, ABC News began its broadcast this way: “Tonight, we take you into a hidden world, a place authorities say gave birth to a violent domestic terror plot in Michigan — foiled by the FBI.”

    Democrats and liberal journalists instantly seized on this storyline to spin a pre-election theme that was as extreme as it was predictable. Gov. Whitmer herself blamed Trump, claiming that the plotters “heard the president’s words not as a rebuke but as a rallying cry — as a call to action.” Rep. Maxine Waters (D-CA) claimed that “the president is a deranged lunatic and he’s inspired white supremacists to violence, the latest of which was a plot to kidnap Gov. Whitmer,” adding: “these groups have attempted to KILL many of us in recent years. They are following Trump’s lead.” Vox’s paid television-watcher and video-manipulator, Aaron Rupar, drew this inference: “Trump hasn’t commended the FBI for breaking up Whitmer kidnapping/murder plot because as always he doesn’t want to denounce his base.” Michael Moore called for Trump’s arrest for having incited the kidnapping plot against Gov. Whitmer. One viral tweet from a popular Democratic Party activist similarly declared: “Trump should be arrested for this plot to kidnap Governor Whitmer. There’s no doubt he inspired this terrorism.”

    New York Governor Andrew Cuomo instantly declared it to be a terrorist attack on America: “We must condemn and call out the cowardly plot against Governor Whitmer for what it is: Domestic terrorism.” MSNBC’s social media star Kyle Griffin cast it as a coup attempt: “The FBI thwarted what they described as a plot to violently overthrow the government and kidnap Michigan Gov. Gretchen Whitmer.” CNN’s Jim Sciutto pronounced it “deeply alarming.”

    A lengthy CNN article — dressed up as an investigative exposé that was little more than stenography of FBI messaging disseminated from behind a shield of anonymity — purported in the headline to take the reader “Inside the plot to kidnap Gov. Whitmer.” It claimed that it all began when angry discussions about COVID restrictions “spiraled into a terrorism plot, officials say, with Michigan Gov. Gretchen Whitmer the target of a kidnapping scheme.” CNN heralded the FBI’s use of informants and agents to break up the plot but depicted them as nothing more than passive bystanders reporting what the domestic terrorists were plotting:

    The Watchmen had been flagged to the FBI in March, and one of its members was now an informant. That informant, others on the inside, as well as undercover operatives and recordings, allowed the bureau to monitor what was happening from then on.

    The article never once hinted at let alone described the highly active role of these informants and agents themselves in encouraging and designing the plot. Instead, it depicted these anti-government activists as leading one another — on their own — to commit what CNN called “treason in a quaint town.” The more honest headline for this CNN article would have been: “Inside the FBI’s tale of the plot to kidnap Gov. Whitmer.” But since CNN never questions the FBI — they employ their top agents and operatives once they leave the bureau in order to disseminate their propaganda — this is what the country got from The Most Trusted Name in News:

    Gov. Whitmer herself attempted to prolong the news cycle as much as possible, all but declaring herself off-limits from criticism by equating any critiques of her governance with incitement to terrorism. Appearing on Meet the Press two Sundays after the plot was revealed, Whitmer said it was “incredibly disturbing that the president of the United States—10 days after a plot to kidnap, put me on trial, and execute me, 10 days after that was uncovered—the president is at it again, and inspiring, and incentivizing, and inciting this kind of domestic terrorism.”

    On October 22 — just two weeks before Election Day — MSNBC’s Rachel Maddow hosted Whitmer and told the Michigan Governor that the evidence was clear that Trump had been “turning on a faucet of violent threats” against her. Whitmer agreed that Trump was to blame for the kidnapping plot by having repeatedly attacked her in his rallies:

    Joe Biden also made repeated use of this storyline. Appearing at a campaign rally in Michigan on October 16, the Democratic candidate blasted Trump for the crime of continuing to criticize Whitmer even after she was the target of a terror plot. He explicitly blamed Trump for having incited it: “When the president tweeted ‘Liberate Michigan, Liberate Michigan,’ that’s the call that was heard. That was the dog whistle.” And he accused Trump of purposely stoking a wave of the worst kind of terrorism on U.S. soil: “it’s the sort of behavior you might expect from ISIS,” he said of the accused.

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    Yet from the start, there were ample and potent reasons to distrust the FBI’s version of events. To begin with, FBI press releases are typically filled with lies, yet media outlets — due to some combination of excessive gullibility, an inability to learn lessons, or a desire to be deceived — continue to treat them as Gospel. For another, the majority of “terror plots” the FBI claimed to detect and break up during the first War on Terror were, in fact, plots manufactured, funded and driven by the FBI itself.

    Indeed, the FBI has previously acknowledged that its own powers and budget depend on keeping Americans in fear of such attacks. Former FBI Assistant Director Thomas Fuentes, in a documentary called “The Newberg Sting” about a 2009 FBI arrest of four men on terrorism charges, uttered this extremely candid admission:

    If you’re submitting budget proposals for a law enforcement agency, for an intelligence agency, you’re not going to submit the proposal that “We won the war on terror and everything’s great,” cuz the first thing that’s gonna happen is your budget’s gonna be cut in half. You know, it’s my opposite of Jesse Jackson’s ‘Keep Hope Alive’—it’s ‘Keep Fear Alive.’ Keep it alive.

    In the Whitmer kidnapping case, the FBI’s own affidavit in support of the charges acknowledged the involvement in the plot of both informants and undercover FBI agents “over several months.”

    Excerpt of FBI affidavit criminal complaint accompanying the criminal complaint in U.S. District Court against six defendants in the Whitmer plot

    In sum, there was no way to avoid suspicions about the FBI’s crucial role in a plot like this absent extreme ignorance about the bureau’s behavior over the last two decades or an intentional desire to sow fear about right-wing extremists attacking Democratic Party officials one month before the 2020 presidential election. In fact, the signs of FBI involvement were there from the start for those who — unlike CNN — wanted to know the truth.

    A report from the Detroit Free Press published just two days after CNN’s FBI stenography noted that the FBI agents were incapable of identifying any specifics of this supposed plot, adding that defense attorneys were adamant that those accused were merely engaged in idle chatter, boasting that they were never really serious about following through. Then the paper added that, for defense lawyers, “it remains to be seen what roles the undercover informants and FBI agents played in the case, and whether they pushed the others into carrying out the plan.” Meanwhile, an actually independent journalist, Michael Tracey, had no trouble identifying the telltale signs of FBI orchestration that were so apparent countless times during the first War on Terror. Three days before the CNN story, he wrote:

    But the value of depicting Trump as having incited a frightening terrorist attack just weeks before the election, and the zeal to feed the broader narrative pushed by the U.S. security state that anti-government extremism is America’s greatest national security threat, drowned out any skepticism. The storyline was clear and unquestioned: Trump was inciting ISIS-like terrorism on U.S. soil and right-wing extremists, who would fester even after Trump was done, were the primary menace that requires new domestic powers and larger budgets in order to defeat.

    Yet just as happened with so many other narratives — from the origins of COVID to Hunter Biden’s corrupt use of his ties to his father — Trump’s defeat means the media is now willing to reconsider some of the propaganda that was pushed in the lead-up to the election. An excellent piece of investigative journalism published by BuzzFeed on Tuesday documents that, far from being passive observers of the plot, FBI informants and agents were the key drivers of it:

    An examination of the case by BuzzFeed News also reveals that some of those informants, acting under the direction of the FBI, played a far larger role than has previously been reported. Working in secret, they did more than just passively observe and report on the actions of the suspects. Instead, they had a hand in nearly every aspect of the alleged plot, starting with its inception. The extent of their involvement raises questions as to whether there would have even been a conspiracy without them.

    So central to this plot were those acting at the behest of the FBI that many of the accused plotters only met each other because of meetings arranged at the direction of the FBI, who targeted them based on social media postings and other political activities that suggested anti-government and anti-Whitmer sentiments which could be exploited:

    A longtime government informant from Wisconsin, for example, helped organize a series of meetings around the country where many of the alleged plotters first met one another and the earliest notions of a plan took root, some of those people say. The Wisconsin informant even paid for some hotel rooms and food as an incentive to get people to come.

    One of the FBI’s informants, a former Iraq War soldier, “became so deeply enmeshed in a Michigan militant group that he rose to become its second-in-command.” With his leadership role in one of the key groups, and all while acting under the direction of the FBI, he was “encouraging members to collaborate with other potential suspects and paying for their transportation to meetings.” Indeed, he even “prodded the alleged mastermind of the kidnapping plot to advance his plan, then baited the trap that led to the arrest.”

    A review of not only the BuzzFeed reporting but also the underlying court documents leaves little doubt that the primary impetus for this plot came over and over from the FBI. On July 12, a lawyer for one of the defendants filed a motion asking the court to compel the FBI to turn over all chats which their agents and informants involving the plot. He did so on the ground that the few chats they had obtained themselves — from their own clients — repeatedly show the FBI pushing and prodding its agents over and over to lure defendants into more meetings, to join in “recon” exercises, and to take as many steps as possible toward the plot.

    While it was clear from the start that there were FBI informants and agents in the middle of all of this, it turns out that at least half of those involved were acting on FBI orders: twelve informants and agents. As BuzzFeed says, those acting at the behest of the FBI “had a hand in nearly every aspect of the alleged plot, starting with its inception.” All of that, concluded the reporters, “raises questions as to whether there would have even been a conspiracy without them.”

    But this evidence does not so much raise that question as much as it answers it. The idea of kidnapping Gov. Whitmer came from the FBI. It was a plot designed by the agency, and they then went on the hunt to target people they believed they could manipulate into joining their plot — either people were easily manipulated due to psychological weakness, financial vulnerability, and/or their strongly held political views. In sum, the FBI devised this plot, was the primary organizer of it, funded it, purposely directed their targets to pose for incriminating pictures that they then released to the press, and then heaped praise on themselves for stopping what they themselves had created.

    For anyone covering the FBI during the first War on Terror, none of this is new. So many of the supposed “terror plots” the FBI purported to disrupt over the last twenty years were — just like the Michigan plot — ones that were created and driven by, and would not have happened without, the FBI’s own planning, funding and direction.

    Just as they are doing now, the FBI used those plots to elevate fear levels and justify more domestic surveillance power and funding for the U.S. security state. While the targets then were typically young American Muslims with anti-government views rather than young right-wing white men with anti-government views, the tactics were identical.

    The examples are far too numerous to count. As one illustrative example, in 2015, the FBI flamboyantly praised itself for arresting three Brooklyn men on charges of “attempt and conspiracy to provide material support to the Islamic State of Iraq.” Then, as now, outlets such as The New York Times promoted the FBI’s maximalist-fear-mongering version of events: “3 Brooklyn Men Accused of Plot to Aid ISIS’ Fight,” blared the headline.

    But even that largely pro-FBI Times article raised the question of whether this plot was real or manufactured by the bureau:

    The case against the three men relies in part on a confidential informant paid by the government, court documents show. Defense lawyers have criticized the government’s use of informers in similar cases, saying they may lure targets into making extreme plans or statements. In some cases, the threat has turned out to be overstated.

    And the FBI itself admitted that the “threats of violence” from the three arrested — such as killing President Obama — “had an ‘aspirational’ quality to them, with no indication that the suspects were close to staging an attack, large or small.” The Times article also noted that the FBI observed that “in online postings, the two younger men seem to be searching for meaning in their lives,” adding that “as they were led into court, the youthfulness of Mr. Juraboev and Mr. Saidakhmetov was striking.”

    Analyzing all the evidence in this case, my then-colleague at The Intercept Murtaza Hussain documented “the integral role a paid informant appears to have played in generating the charges against the men, and helping turn a fantastical ‘plot’ into something even remotely tangible.” Indeed, he wrote, “none of the three men was in any condition to travel or support the Islamic State, without help from the FBI informant.” It was only when the FBI sent an older Muslim man to gain their trust — acting as an FBI informant and being paid for his services — did anything resembling a crime start to form. The paid FBI informant encouraged the young men to pursue the plan more concretely, and only then did they begin agreeing with the informant’s proposed plot. The informant befriended them, moved in with them, and spent months “convincing both of them that he intended to travel to Syria and join Islamic State.”

    Just as was true in the Michigan case, Hussain wrote about this arrest: “Crucially, it appears that only after the introduction of the informant did any actual arrangements to commit a criminal act come into existence.” In sum, “the covert informant under the direction of the FBI” — which employs teams of psychologists and other mental health professions who are experts in how to manipulate people’s thinking — “evidently helped encourage the two toward terrorism over the course of these months.”

    Article by Murtaza Hussain of The Intercept, Feb. 20, 2015

    I have also covered countless other FBI plots over the years where all the same attributes were present. After the 2015 “ISIS arrest,” I wrote an article compiling how often the FBI was doing this and asked this question in the headline: “Why Does the FBI Have to Manufacture its Own Plots if Terrorism and ISIS Are Such Grave Threats?,” noting that the bureau’s behavior “is akin to having the DEA constantly warn of the severe threat posed by drug addiction while it simultaneously uses pushers on its payroll to deliberately get people hooked on drugs so that they can arrest the addicts they’ve created and thus justify their own warnings and budgets.”

    Months before the 2015 ISIS arrests, the FBI issued a press release praising itself for arresting “a Cincinnati-area man for a plot to attack the U.S. Capitol and kill government officials.” But as I reported, the scary terrorist was “20-year-old Christopher Cornell, [who] is unemployed, lives at home, spends most of his time playing video games in his bedroom, still addresses his mother as ‘Mommy’ and regards his cat as his best friend; he was described as ‘a typical student’ and ‘quiet but not overly reserved’ by the principal of the local high school he graduated in 2012.”

    Then House Speaker John Boehner immediately seized on that arrest to warn Americans to be afraid: “We live in a dangerous country, and we get reminded every week of the dangers that are out there.” Boehner also told Americans they should be grateful for domestic surveillance and not try to curb it: the Speaker claimed that “the National Security Agency’s snooping powers helped stop a plot to attack the Capitol and that his colleagues need to keep that in mind as they debate whether to renew the law that allows the government to collect bulk information from its citizens.” Yet the only way Cornell got close to any crimes was because the FBI informant began suggesting to him that he act on his rage against U.S. officials by attacking the Capitol.

    Salon articles of my reporting on FBI’s creation of terror plots it “stops”: Nov. 28, 2010 and Sep. 29, 2011

    One of the most egregious cases I covered was the 2011 arrest of James Cromitie, an African-American convert to Islam who the FBI attempted to convince — over the course of eight months — to join a terror plot, only for him to adamantly refuse over and over. Only once they dangled a payment of $250,000 in front of his nose right after the impoverished American had lost his job did he agree to join, and then the FBI swooped in, arrested him, and touted their heroic efforts in stopping a terrorist plot.

    The U.S. federal judge who sentenced Cromitie to decades in prison, Colleen McMahon, said she did so only because the law of “entrapment” is so narrow that it is virtually impossible for a defendant to win, but in doing so, she repeatedly condemned the FBI in the harshest terms for single-handedly converting Cromitie from a helpless but resentful anti-government fanatic into a criminal. The defendant “was incapable of committing an act of terrorism on his own,” she said, adding: “only the government could have made a terrorist out of Mr. Cromitie, whose buffoonery is positively Shakespearean in scope.” She added: “There is not the slightest doubt in my mind that James Cromitie could never have dreamed up the scenario in which he actually became involved.”

    Her written ruling is worth quoting at length because of how relevant it is to current FBI activities. The judge began by noting that Cromitie “had successfully resisted going too far for eight months,” and agreed only after “the Government dangled what had to be almost irresistible temptation in front of an impoverished man from what I have come (after literally dozens of cases) to view as the saddest and most dysfunctional community in the Southern District of New York.” It was the FBI’s own informant, she wrote, who “was the prime mover and instigator of all the criminal activity that occurred.” She then wrote (emphasis added):

    The Government indisputably “manufactured” the crimes of which defendants stand convicted. The Government invented all of the details of the scheme – many of them, such as the trip to Connecticut and the inclusion of Stewart AFB as a target, for specific legal purposes of which the defendants could not possibly have been aware (the former gave rise to federal jurisdiction and the latter mandated a twenty-five year minimum sentence). The Government selected the targets. The Government designed and built the phony ordnance that the defendants planted (or planned to plant) at Government-selected targets. The Government provided every item used in the plot: cameras, cell phones, cars, maps and even a gun. The Government did all the driving (as none of the defendants had a car or a driver’s license). The Government funded the entire project. And the Government, through its agent, offered the defendants large sums of money, contingent on their participation in the heinous scheme.

    Additionally, before deciding that the defendants (particularly Cromitie, who was in their sights for nine months) presented any real danger, the Government appears to have done minimal due diligence, relying instead on reports from its Confidential Informant, who passed on information about Cromitie information that could easily have been verified (or not verified, since much of it was untrue), but that no one thought it necessary to check before offering a jihadist opportunity to a man who had no contact with any extremist groups and no history of anything other than drug crimes.

    One of the reporters who has most extensively covered the FBI’s role in manufacturing terrorism cases it then proceeds to “break up” is Trevor Aaronson. In 2011, he documented, working with the Investigative Reporting Program at the University of California-Berkeley, that of 508 post-9/11 terrorism defendants, “nearly half the prosecutions involved the use of informants, many of them incentivized by money.” After 9/11, the FBI’s budget-increasing, power-enhancing strategy was to target “tens of thousands of law-abiding people, seeking to identify those disgruntled few who might participate in a plot given the means and the opportunity” by monitoring their social media postings, and “then, in case after case, the government provides the plot, the means, and the opportunity.” Of the terrorism arrests from sting operations, almost 1/3 were ones in which “defendants participated in plots led by an agent provocateur—an FBI operative instigating terrorist action.”

    It is this long history and mountain of evidence that compels an investigation into the role played by the FBI in the planning of the 1/6 riot at the Capitol. And it is that same evidence that made the corporate media’s derisive reaction to such demands — as voiced by Darren Beattie’s Revolver News, Fox News’ Tucker Carlson and myself — so ignorant and subservient. They acted as if only some unhinged conspiracy theorist could possibly believe that the FBI would have informants and agents embedded in the groups that planned that Capitol riot rather than what it is: the only logical conclusion for anyone who knows how the FBI actually behaves.

    Indeed, the BuzzFeed reporters who investigated the FBI’s key role in the Michigan case must have been very disturbed by what they found since they used their reporting to raise that taboo topic: what role did the FBI have in 1/6? Moreover, they asked, is this yet another era where the FBI is targeting Americans not for criminality but for their political views, and then orchestrating their own plots that justify the U.S. security state’s massive budget and unlimited powers?

    Instead, [the accused] say, they were targeted because of their political views. Some describe the case as a premeditated campaign by the government to undermine the Patriot movement, an ideology based on fealty to the Second Amendment and the conviction that the government has violated the Constitution and is therefore illegitimate. They argue that the recordings and text messages that the government calls proof of a criminal conspiracy are in fact constitutionally protected speech — expressions of frustration at what they see as the government’s betrayal of its citizens.

    The Michigan case is unfolding at another fraught moment in American history. In court, the government has drawn a direct line between the alleged kidnapping plot and the Jan. 6 insurrection, holding up the storming of the US Capitol as evidence that the Michigan defendants posed a profound threat. . . . [I]f the defense is able to undermine the methods used to build the Michigan case, it could add weight to the theory that the administration is conducting a witch hunt against militant groups — and, by extension, that the Jan. 6 insurrection was a black op engineered by the FBI.

    When Carlson raised these same questions on his Fox program, he did what I did when doing so: cited my reporting as well as Trevor Aaronson’s about the FBI’s long history of orchestrating such plots and luring people into them using informants and undercover agents. Much of that reporting about the FBI’s tactics was published by The Intercept, which — when aimed at American Muslims during the First War on Terror — had an editorial view that it was extremely improper and dangerous for the FBI to do this. But now that it is being done to American anti-government activists on the right, the site’s liberal editors seem happy about it. They got Aaronson to write an article under the headline “Tucker Carlson Distorted My Reporting in His Latest Jan. 6 Conspiracy Theory.”

    But that headline was an absolute lie. There was nothing in Aaronson’s article that pointed to any “distortions” in how Carlson (or I) cited Aaronson’s work. To the contrary, Aaronson himself acknowledged that the FBI’s past history — including in the Whitmer case — made such questions highly rational and necessary:

    In many of these stings, informants or undercover agents provided all the money and weapons for terrorist plots, and sometimes even the ideas — raising significant questions about whether any of these people would have committed the crimes were it not for the FBI’s encouragement. Many targets of these FBI stings were mentally ill or otherwise easily manipulated. . . .

    Carlson’s claim fits an existing and well-established argument: that the FBI creates crimes through aggressive stings where no crimes would otherwise exist. . . . I think it’s worth noting that there’s a reason for the cultural stickiness of the claim by Revolver and Carlson. It might be a conspiracy theory, but it’s not exactly “baseless,” as the Post described it. That’s because there are genuine concerns that the sting tactics used over the past two decades against impressionable Muslims will be used against equally impressionable Americans with right-wing ideologies. In the supposed plot to kidnap Michigan Gov. Gretchen Whitmer, for example, FBI agents and an informant played significant roles, raising the same question that surrounds so many supposed Islamic State and Al Qaeda cases in the United States: Would this plot have happened were it not for the FBI?

    In addition, there is evidence the FBI is assigning informants to infiltrate groups based solely on right-wing ideology. And the increase in right-wing violence in recent years has prompted calls for new anti-terorrism laws that would give the FBI even more power.

    I think the FBI’s investigation of potential right-wing threats, and the degree to which the bureau replicates its abusive post-9/11 tactics, will be a critically important story in the coming years. How news organizations report on it will be a significant test.

    While Aaronson insists that no proof has yet been presented that the FBI had foreknowledge of the 1/6 plot or encouraged it to happen, and also seized on a minor error in the Revolver News article originally raising these questions about “confidential informants” — an error I noted in my own article about this topic while explaining that it was ancillary and insignificant to the overall question — Aaronson’s article has far more in common with the primary theme raised by Carlson than it does arguments that Carlson “distorted” anything. In particular, Aaronson writes, the FBI’s ample history requires a serious investigation into the role it may have played in knowing about and/or encouraging the 1/6 plotters.

    As I documented in my own reporting on this question, there is ample evidence to believe that the FBI had informants embedded in at least two of three key groups it says were behind the 1/6 Capitol riot. As I noted at the time, most of the corporate press spewed contempt and scorn on these questions because 1/6 has become an event that carries virtually religious importance to them, and their reverence for the U.S. security state makes them resistant to any suggestions that the FBI may have acted deceitfully — an utterly bizarre mindset for U.S. journalists to possess. But such is the state of the liberal sector of the corporate press today.

    Now that one of their own liberal members in good standing — BuzzFeed — has not only proven the FBI’s key role in the Whitmer plot but also themselves suggested that it makes more plausible the bureau’s involvement in 1/6, these questions are becoming increasingly unavoidable. Both the Whitmer plot and especially 1/6 are absolutely crucial to everything that has happened since: the launch of the new War on Terror, billions more in funds for the security state, proposals for greater surveillance, Biden’s use of the intelligence community to insist that anti-government activists constitute the greatest threat to U.S. national security. Asking what role the FBI played in the episode at the Capitol is not only rational but imperative.

    Tyler Durden
    Mon, 07/26/2021 – 00:00

  • Biden Approval Drops, Hits New Low In Gallup Poll 
    Biden Approval Drops, Hits New Low In Gallup Poll 

    President Joe Biden’s approval rating is showing the “first signs of a meaningful decline” as the “honeymoon period” appears to be over, according to the latest Gallup opinion poll. 

    Biden’s latest job approval rating plunged six percentage points to 50%, a new low, down from 56% in June. The latest survey consisted of 1,007 US adults between July 6-21. “Before this month, his ratings had not shown meaningful variation during his time in office, and the current figure marks the lowest measured for him to date,” Gallup said. 

    The lower rating comes as vaccination rates have hit a wall, the spread of the COVID-19 Delta variant, and concerns about rapid inflation, exploding wealth inequality, and millions of people unemployed. 

    The poll found 45% of respondents disapprove of Biden’s performance, and 5% had no opinion. 

    Gallup expands more on why the president’s approval ratings are in decline:

    It comes at a time when U.S. progress in fighting the coronavirus has stalled, with vaccination rates slowing and case levels now rising. The economic recovery continues, with unemployment declining and stock market values near record highs. But consumers are paying higher prices for gas and other goods. Biden has also struggled to deliver on his promise of greater bipartisanship, although negotiations on an infrastructure bill continue in the Senate.

    By political party, about 12% of Republicans give Biden a positive job approval rating compared to 90% of Democrats and 48% of independents.

    Despite the slump in support, Biden remains in positive territory, and “it’s common for presidents to see about a 3-point decrease in their average job approval ratings between their first and second quarters,” Gallup said. 

    Biden’s first-quarter job approval rating averaged 56%.

    His second-quarter average approval rating was 53.3%, higher than former President Bill Clinton (44%) and former President Donald Trump (38.8%). But below former President Barack Obama (62%) and former President George W. Bush (55.8%).

    Gallup’s bottom line on Biden falling approval rating: 

    Biden’s approval rating is showing the first signs of meaningful decline. If the lower ratings persist, it could indicate his “honeymoon” period is over. Because Republicans have been unlikely to support him from the beginning of his presidency, changes in his approval are likely to come from Democrats’ and independents’ evaluations of him. That is what has occurred now, with both groups slightly less positive toward Biden than they have been to this point. Still, he maintains very high approval among Democrats, and his rating among independents remains higher than his immediate predecessor Trump ever received from that group.

    Biden’s “Build Back Better” plan and trillions of dollars in stimuli pumped into financial markets and the economy, along with continued supply chain disruptions, is causing the administration to publicly address inflation because it could be a sour topic for Democrats come 2022 midterms.

    Meanwhile, another poll via ABC shows pessimism continues to accelerate against Biden and his administration.  

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

    Biden still holds high favorability ratings, but not taming inflation could result in further rating declines. 

    Tyler Durden
    Sun, 07/25/2021 – 23:30

  • Emerging Market Vulnerability Heatmap: Are EMs Threatened By Increasing Inflation Expectations
    Emerging Market Vulnerability Heatmap: Are EMs Threatened By Increasing Inflation Expectations

    By Wouter van Eijkelenburg, economist at Rabobank

    Emerging Market Vulnerability Heatmap

    Summary

    • There are divergent paths to economic recovery in advanced economies and emerging markets, due in part to differences in Covid-19 infections and vaccination rates
    • Inflation expectations are increasing in advanced economies, raising questions on central bank policies going forward
    • Tapering of QE or even policy interest rates hikes by central banks in advanced economies, particularly by the Fed, pose downside risks to the economies of emerging markets
    • Our vulnerability Heatmap provides an overview of economic indicators that signal potential vulnerabilities for certain emerging markets
    • Factors like a country’s (foreign currency denominated) debt, international trade position and interest rate risks are important determinants for EM vulnerability
    • We examine these factors in detail for certain emerging markets by diving into debt metrics, current accounts and interest rates

    Back to business?

    In 2020, the Covid-19 pandemic triggered the largest crisis since WW2. Across the world countries went into lockdown to mitigate the spread of the corona virus. While they succeeded in containing the virus, the lockdowns had severe economic implications. Governments and central banks have stepped in by providing enormous amounts of fiscal and monetary stimulus in order to counter the negative economic consequences of the imposed lockdowns. A recent publication showed that economic contractions could have been much worse if there had been no additional fiscal stimulus by governments.

    Halfway through 2021, we are seeing restrictions being loosened in many parts of the world due to increased vaccination rates. Although the virus is far from beaten, as new variants continue to emerge, economies are opening up globally and the economic outlook for most, if not all, countries is improving. A better economic outlook might require other policies by central banks and governments as inflationary pressure intensifies. However, economies are not all recovering at the same pace, and every economy has its own individual characteristics and autonomous regime. In this publication we will explore some of the implications of divergent economic growth paths between advanced economies (AEs) and emerging markets (EMs) with a special focus on the vulnerability of emerging markets to potential tighter monetary policy by AEs.

    Different speeds of recovery

    Globally, all of us have felt the impacts of the pandemic. But the intensity, limitations and consequences vary per country and probably even per person. Diverse policy actions have led to differences between countries in terms of virus penetration, containment success and economic consequences. Furthermore, we have seen that AEs have a greater vaccine availability and better logistical networks to start vaccinating quickly and effectively while most EMs are lagging behind. Figure 1 shows the varied pace of vaccination rates, which tends to be lower for most EMs (notwithstanding some exceptions, like Chile). It’s generally thought that higher vaccination rates allow economies to open up with a reduced risk of infections rising and therefore a lower risk of new waves of the virus hitting the country and economy.

    While many Europeans are planning or enjoying summer holidays at home abroad, countries like Indonesia, Thailand and Vietnam are close to or at the highest number of infections since the start of the pandemic. At the same time, India is still licking its wounds after a devastating 2nd wave, while other countries like Brazil, Argentina, and Colombia still need to up their games and improve their current pace of vaccination. These differences translate into the path to economic recovery and the economic outlook going forward. Figure 2 shows GDP growth per country compared to what it would have been in the absence of the Covid-19 pandemic based on average GDP growth in the period 2011-2019. Figure 2 illustrates that not only did AEs (solid lines) generally suffer less than EMs (dashed lines) in terms of “lost” growth in 2020, they are also better able to regain lost ground in 2021 through to 2022. The US is expected to have regained almost all lost ground by the end of 2022. In contrast by the end of 2022 especially Asian EMs like Thailand, India and Indonesia will still face a loss of almost 10% in economic output due to the crisis.

    Structural impact on the economy

    One of the most pressing questions regarding the pandemic for developing countries is whether the unprecedented crisis will result in any lingering, structural scars on the economy. The impact of the current crisis has mainly felt in high-contact service industries, tourism in particular. The World Tourism Organization estimates that tourism shrank by 74% in 2020 and the IMF forecasts that it would take at least 3 years for global tourism to return to pre-pandemic levels. Even if the rest of the economy slowly recovers, it is highly likely that the tourism sector will remain extremely weak in the coming years. Economies that are more dependent on tourism like Thailand, Mexico and Malaysia are more vulnerable to these shocks than countries that are less dependent on tourism (Figure 3)

    Manufacturing in general bounced back relatively quickly in 2021 (especially compared to the aftermath of the Global Financial Crisis), due to pent-up demand, government support to households in advanced countries and more spending in durables instead of services. The car industry has been the largest driver of the manufacturing recovery, accounting for about 35 percent of the global rebound in the second half of 2020, while electrical equipment accounted for almost 5 percent of the rebound.

    However, the economic recovery is mainly driven by large, while small and medium-sized enterprises (SMEs) were hit very hard by the pandemic, due to lower capital levels, lower capacity to adjust to remote working, and lower access to government funds. Moreover, the penetration of online retailers increased substantially during the lockdowns, which reduced the market share of traditional SMEs. In most emerging markets, the line between the SMEs and the informal sector is quite blurred, making it particularly difficult for these companies to receive government support. Support for SMEs was an important part of government packages in many countries: the Brazilian government dedicated 58.0% of their BRL1.27trn package to support workers and firms, the Indian government extended guarantees for SME loans, created a fund for equity infusion and loosened the regulations; Turkey offered an extended lending scheme for SMEs ; Thailand approved close to USD 20bn in soft loans to SMEs (both through private banks and directly from the government), to name but a few. It is likely that in the coming years non-payment of these loans or guarantees might materialize as liabilities for the sovereigns states.

    Rising inflation (expectations)

    The recovering economic growth and optimistic growth outlook in AEs increase pressure on prices in a number of ways, potentially leading to higher inflation. This extensive report dives deeper into drivers for inflation and potential scenarios. Here we give only a brief description of some main drivers of current inflation expectations: Firstly, the restrictions of the pandemic are fading, leading to higher private consumption and consumer confidence which increases demand and puts pressure on prices. Secondly, global commodities prices are surging (Figure 4) which increases input costs for manufacturers and potentially pushes costs down the supply chain, leading to higher prices. Thirdly, most central banks have an ultra-accommodative stance: this means low interest rates and low borrowing costs, leading to increased investments and potentially an increase in prices (for example, housing prices). Finally, fiscal stimulus by governments is very large (as explained in this publication), which also has the potential to increase inflation.

    Reaction of central banks

    All of these factors push up inflation expectations. Recently, we have already seen the first examples in the US and UK, where inflation figures were higher than expected. Many central banks explain the rise in inflation as “transitory”, but the voices questioning the length of the period of higher inflation are getting louder. These developments cause us to wonder: what are central banks going to do? The question is particularly relevant for the Fed, as any material policy decisions related to inflation, which accelerated again in June, and a more hawkish stance by the Fed will potentially have direct consequences for the financial stability of EMs.

    The last time the Fed started tapering had dramatic consequences for many EMs, known as the “taper tantrum” back in 2013. One of the main reasons for the sudden collapse of EM currencies was that the tapering came somewhat unexpectedly. Therefore the Fed tries to be as predictable as possible in order to prevent such shocks going forward. For this reason, Fed chair Powell speaks about an advanced notice, which will signal any changes in policy before announcing a decision on a change in asset purchases. So how far away are we from an advanced notice?

    As we explain in our comments on the FOMC, the minutes from June highlight that the rise in inflation was higher than anticipated and a substantial majority of the participants think inflation risk is towards the upside. Furthermore, various participants expect the conditions to start reducing the pace of asset purchases (tapering) somewhat earlier than they expected previously. The median FOMC participant now expects two rate hikes of 25bps in 2023 instead of zero last March. Meanwhile, the discussion on tapering has started and Powell’s advance notice could come as soon as the Jackson Hole symposium in late August or the FOMC meeting in September.
    How vulnerable are EMs to any tightening of monetary policy at this time? Especially taking into account the asymmetry in the pandemic and divergence in economic recovery as described above.

    Risks for emerging markets

    Explosive cocktail in the making

    Tightening monetary policy in the US generally pushes up US yields and may also strengthen the USD verses EM currencies. This can potentially reverse some of the international capital flows which have been flowing towards EMs in the past year as a spill-over effect of the ultra-loose fiscal and monetary policy by advanced economies (Figure 5). These spill-over effects strengthened emerging market  currencies over  the last year, pushing them close to the highest level in a decade (Figure 6). The strength of the EM currencies, as a result of the capital inflows, helped EM governments in providing affordable financing to battle the consequences of the pandemic. However, there may be an explosive cocktail in store for vulnerable EMs due to the combination of weakening of domestic currencies vs. USD as a result of FED policy action, increased foreign currency debt levels as a result of Covid-19, high commodity prices (including oil), and faltering domestic recovery as a result of new waves of Covid-19.

    The ‘EM Vulnerability Heatmap’ as presented in Table 1 provides an overview of many economic indicators which allow us to asses and compare the relative vulnerability of EMs. In the next section we dive deeper into five indicators that could be valuable in order to assess a  country’s vulnerability.

    Public debt levels have increased across the board

    Governments have increased expenditures as a reaction to the negative economic consequences of the pandemic, resulting in higher debt levels (as a % of GDP) in many countries (Figure 7). Especially Colombia, India and South Africa show large increases in public debt over the past year.

    However, by using a methodology developed by Mauro and Zilinsky (Figure 8) we are able to nuance the growth in public debt to GDP ratio. Interestingly, despite falling interest rates, the interest expenses of advanced economies have slightly increased due to massive increases in the gross debt level. Simultaneously, we observe that the interest expense in emerging economies is only a marginal effect of the increase in public debt, while the loss in economic growth accounts for a much more significant part of the increase in public debt to GDP ratio. What is even more striking is that economic growth had a greater impact on the increase in debt to GDP ratio than fiscal policy measures in EMs. Figure 8 demonstrates that economic growth plays a much bigger role in emerging markets and low-income developing economies. In other words, economic growth rates are very important with regard to managing sustainable public debt levels. As already mentioned above, this is precisely what might work against EMs in 2021 as long as vaccination programs are slow to develop and the spread of the virus continues to drag on the economy.

    Nonetheless, while total public debt levels provide valuable information on the fiscal state of a country, there are other metrics which are well suited to explain EMs’ vulnerability. Debt levels are not always directly affected by any of the exogenous factors we discussed above (like increasing US interest rates). Therefore, a better indicator to gauge vulnerability would be the part of the total debt which is denominated in a foreign currency. : If the USD (or other foreign currency) were to strengthen versus the domestic currency this could have severe implications for the sustainability of EM debt levels Why? As the domestic currency depreciates this essentially increases the debt level in domestic currency. This implies that the higher your foreign currency denominated debt level is, the more vulnerable your fiscal position with regard to a depreciating currency.

    Moreover, a country can only service its foreign currency debt by reducing its currency reserves and/or earning enough currency in foreign trade. So apart from holding external FX reserves and international assets, a positive current account balance is crucial for these countries. On the other hand, a deficit here increases their financial troubles. We will look at the current account in more detail in the next section. Figure 9 shows that the governments of countries on the left-hand side like Argentina, Turkey and Colombia are relatively vulnerable in terms of foreign currency debt. China, Thailand and India have less foreign currency debt , making them less vulnerable to exogenous shocks that affect the price of the domestic currency.

    Trade positions have shifted due to the pandemic

    The pandemic hit countries in an asymmetric fashion as a result of diverse characteristics of domestic economies. This has also undoubtedly been the case with regard to trade. There have been swings in the current account of many emerging countries, in a positive sense for some and negative for others. A few developments that were aa direct consequence of the pandemic impacted the current account over the course of last year. Firstly, increased demand for medical goods meant that exporters of health-related products or inputs saw a dramatic rise in demand for their products. Secondly, at the same time, due to lockdowns in advanced economies people were unable to spend their money on services and therefore private expenditures shifted partly towards purchasing goods. This higher demand for goods from AE’s increased exports of products for emerging markets that produce these goods. Thirdly, over the course of the year commodity prices started to increase (Figure 4): this was due to a more positive economic growth outlook that increased demand and benefitted commodity exporters but negatively impacted commodity importers. Finally, domestic import of products and services collapsed in many EMs as a result of lower domestic consumption during the crisis, thereby increasing the current account. Figure 10 illustrates and compares the differences in current accounts of EMs from Q2 2020 to Q2 2021.

    The recent developments pose certain risks to the current account going forward. Firstly, as the coronavirus slowly fades, consumers in AEs might substitute the expenditures on goods back to services, which decreases the exports of EMs over time, shifting back to pre-corona levels. The second is that the de-globalisation trend will continue going forward and re-shoring will move some export products from EMs towards AEs. As explained earlier, a current account surplus makes it easier for countries to service their foreign currency debt. However, if one of the above scenarios materializes this might negatively impact the current account, leaving some EMs with current account deficits. In such a scenario the export cover is a factor that could limit the domestic FX currency risks. In Figure 11 we show how many months of imports can be covered by the FX reserves of the country. We observe that countries on the left-hand side, like Brazil, Russia and China, have many FX reserves, mitigating the risks of a depreciating currency. In contrast countries like Mexico, Hungary and Turkey are more vulnerable to FX shocks.

    Interest rate costs

    Nominal and real rates of EMs have steadily decreased over the past year partly as a result of the pandemic. But it is likely that 2021/22 will see a rise in interest rates across the emerging markets. This can be clearly seen with Brazil which is poised to hike its Selic rate by year-end to levels seen before the pandemic, but it has also been the case for other EMs like Russia and Chile. Anticipation of a US normalization of monetary policy might add pressures for central banks to hike sooner across the board.

    To give a more nuanced picture we have captured the real short-term interest rates (ex-post) in Figure 12. These are negative for five out of the seven countries in consideration (nominal rate adjusted for inflation) in 2021. Countries are using this as an opportunity to increase short-term borrowing instead of longer-term borrowing. This has been observed across both AEs and EMs. The strategy is to roll over short-term debts in the current “higher” inflation environment and wait for the market uncertainty to settle before converting it to long-term debt. Some countries like China and Mexico are relying on recovering revenues to pay back this debt, while others, like India, are also looking at privatization of public sector entities for the required cash.

    However, emerging markets will probably not be benefitting from negative real interest rates forever. Figure 12 already illustrates that nominal and real interest rates have started to climb in some countries over the course of 2021. So while the public debt figures kept climbing, the pandemic (or rather the related fiscal and monetary measures) temporarily reduced the cost of financing for most countries. Nevertheless, there is an increasing likelihood of higher interest rates on the back of inflation expectations and subsequent rate hikes by central banks. Higher interest rates will probably lead to higher interest rate costs for EMs, posing a threat to debt sustainability going forward.

    Having discussed some important indicators to monitor with regard to emerging market vulnerability, the question is: how do all of these factors add up?

    The final ranking

    Table 1 summarizes the main factors determining EM vulnerability according to the indicators included in our Heatmap. In Table 2 we have added them up to get a general sense of which countries can be deemed more vulnerable with regard to the indicators included. In general we see that LatAm countries are relatively vulnerable compared to their peers. Asian countries are relatively less vulnerable, although the Philippines, Malaysia and Indonesia are increasingly vulnerable and rank lower compared to six months ago. The same holds for South Korea, although it is still close to the top of the chart. European countries are now better ranked than 6 months ago although their individual scores did not improve so much.

    In conclusion, we hope that the use of the Heatmap and accompanying economic indicators has helped to sketch a clear picture of potential risks and vulnerabilities of EMs. Naturally, they help to indicate risks and compare the relative vulnerabilities of EMs. However, keep in mind that these are based on current economic indicators and are therefore an illustration of the current situation and vulnerability. They do not include any forecasts or have the intention to rank future economic performance of the countries included.

    Tyler Durden
    Sun, 07/25/2021 – 23:00

  • Crypto Soars Higher In Early Asia Trading, Bitcoin Nears $40k
    Crypto Soars Higher In Early Asia Trading, Bitcoin Nears $40k

    As Asian investors woke this morning, crypto markets have roared higher…

    Source: Bloomberg

    That is jump of over 30% from the below-$30k lows ahead of last week’s much anticipated “B-Word” conference with Elon Musk and Jack Dorsey…

    Source: Bloomberg

    This is the biggest jump since early May and second biggest since February.

    The catalyst for the move remains uncertain but we note that Bitcoin broke above its 50DMA and is testing up towards its 100DMA…

    Source: Bloomberg

    Others suggested it is pre-emptive buying ahead of TSLA’s earnings this week, anticipating a pro-crypto message.

    Still more pointed out the headlines around Amazon ramping up its crypto team and hopes for more widespread adoption could be a driver.

    CoinTelegraph reports that an anonymous source within Amazon has reportedly told London business newspaper City A.M. that the e-commerce giant is planning to accept Bitcoin (BTC) payments by the end of 2021, possibly setting the stage for broader mainstream acceptance of crypto transactions. 

    “This isn’t just going through the motions to set up cryptocurrency payment solutions at some point in the future – this is a full-on, well-discussed, integral part of the future mechanism of how Amazon will work,” the anonymous source told City A.M., according to a report published on Sunday

    She indicated that, while Bitcoin is the first step in Amazon’s crypto ambitions, executives at the company were keen to add other established cryptocurrencies in the future.

    The “directive is coming from the very top,” referring to Jeff Bezos, she said, adding:

    “This entire project is pretty much ready to roll.”

    Finally, we note that Japanese markets were closed Thursday/Friday for the Olympics and so this morning represents a reopening of liquidity from those markets.

    Bitcoin was not alone with Ethereum spiking above $2300…

    Source: Bloomberg

    Is The Fed’s recent rebound in its balance sheet signaling time to rotate back into bubble markets?

    Source: Bloomberg

    Get back to work Mr.Powell.

    Tyler Durden
    Sun, 07/25/2021 – 22:29

  • Typhoon In-Fa Hits China's East Coast, Forcing Container Ports To Close 
    Typhoon In-Fa Hits China’s East Coast, Forcing Container Ports To Close 

    Typhoon In-Fa made landfall in eastern China with high wind and torrential rains as other parts of the country were cleaning up from last week’s historic flooding.

    In-Fa came ashore Sunday on China’s east coast south of Shanghai. Hundreds of thousands of people were evacuated, airline flights and trains were canceled, seaports were shuttered, and the public was advised to remain indoors. 

    The national weather agency said the typhoon made landfall in Zhoushan in Zhejiang province and is expected to dump 10-14 inches. 

    On Saturday, Yangshan Port in Shanghai moved containerships and secured containers on land ahead of the storm. Yangshan Port is a deep-water port and one of the most active in China. The disruption throws another wrench in global supply chains that are already under stress. 

    Melinda Liu, Beijing bureau chief for Newsweek, said, “the problem with this typhoon is not only that it is wreaking economic havoc in some key parts in China but also that it comes at a very delicate time.”

    “It, first of all, comes just a few days after massive flooding in central China, which has disrupted lives of a million people and killed dozens. Not just killed people but also created images that went viral on social media, some very graphic pictures of people who apparently drowned in a subway system,” she said.

    “But there is also a political significance, and the point of that is probably going to play out in the coming months.”

    “There is a possibility that … if the handling of the preparedness is not up to par, then the government might be blamed.”

    Videos posted on social media show the dark sky over Shanghai’s skyscrapers. 

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

    As the storm came ashore, 60 mph winds ripped through city streets. 

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

    At least 360,000 people were evacuated. Here’s another video of damaging winds.

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

    Meanwhile, Tropical Storm Nepartak is in the Philippine Sea and barreling towards Japan as the Olympic Games begin. 

    Tyler Durden
    Sun, 07/25/2021 – 22:00

  • Time To Buy Gold As A Hedge Against "Extreme Financial Deleveraging" Credit Suisse Says
    Time To Buy Gold As A Hedge Against “Extreme Financial Deleveraging” Credit Suisse Says

    It’s been a while since Wall Street banks recommended anything to do with either gold or gold stocks, but in a surprising reversal, last week one of Wall Street’s biggest bulls Credit Suisse said that the time has come to use gold stocks as a risk off diversifier, while seeing material upside for the precious metal.

    Here is why CS’ global equity strategist Andrew Garthwaite, believes that it is now time to buy gold:

    • First, according to Garthwaite, the valuation of gold stocks is abnormally cheap on both P/E – trading at a 25% discount to the broader market vs a 30% premium normally, and also cheap on a price-to-book basis relative to the market

    • Looking at individual stocks, Credit Suisse writes that its “outperform”-rated stocks which screen cheap and have positive earnings revisions are: Newcrest Mining, Newmont, Endeavour Mining, Perseus, Regis Resources, St Barbara, Agnico Eagle Mines, Barrick Gold, Kinross Gold, Yamana Gold

    As for the metal itself, the Swiss bank notes that gold is also at the bottom end of its 10-year range against silver or industrial commodities and 20% below its 2011 peak in real terms.

    According to the Credit Suisse model, the price of gold is driven by the TIPS yield and the dollar. Why does this matters?

    Recently, the gold price has lagged the fall in TIPS yield (should be 5% higher). Looking at TIPS yields, Garthwaite sees little change; the more investors fear an inflation tail risk as they do on the UoM or FOMC data, the more they will likely want to buy inflation protection and the more expensive the TIPS yield becomes.

    As for the dollar, CS remains structural bears. The last time the European current account surplus was this high against the dollar, the euro was 30% higher. Meanwhile, the US current account deficit is not improving with US net debt now at 70% of GDP (anything above 50% according to the IMF, could cause a currency crisis) and globally the world is overweight dollars (60% of FX reserves and 25% of GDP). Speculative positions are at one-year highs.

    Combining the two signals, the bank’s model suggests 7% upside potential to the gold price.

    But while gold may be undervalued in strictly fundamental terms, there is always a risk that central banks will lose control and markets will crash. Gold fixes this, because as Garthwaite writes, “Gold is a hedge against extreme financial deleveraging” and adds:

    The level of government debt, deficit and corporate debt is extreme. We continue to believe that if the TIPS yield gets much above zero, that would start to cause the markets to worry about a debt trap and that in turn could lead to a major risk-off trade. This could then prompt a Fed response driving down real yields (and debasing money).

    Additionally, gold is also a hedge against the explosive global money supply:

    We think this will also cause central banks to buy more gold (as currencies are being debased). Central banks account for 12% of gold demand. If all central banks had a minimum of 10% in gold, then gold demand would increase 1.6x, on our calculations.

    What about crypto? If bitcoin is digital gold, is gold then the physical bitcoin? Well, not really: according to Credit Suisse, the disintermediation risk from cryptocurrencies appears to have decreased.

    Digging deeper into this, Credit Suisse sees that following constraints on the ability of cryptos to disintermediate gold:

     

    Finally, gold’s technicals also hint at a potential upside breakout, with speculative positions neutral, while gold is trading close to its six-month MA.

    Of course, none of this matters as long as the BIS strategically lends out paper gold to its member banks who have a net deficit in the thousands of tons, and tactically decides to slam the bid every time there is an even modest breakout to make sure that golden animal spirits never emerge.

    Tyler Durden
    Sun, 07/25/2021 – 21:00

  • Why Did China Buy An Airstrip In Texas?
    Why Did China Buy An Airstrip In Texas?

    Authored by Aden Tate via The Organic Prepper blog,

    Should nations let their enemies purchase land within their own borders? You’d likely give a resounding ‘no’ to this question, correct? 

    And yet, a former Chinese general with alleged ties to Chinese concentration camps recently bought an airstrip in Texas. And this isn’t just some random ranch in the middle of nowhere. It is 200 square miles (130,000 acres) of land between one of the most active Air Force bases in the U.S. and the border of Mexico.

    As the world is being fear-mongered about “variants,” this is happening right under American noses. 

    Who is Sun Guangxin?

    Sun Guangxin is a former General of the People’s Liberation Army in China. He owns two-thirds of real estate where the Uyghur concentration camps are located in the capital of Xinjiang. 

    Russia had The Gulag. China has the LAOGAI.

    The terrors that take place within the LAOGAI system can be seen and read about on the LAOGAI Research website. The pictures and nightmarish stories within will show you the brutal truth about socialism/communism. 

    Why Did Guangxin Purchase Land in the U.S.? 

    The former Chinese General purchased the land to allegedly build wind farms. The name of the property purchased by the Chinese firm is called the Morning Star Ranch.

    Sun Guangxin, who has close ties to the Chinese Communist Party, purchased the land allegedly to build wind farms, Kyle Bass, founder, and principal of Hayman Capital Management and a founding member of the Committee on the Present Danger: China, told Epoch T.V. in a recent interview.

    The wind farm project, known as the Blue Hills Wind development, is being managed by G.H. America Energy, the U.S. subsidiary of Sun Guangxin’s Guanghua Energy Company. [source]

    Should We Be Concerned About the Morning Star Ranch?

    Well. Perhaps, yes. 

    “You’ve got a former People’s Liberation Army general billionaire who has bought over 130,000 acres of Texan land, including a giant wind farm in an area where there isn’t particularly a lot of wind but happens to be right beside a very sensitive U.S. military installation,” Bass said.[source]

    And the Morning Star Ranch has its own airfield. We’re not talking about just some cruddy dirt airstrip for a Cessna, either. We’re talking about a well-maintained, paved runway that’s somewhere in the ballpark of 4000-5000 feet. Current reports indicate that the former General may have expanded to 10,000 feet. The airfield is listed as permanently closed by the FAA (its call sign is TA81), yet it appears to be well-maintained. 

    Who Wants a (Reportedly) 10,000-Foot Long Airway in the Middle of Nowhere, Texas?

    Or, perhaps a better question: WHY would anyone want an airway of this size in the middle of Nowhere, Texas? 

    Maybe to land a Chinese-130 or Chinese-130J clone? (This size runway could easily accommodate such an aircraft.)

    We’re talking about a remote ranch with excellent views in all directions. It has ready access to a nearby Air Force pilot training base. And it’s not too far from Mexico.

    Let’s Build a Wind Farm Where There’s No Wind!

    As I mentioned above, Guangxin allegedly purchased the airstrip to develop a wind farm on the premises. Interestingly, this region of Texas is not known for its high wind volume.

    “You’ve got a former People’s Liberation Army general billionaire who has bought over 130,000 acres of Texan land, including a giant wind farm in an area where there isn’t particularly a lot of wind but happens to be right beside a very sensitive U.S. military installation,” Bass said.

    …

    ” My view and this is my view only, not our country view yet, but my view is the reason that he bought the wind farm and wants to put up 700-foot turbines is he plugs directly into our electric grid.” [source]

    A report from news4santonio.com claims Texas lawmakers passed a bill stopping Guangxin from building the wind farm.

    Property owners and conservationists were the first to raise alarm about the wind farm, saying construction might harm the pristine Devil’s River. The also worry allowing a foreign company to connect to the Texas power grid would make it vulnerable.

    “There are foreign actors, as we’ve seen recently with the gas pipeline hack, that have ill intent for our country and our critical infrastructure,” said Julie Lewey with the Devil’s River Conservancy.

    Those concerns were amplified by China-watchers like Kyle Bass, who recently took a picture of an air strip on Sun’s ranch. Bass alleges Sun Guangxin is a former general with ties to the communist party, and his company should not be allowed access to the power grid.

    “When you’re able to plug directly in you’re able to map it, you’re also able to upload malware, you can do all kinds of horrible things to our grid,” Bass said. [source]

    And Now There are Strange Drone Sightings in the Region

    On February 9, 2021, an unknown drone was spotted surveilling the Kinder Morgan fuel tanks in the region around Davis-Monthan Air Force Base. 

    The drone, spotted accidentally, did not appear on any radar systems nearby, nor could it be seen with night vision technology. It seems as if this is some form of highly modified ‘stealth’ drone. The presence of a single, green LED light is the only reason the drone was spotted. 

    The drone, described as a quad-copter, is roughly 5′ in length and 3′ in width. Two helicopters were sent out to follow it: one by the CBP and the other by the Tucson police department. The drone outran and outmaneuvered them both.

    As the helicopters chased after the drone, the drone accelerated and ascended until it disappeared into the cloud cover at 14,000′. At that point, the search ended as the drone could no longer be found. 

    Who Has That Kind of Technology? 

    Who has the technology necessary to create a drone with zero radar signature, is invisible to night vision, can outrun two helicopters, and can ascend to 14,000 feet? That’s an incredible display of technology!

    We know that China has invested heavily in drones of late, as referenced in our recent post on drone swarms. Chief of these drones would be the Y-8, an electronic warfare drone, and the GJ-11, aka the ‘Sharp Sword.’ The GJ-11 was unveiled in October 2019 and is a hypersonic stealth drone.

    Given all the other Chinese involvement in the region, it seems logical that these are Chinese drones.

    What Conclusions Can We Draw?

    So we have a former Chinese general purchasing an airstrip in Texas. He expanded the airstrip. He allegedly bought the land to build a wind farm in an area that is not known for its wind. Multiple Chinese real estate investments have hit the surrounding region. And now, there are highly advanced drones being spotted in the region.

    Something else to consider, as noted in a recent article by Robert Wheeler, part of China’s strategy to become the world’s superpower is to buy up Western businesses.

    Are Chinese troops conducting surveillance of Texas and the surrounding regions? Are they prepping the ability to launch drones throughout this part of America? What possible reasons could there be for their desire to tie into the American power grid here?  

    What do you think the motive might be? Is it entirely innocent? What are your thoughts? Let us know in the comments.

    We’ll leave that up to the reader to decide. As for me, I believe that the reasoning is pretty straightforward: the Chinese want American soil.

    Tyler Durden
    Sun, 07/25/2021 – 20:30

  • Move Over COVID: A Drug Resistant Super Bug Fungus Is Now Being Reported In Texas And Washington D.C.
    Move Over COVID: A Drug Resistant Super Bug Fungus Is Now Being Reported In Texas And Washington D.C.

    Just when you thought things couldn’t get any better on the global health landscape, along comes one of those pesky drug-resistant superbug fungi.

    An outbreak of such a “superbug” has spread among patients in hospitals and long-term care facilities in Texas and Washington, D.C., according to CBS News. The 30 day mortality rate for the outbreaks, combined, was 30% the report said.

    The Centers for Disease Control and Prevention said late last week that the Candida auris fungus preys on people with weak immune systems and that cases were the result of person-to-person transmission.

    The cases in Texas and Washington, D.C. appear to be unrelated to one another. 

    Candida auris was first discovered in 2013 and is “resistant to multiple anti-fungal drugs that we have, and it’s also resistant to all the things that we use to eradicate bacteria and fungal strains in the hospital,” according to internal medicine specialist Dr. Neeta Ogden.

    101 cases have been identified in Washington D.C. between January and April 2021. Three cases “were isolated as being resistant to all three major classes of anti-fungal medications”, CBS reported.

    In Texas, 22 cases were identified over the same period, with two cases “being resistant to all three anti-fungal medications, and five resistant to two of the medications”.

    Dr. Meghan Lyman of the CDC said: “This is really the first time we’ve started seeing clustering of resistance.”

    People with breathing tubes, feeding tubes or central venous catheters appear to be the most at risk to catch the superbug, the CDC said. The superbug has been reported in hospitals and long-term care facilities around the world.

    The CDC report concluded: “Surveillance, public health reporting, and infection control measures are critical to containing further spread.”

    There’s been no word on whether or not locking down the entire country and economy, along with double, triple and quadruple masking, are options. We’ll wait to hear from Dr. Fauci on that.

    Tyler Durden
    Sun, 07/25/2021 – 20:00

  • Trans Individuals Sue Montana Over Proof-Of-Sex-Change Requirement To Amend Birth Certificates
    Trans Individuals Sue Montana Over Proof-Of-Sex-Change Requirement To Amend Birth Certificates

    Authored by Matthew Vadum via The Epoch Times,

    Two Montanans who claim to be transgender filed a lawsuit against the state over a law that requires those wishing to change their sex on birth certificates to prove that they’ve had sex reassignment surgery.

    The measure, known as Senate Bill 280, signed in April by Gov. Greg Gianforte, a Republican, provides that the sex designation on a birth certificate may be altered only if the Montana Department of Public Health and Human Services has first received a certified copy of a court order indicating that the sex of the individual born in Montana had been changed by surgical procedure.

    State Sen. Carl Glimm, who introduced the bill, said in March he believes a birth certificate is “an item in fact” that should record reality.

    “When a person is born, you record where they’re born, you record their weight, you record their sex. And that’s important information to document,” the Republican lawmaker said, according to local media.

    The lawsuit, known as Marquez v. State of Montana, was filed July 16 as case number DV21-00873 in the 13th Judicial District Court in the state court system.

    According to the legal complaint, the plaintiffs are Amelia Marquez, a man who identifies as a woman, and John Doe, a woman who identifies as a man. Marquez and Doe wish to “correct” their respective Montana birth certificates, which they claim no longer reflect reality.

    Both plaintiffs have taken hormone therapy, and Doe has “completed masculinizing chest reconstruction surgery.” Both have no desire to undergo more surgery.

    The American Civil Liberties Union (ACLU), which is representing the plaintiffs, argues the statute in question violates their constitutional rights to privacy, equal protection of the law, and due process, according to a statement. Having a birth certificate that doesn’t match a person’s gender identity puts that individual at greater risk of harassment, hostility, and discrimination, the group stated.

    “I would like to change the sex designation on my birth certificate to match my female gender identity, but am unable to do so because of the Act,” Marquez said.

    “My inability to obtain a birth certificate that accurately reflects my female gender identity is a painful and stigmatizing reminder of the State of Montana’s refusal to recognize me as a woman. Further, denying me an accurate birth certificate places me at risk of embarrassment or even violence every time I am required to present my birth certificate, because it incorrectly identifies me as male.”

    According to the 2015 U.S. Transgender Survey, only 25 percent of transgender people in America reported having undergone some form of transition-related surgery. As a result, advocates say laws requiring surgery make it impossible for most of these people to change their gender on birth certificates or driver’s licenses.

    A lack of linguistic clarity has clouded the issue in recent years as the concepts of sex and sexual identity, or gender—a politically and scientifically contentious concept whose definition isn’t universally agreed upon—have become difficult to separate. Despite the distinct meanings of the two words, many institutions and individuals use “gender” to mean biological sex, especially on fillable forms and documents.

    “A person’s sex designation is determined by the gender identity, not their sex assigned at birth or their anatomy,” the complaint claims.

    “Gender-affirming surgery, even for those transgender people who have a medical need for it, does not ‘change’ their sex, but rather affirms it.”

    “By embracing the Act, the State of Montana has imposed a draconian medical requirement on transgender people that has no medical or other rational justification. It reinstates an archaic understanding of transgender people and ignores modern medical treatment guidelines.”

    Former transgender activist James Shupe told The Epoch Times via email that the lawsuit is nonsensical because the idea that one can change one’s sex is a “legal and medical fiction.”

    “So a penis of a male that’s been flipped inside out or otherwise reconstructed by a surgical procedure to resemble a vagina is still made of up cells that are male,” Shupe said.

    “Likewise, tissue removed from the arm of a female to construct a fake penis is still composed of cells that are female. No sex change has taken place. It’s legal and medical fiction. When the police find an unrecognizable body on the side of the road, they don’t use gender identity, a person’s belief about themself, to determine the sex of that corpse. Nor do archeologists.”

    Shupe, after serving as an icon of transgender activism, denounced the movement and the idea that one can change one’s sex as a fraud. Shupe was the first individual in Oregon to receive legal recognition for his “non-binary” sex designation, only to ask to have the status rescinded and his male sex designation restored on his birth certificate after his epiphany.

    Tyler Durden
    Sun, 07/25/2021 – 19:30

  • The Role Of Impaired Liquidity On The Recent Treasury Market Rollercoaster
    The Role Of Impaired Liquidity On The Recent Treasury Market Rollercoaster

    Two weeks ago, on July 8 we summarized what Wall Street thought were the main reasons behind the sudden volatility observed in 10Y yields, when over the span of a few weeks, benchmark Treasury rates plunged from 1.70% to 1.30%, covering everything from fundamentals worries to technical positioning. However considering that just as volatile moves observed since then…

    … one wonders if there isn’t a more basic, if ominous, reason behind the roller coaster observed in what once was the world’s deepest and most liquid market: lack of liquidity.

    That’s the conclusion reached by JPMorgan quant Nick Panigirtzoglou, who writes that given the recent market moves, particularly in bond markets, it has raised the question of whether liquidity conditions have played an amplifying role. Reminding readers of the violent moves in rates earlier in the year, when following the catastrophic February 7Y auction the bond market suffered a historic breakdown and when a deterioration in market liquidity undoubtedly contributed to the bond market sell-off, the JPM strategist asks whether something similar could have exacerbated market moves more recently?

    His answer is a decisive yes, and after pointing out the sharp decline in equity vol in recent weeks, something we highlighted last week when we showed the sudden drop (and subsequent rebound) in e-mini top of book depth liquidity…

    … Panigirtzoglou goes on to observe bond market liquidity and notes that after the bond market had recovered its early 2021 liquidity deterioration by mid-May, it has since deteriorated again to levels closer to the late February lows. By contrast, market depth in 10y Bund futures appears little changed (figure 5). Furthermore, JPM’s metric for market breadth, or the price impact of trading volumes, for 10y UST futures is also consistent with a deterioration in liquidity conditions to levels earlier in the year (Figure 6).

    In other words, in contrast to equities where liquidity conditions show little sign of deterioration, in UST markets a deterioration in liquidity conditions has likely amplified market moves.

    Finding no similar contraction in liquidity in commodities or credit, the JPM strategist concludes that “the deterioration in liquidity conditions in markets appears to have been mainly concentrated in UST markets and has very likely exacerbated the magnitude of those moves.” In equities, the deterioration in liquidity conditions appears relatively modest for US equities, though there is some evidence of deterioration in non-US markets.

    Of course, declining liquidity merely means that every sizable trade will have a far greater impact than otherwise, and in a world where momentum, trend-following managers and CTAs in general dominate (as most carbon-based traders are out on vacation), it pays to take a look at how CTAs are positioned. Well, according to JPMorgan, when 10y TSYs reached intra-day lows of around 1.13% on Tuesday, a move exacerbated by the deterioration in liquidity conditions noted above, some of these short-term overbought CTA signals have likely triggered mean reversion or profit taking.

    And while Panigirtzoglou concedes that the longer-term signals are still some way from being triggered, but similar to signalling the oversold levels in March it is likely that shorter-term signals have a greater weight in the current conjuncture.

    In other words, the CTAs are now done buying Treasurys and if anything, will seek to sell to book profits, and – eventually – short outright.

    Tyler Durden
    Sun, 07/25/2021 – 19:00

  • Chicago Chamber Of Commerce Rages As Average Unemployed Illinoisan Parent Earns $35/Hour Sitting On The Couch
    Chicago Chamber Of Commerce Rages As Average Unemployed Illinoisan Parent Earns $35/Hour Sitting On The Couch

    Authored by Noah Sheer via IllinoisPolicy.org,

    Illinois employers are hurting from a lack of workers while the state unemployment rate remains high. When a parent can stay home and make $51,627 on unemployment, the prospects of getting more workers back to work this summer appear dim.

    Illinois’ unemployment rate rose to 7.2% July 15, the 8th worst in the nation, at the same time employers are having trouble filling job vacancies.

    The average Illinoisan earns $55,770 a year at work. If that person stayed home with their kids and collected unemployment, it would be $51,627.

    For a parent earning around the state average, that’s $4,000 less for deciding not to work, and with no child care or transportation expenses.

    Crunch the numbers another way and add federal stimulus, and the Chicagoland Chamber of Commerce calculated an unemployed worker receives $35 an hour.

    “In Illinois alone, there are tens of thousands of unfilled jobs. Employers are offering substantially higher wages, employment bonuses and taking other steps to encourage people to return to work,” the chamber wrote in an open letter to Gov. J.B. Pritzker.

    “The problem is employers cannot compete with the approximate $35 per hour unemployed workers have received over the last four months as a result of enhanced UI benefits, tax credits, and stimulus payments.”

    Illinois’ 7.2% unemployment rate exceeds the national average of 5.9%. Government policies are not helping reduce it.

    Unemployed Illinoisans before the COVID-19 pandemic were required to upload a resume on IllinoisJobLink.com, a state-run job bank. The state rescinded the requirement for those unemployed by the pandemic. Currently, employers have posted over 120,000 jobs on the state jobs site; residents have only posted 37,834 resumes.

    This month, Washington joined a growing list of states to require unemployment recipients to search for a job. Illinois will not be joining them.

    “I don’t want to pull the rug out from under people that have certainly legitimate reasons for remaining on unemployment,” Pritzker said when asked about the reform.

    He also promised to keep paying the extra $300 in federal pandemic unemployment relief through the federal expirationdate of Sept. 6. Over half of states are already putting an early stop to the additional $300 over concerns it is incentivizing people to stay unemployed.

    Pritzker’s solution has been to ponder paying people bonuses for returning to work. The program has been used in Arizona, Montana, New Hampshire and Oklahoma and replaces extended benefits with a $1,000 bonus received upon return to work. Even with the bonuses, recipients will still have trouble making more by working than by staying home.

    Maximum unemployment benefits – which are set based on the average wage of a person paying into unemployment – are currently $805 per week for single, childless Illinoisans. That is $505 from the state and $300 from federal Pandemic Emergency Unemployment Compensation funds. Because lower wage individuals are more likely to collect unemployment benefits, average unemployment payouts are lower than what the average worker would make on unemployment. Across all recipients, the average benefit paid out was $364.76 as of May 2021 plus the additional $300.

    A recipient with a child can receive up to $993 in weekly benefits. The state gives a maximum of $693 to individuals with children, regardless of how many children, plus the $300 from the federal government. Parents as of July were also eligible to receive their child tax credit monthly, which has also been increased per child and per month.

    So go to work, average $55,770 and pay for child care, transportation and taxes. Stay home, save the expenses, collect tax breaks and get up to $51,627.

    It would be nice if Illinois didn’t leave people questioning their work ethic.

    Tyler Durden
    Sun, 07/25/2021 – 18:30

  • Watch: RINO AZ Senator Who Voted Against Election Integrity Bill Booed Off Stage
    Watch: RINO AZ Senator Who Voted Against Election Integrity Bill Booed Off Stage

    Republican Arizona State Sen. Michelle Ugenti-Rita was booed off the stage at a rally which former President Trump was set to appear.

    Ugenti-Rita, who notably voted against a GOP-backed measure that would remove tens of thousands of voters from the state’s early ballot mailing list, was met with a chorus of boos while speaking at the “Protect Our Elections” rally hosted by TPUSA in Phoenix on Saturday.

    “Why don’t you listen to what I have to say?” asked Ugenti-Rita, adding “Listen. Fine, OK… I am running to be your next Secretary of State. I’m going to win the primary. Thank you very much.”

    https://platform.twitter.com/widgets.jsIn addition to voting against the election integrity measure, Ugenti-Rita also no longer supports a months-long audit of the 2020 election in Maricopa County.

    “I won’t support bills that fail to strengthen our election system. The same holds true for the audit. I supported the audit, but I do not support the Trump audit any longer,” she said, adding “I wanted to review our election processes and see what, if anything, could be improved. Sadly, it’s now become clear that the audit has been botched.”

    Following her booing, Ugenti-Rita allegedly had a Gateway Pundit reporter handcuffed by police for ‘harassing’ her, then lashed out at Sen. Kelly Townsend for ‘encouraging him to break the law by committing trespassing by re-entering the building to continue to harass me.

    More from the National File’s Andrew White: 

    After Townsend expressed her outrage over how Ugenti-Rita had the police arrest a reporter, the reporter was ultimately released. “I think it’s concerning that someone on our side has such disregard for the Constitution that she would seek to have a journalist arrested because he dared ask her a question about me that angered her. I am glad we were able to resolve the issue and correct what could have been a great miscarriage of justice,” said Townsend.

    “As a veteran, I believe the only thing that is important right now is to get our elections secured. Americans, choose wisely in 2022, support those who support the audit. You will know who does, and who does not. Do not back down.” The Gateway Pundit explained what happened to their reporter at the behest of Ugenti-Rita:

    While on the phone with the Senator and simply walking to meet her outside of the event, police grabbed Conradson and used handcuffs to put him in the back of a police car.

    Conradson could hear police radios accusing him of being a member of the Proud Boys, a right-wing organization that the left has labeled as terrorists. Conradson has no affiliation with any political groups.

    The police said he was facing a misdemeanor and a fine of up to $900. This tyrant violated Conradson’s free press rights. State Senator Kelly Townsend raised hell when this happened which is most likely what led to Conradson’s release. The officers dropped Conradson off at his vehicle and said that he is permanently banned from the venue.

    *  *  *

    Needless to say, Midterms may be a bloodbath for RINOs trying to ‘take their party back.’

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

    Tyler Durden
    Sun, 07/25/2021 – 18:00

  • Weaponizing FARA? Trump Ally Barrack Released On Stunning $250 Million Bail
    Weaponizing FARA? Trump Ally Barrack Released On Stunning $250 Million Bail

    Authored by Andrea Widburg via AmericanThinker.com,

    There are so many things wrong with the story of Thomas Barrack that it’s hard to know where to begin.  

    Briefly, Biden’s DOJ charged Barrack, the man who chaired Trump’s inaugural fund, with illegal lobbying for the UAE.  Then, for the 74-year-old Barrack to get out of jail, a federal magistrate imposed a $250,000,000 bail on him, along with other serious restrictions on travel.  This is a travesty of justice and a clear threat to Trump allies, past, present, and future.

    As always, the Daily Mail has a good summary:

    Donald Trump‘s billionaire ally Thomas Barrack is being released on $250 million bond after being charged with illegally lobbying the Trump administration on behalf of the United Arab Emirates.

    The 74-year-old reached a deal with prosecutors on Friday that will see him released from custody while he awaits trial on charges of illegal lobbying.

    A federal magistrate judge in Los Angeles signed off on the conditions of the agreement, which will include surrendering his passport, complying with a curfew, and wearing an ankle bracelet with GPS monitoring.

    The agreement also calls for Barrack to put up a $250 million bond, secured by $5 million cash, which would be forfeited if he does not appear for court proceedings.

    Barrack, who chaired Trump’s inaugural fund in 2017 and founded the private equity firm Colony Capital, waived his right to appear in federal court.

    He will be arraigned in federal court in Brooklyn, New York on Monday. 

    There are several points to be made here, which I offer in no particular order:

    One: Before the Democrats weaponized it, few people had ever been prosecuted as unregistered foreign agents under the Foreign Agents Registration Act (FARA).  An article from 2010 reveals that the act was intended to sweep up foreign nationals:

    The major roll-up of 11 Russian spies-cum-suburbanites involves the relatively rare use of the criminal code that requires agents of foreign powers to register with the U.S. Justice Department – a provision that allows prosecution of covert foreign operatives working without diplomatic immunity.

    By 2010, when people were swept up under the act, they were working for hostile governments, as was the case with Robert Cabelly, a former State Department official under George H.W. Bush and Clinton who worked for Sudan, and Frank Duran, a Venezuelan national who worked for Hugo Chávez.

    By 2019, when the leftist Foreign Policy declared that the Act “is broken,” it also noted that its purpose, when enacted in 1938, was to combat fascist propaganda and that, since then, it was a “previously obscure piece of legislation.”  The same publication noted that it was Mueller who revitalized it to go after Trump allies.

    Just to remind you of the uneven application of this law, the DOJ, which has long been a leftist swamp, ignored it entirely when Tony Podesta represented a bank that was tied to Russian spying agencies.

    Two: Given that FARA was meant to protect against people sneakily representing enemies of the United States, it’s telling that, in Barrack’s case, the DOJ brought the charge against someone working with the United Arab Emirates.  The UAE not only has a friendly relationship with America but is also completely dedicated to the Abraham Accords with Israel.  It seems likely that the Biden administration is sending a “back off” message to anyone who gets too friendly with a nation the left wants to destroy.  Certainly, MSNBC wants everyone to understand that any Mideast nation friendly with Trump is a Biden enemy.

    Three: The trend across Democrat-run cities and states across America is to do away with bail.  After all, no one would expect a repeat violent offender, released without bail, to commit another violent crime or make a run for it.

    However, an elderly man with an ankle bracelet and a seized passport nevertheless must put up $250,000,000 in bail.  You don’t correct the age-old situation of having one law for the rich and one for the poor by relieving the poor of any obligations under the law and treating those rich people who aren’t political allies as if every one of them is Jack the Ripper.

    Four: What’s happening to Barrack has nothing to do with law or justice.  This represents the left’s continued persecution of anybody who worked with Donald Trump.  The clear intent is to make sure that everyone gets the message that, if Trump runs again, whether he wins or loses, those who work with him will be completely destroyed — not just shunned and barred from the “right” parties, but ground into dust.

    The peaceful, constitutional transition of power in America cannot include hunting down every ally of the previous administration and destroying those people.  But if it does — if that’s what the Democrats have set as the new standard — game theory says we win by doing this twice as hard (and on much better evidence) when Republicans gain power from the corrupt, feckless Democrats.

    Tyler Durden
    Sun, 07/25/2021 – 17:30

  • Why Is The CDC Quietly Abandoning The PCR Test For COVID?
    Why Is The CDC Quietly Abandoning The PCR Test For COVID?

    We have detailed (most recently here and here) the controversy surrounding America’s COVID “casedemic” and the misleading results of the PCR test and its amplification procedure in great detail over the past few months.

    As a reminder, “cycle thresholds” (Ct) are the level at which widely used polymerase chain reaction (PCR) test can detect a sample of the COVID-19 virus. The higher the number of cycles, the lower the amount of viral load in the sample; the lower the cycles, the more prevalent the virus was in the original sample.

    Numerous epidemiological experts have argued that cycle thresholds are an important metric by which patients, the public, and policymakers can make more informed decisions about how infectious and/or sick an individual with a positive COVID-19 test might be. However, as JustTheNews reports, health departments across the country are failing to collect that data.

    Here are a few headlines from those experts and scientific studies:

    1. Experts compiled three datasets with officials from the states of Massachusetts, New York and Nevada that conclude:“Up to 90% of the people who tested positive did not carry a virus.”

    2. The Wadworth Center, a New York State laboratory, analyzed the results of its July tests at the request of the NYT: 794 positive tests with a Ct of 40: “With a Ct threshold of 35, approximately half of these PCR tests would no longer be considered positive,” said the NYT. “And about 70% would no longer be considered positive with a Ct of 30! “

    3. An appeals court in Portugal has ruled that the PCR process is not a reliable test for Sars-Cov-2, and therefore any enforced quarantine based on those test results is unlawful.

    4. A new study from the Infectious Diseases Society of America, found that at 25 cycles of amplification, 70% of PCR test “positives” are not “cases” since the virus cannot be cultured, it’s dead. And by 35: 97% of the positives are non-clinical.

    5. PCR is not testing for disease, it’s testing for a specific RNA pattern and this is the key pivot. When you crank it up to 25, 70% of the positive results are not really “positives” in any clinical sense, since it cannot make you or anyone else sick

    So, in summary, with regard to our current “casedemic”, positive tests as they are counted today do not indicate a “case” of anything. They indicate that viral RNA was found in a nasal swab. It may be enough to make you sick, but according to the New York Times and their experts, probably won’t. And certainly not sufficient replication of the virus to make anyone else sick. But you will be sent home for ten days anyway, even if you never have a sniffle. And this is the number the media breathlessly reports… and is used to fearmonger mask mandates and lockdowns nationwide…

    In October we first exposed how PCR Tests have misled officials worldwide into insanely authoritative reactions.

    As PJMedia’s Stacey Lennox wrote, the “casedemic” is the elevated number of cases we see nationwide because of a flaw in the PCR test. The number of times the sample is amplified, also called the cycle threshold (Ct), is too high.

    It identifies people who do not have a viral load capable of making them ill or transmitting the disease to someone else as positive for COVID-19.

    The New York Times reported this flaw on August 29 and said that in the samples they reviewed from three states where labs use a Ct of 37-40, up to 90% of tests are essentially false positives. The experts in that article said a Ct of around 30 would be more appropriate for indicating that someone could be contagious – those for whom contact tracing would make sense.

    Just a few days earlier, the CDC had updated its guidelines to discourage testing for asymptomatic individuals. It can only be assumed that the rationale for this was that some honest bureaucrat figured out the testing was needlessly sensitive. He or she has probably been demoted.

    This change was preceded by a July update that discouraged retesting for recovered patients. The rationale for the update was that viral debris could be detected using the PCR test for 90 days after recovery. The same would be true for some period of time if an individual had an effective immune response and never got sick. Existing immunity from exposure to other coronaviruses has been well documented. These are many of your “asymptomatic” cases.

    However, due to political pressure and corporate media tantrums, the new guidance on testing was scrapped, and testing for asymptomatic individuals is now recommended again. Doctors do not receive the Ct information from the labs to make a diagnostic judgment. Neither the CDC nor the FDA has put out guidelines for an accurate Ct to diagnose a contagious illness accurately.

    Hence, our current “casedemic.” Positive tests as they are counted today do not indicate a “case” of anything. They indicate that viral RNA was found in a nasal swab. It may be enough to make you sick, but according to the New York Times and their experts, probably won’t. And certainly not sufficient replication of the virus to make anyone else sick. But you will be sent home for ten days anyway, even if you never have a sniffle. And this is the number the media breathlessly reports.

    A month later, Dr. Pascal Sacré, explained in great detail how all current propaganda on the COVID-19 pandemic is based on an assumption that is considered obvious, true and no longer questioned: Positive RT-PCR test means being sick with COVID.

    This assumption is misleading.  Very few people, including doctors, understand how a PCR test works.

    In mid-November, none other than he who should not be questioned – Dr. Anthony Fauci – admitted that the PCR Test’s high Ct is misleading:

    “What is now sort of evolving into a bit of a standard,” Fauci said, is that “if you get a cycle threshold of 35 or more … the chances of it being replication-confident are minuscule.”

    “It’s very frustrating for the patients as well as for the physicians,” he continued, when “somebody comes in, and they repeat their PCR, and it’s like [a] 37 cycle threshold, but you almost never can culture virus from a 37 threshold cycle.”

    So, I think if somebody does come in with 37, 38, even 36, you got to say, you know, it’s just dead nucleotides, period.”

    So, if anyone raises this discussion as a “conspiracy”, refer them to Dr.Fauci.

    In response to this and the actual “science”, Florida’s Department of Health (and signed off on by Florida’s Republican Governor Ron deSantis), decided that for the first time in the history of the pandemic, a state will require that all labs in the state report the critical “cycle threshold” level of every COVID-19 test they perform.

    Then, in January,  as Biden takes office, The FDA publicly admits it…

    The U.S. Food and Drug Administration (FDA) is alerting patients and health care providers of the risk of false results… with the Curative SARS-Cov-2 test.

    First Fauci, then WHO, and then FDA all admit there is malarkey in the PCR Tests, but have – until now, done nothing about it… allowing the daily fearmongering of soaring “cases” to enable their most twisted 1984-esque controls.

    All of which brings us to today’s announcement from The FDA, that it will be abandoning the PCR Test for COVID at the end of the year.

    Audience: Individuals Performing COVID-19 Testing

    Level: Laboratory Alert

    After December 31, 2021, CDC will withdraw the request to the U.S. Food and Drug Administration (FDA) for Emergency Use Authorization (EUA) of the CDC 2019-Novel Coronavirus (2019-nCoV) Real-Time RT-PCR Diagnostic Panel, the assay first introduced in February 2020 for detection of SARS-CoV-2 only. CDC is providing this advance notice for clinical laboratories to have adequate time to select and implement one of the many FDA-authorized alternatives.

    Visit the FDA website for a list of authorized COVID-19 diagnostic methods. For a summary of the performance of FDA-authorized molecular methods with an FDA reference panel, visit this page.

    In preparation for this change, CDC recommends clinical laboratories and testing sites that have been using the CDC 2019-nCoV RT-PCR assay select and begin their transition to another FDA-authorized COVID-19 test. CDC encourages laboratories to consider adoption of a multiplexed method that can facilitate detection and differentiation of SARS-CoV-2 and influenza viruses. Such assays can facilitate continued testing for both influenza and SARS-CoV-2 and can save both time and resources as we head into influenza season. Laboratories and testing sites should validate and verify their selected assay within their facility before beginning clinical testing.

    The question one is forced to ask is simple – as with everything else that happens in the Healthcare-Industrial-Complex – cui bono?

    Is another provider of testing about to be enrichened?

    Or is it even more sinister than standard crony capitalism? Given the traditional winter spike in ‘flu’ cases and the PCR-Test-driven “casedemic” we experienced into the election and through the start of the Biden administration, one could be forgiven for suggesting that the last thing an already weakened Democratic Party, desperate to cling to control in DC, would be a dramatic re-emergence of the “deadly” virus (driven by the numerous false positives of the PCR Test as described in detail above) ahead of the Midterms?

    Killing off the PCR Test would go a long way to “solving” the “casedemic” and offer Biden and his pals a positive talking point for voters.

    Tyler Durden
    Sun, 07/25/2021 – 17:00

  • America Has Lost The Trade War With China, And The Real Pain Has Yet To Begin
    America Has Lost The Trade War With China, And The Real Pain Has Yet To Begin

    Authored by Charles Hugh Smith via OfTwoMinds blog,

    Corporate America sacrificed national interests in service of greed, and so did the U.S. government.

    As we all know, the source of Corporate America’s unprecedented explosion in profits in the 21st century is the offshoring of manufacturing to China. If you doubt this, please study the chart below of corporate profits. Apologists claim many excuses in an attempt to evade the central role of offshoring production to China, but they all ring hollow: no, it wasn’t increasing productivity or automation or Federal Reserve magic, it was shipping production to China and other low-labor-cost nations.

    Whether we like to admit it or not–mostly not–the American economy is entirely dependent on manufacturing in China. America’s short-sighted obsession with increasing profits to fund buybacks and golden parachutes for corporate insiders and vast fortunes for financiers has led to a dangerous dependency that has handed China tremendous leverage, which China is now starting to make use of. (And why not? Wouldn’t the U.S. start using the same leverage if it could?)

    A long-time U.S. correspondent who prefers to remain anonymous for obvious reasons recently shared his experiences with parts shortages and price increases from previously reliable suppliers in China. Here is his account of the disruptive shift in the supply chain of essential parts from China to the U.S.

    China is laying siege to the USA by slowing down production and delivery of goods. It doesn’t take much to hang up US production, just one missing item can do it. So much stuff is sourced through China they can affect all supply chains. Semiconductors are just the canary–because the chains are so long and complex, and specialized materials are required, etc. But it is happening everywhere.

    I have a little manufacturing company and I am seeing this in supply lines. I sent an order to China for printed circuit boards (US prices are astronomical because of various factors). They don’t get back for a week, then they quote, then I send money, then they sit on it, then I call and they say they are having problems with some process… etc. But all the suppliers are like this, it is not an isolated incident. They are sandbagging.

    So just as in laying siege, the attackers have the food outside the castle and wait for the people inside to starve.

    As prices rise the Chinese manufacturers take bigger profits so the slowdown effects on that end are mitigated. For products they do not have a monopoly on, like PC boards, they slow down. for things like LCD displays and NFeB magnets, the items become unavailable (try buying magnets on Amazon).

    I have to say this is a brilliant idea on China’s part, and no one on this side has realized the situation yet. This plan is straight out of Sun-Tzu. implications? inflation and shortages will continue for a long time… maybe forever. The only long-term solution is repatriation of manufacturing to the US. But it is going to cause some serious hurt, vastly more than the sanctioning of Chinese tech companies.

    i just sent a request for quote for some radio chips I use to Alibaba. they are $1 each and there are many vendors. I sent notes to 2 vendors i used before and after 4 or 5 days got a ping back that my requests were cancelled. i wound up getting the parts–for 2x the price– from Hong Kong, which at the moment seems to be something of a channel to the mainland. But I expect they will close that leak pretty soon.

    I have long made the case that manufacturing, energy and food are all fundamentally national security issues. Those benefiting from “free trade” (there is no such thing, that’s just a handy PR cover) have sold the unwary the fraudulent notion that “everyone benefits” from globalization. Nothing could be further from reality. A handful of corporate insiders and financiers have benefited at the expense of everyone else.

    And now the chickens are coming home to roost. Essential parts and feedstocks become unavailable for all sorts of flimsy excuses, prices double, triple, then double again, and since we’ve allowed our entire economy to become dependent on a handful of sources for these essentials because that dependency maximized profits, then there are no alternatives.

    America has already lost the trade war, but the pain has yet to begin. Corporate America sacrificed national interests in service of greed, and so did the U.S. government. Now it’s too late, and all the good seats at the banquet of consequences have already been taken.

    *  *  *

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    Tyler Durden
    Sun, 07/25/2021 – 16:30

  • Previewing The Next Crisis: Spending Tumbles Among Households Cut Off From Unemployment Benefits
    Previewing The Next Crisis: Spending Tumbles Among Households Cut Off From Unemployment Benefits

    First, the good news. As we first observed one month ago and as we confirmed on Thursday, the debate – inasmuch as one ever existed – is now over: jobless claims, both initial (as Morgan Stanley shows)…

    … and continuing (as shown just a few days ago by Goldman)…

    … are tumbling in Republican states which have ended emergency covid benefits ahead of their official end in September, while barely budging in Democrat states which hope that government handouts will last forever, just like in all socialist success stories in the history of the world.

    The message here: republican states are well on their way to normalizing the most fractured and broken labor market the US has had since World War II, one where there are 9 million job openings and over 12 million people collecting jobless benefits (and refusing to look for a job) thanks to Biden’s generous handouts. Still, the transition back to a normal job market will be a painful one, and one where the jump from full handouts to full employment will be accompanied by a sharp drop off in spending and which may well spark the next (2 month) recession.

    Which brings us to the bad news. Total card spending based on the aggregated BAC credit and debit card data shows that as one would expect, states where generous government handouts have ended are seeing a sharp drop in spending, especially among the unemployed.

    As Bank of America notes, in the states where benefits were cut, spending was weaker for the cohort receiving UI as compared to those not getting benefits.

    For comparison, BofA ran this same exercise for the other states that did not allow for UI expiration: there was a smaller gap between the spending trends of the UI cohort vs. the non-UI recipients (Exhibit 11).

    To be sure, nobody is going cold turkey yet: one of the reasons why spending has not fallen off a cliff is that the first monthly payment of the Child Tax Credit was distributed on July 15th, and BofA will be able to quantify its impact in a few days, although it is safe to assume that comforted by the knowledge that Uncle Sam’s benefit will continuing trickling in, even if under a different name, consumers still spent aggressively.

    It’s also why despite a growing divergence in spending patterns between household who received unemployment benefits and those that didn’t in states where benefits were cut early, there wasn’t a discernible impact on aggregate spending yet, and overall spending in the states where UI has expired looks similar to the states where UI was not reduced.

    This, however, is likely due to the introduction of the abovementioned child credit as well as the accelerated drawdown of the $2.5 trillion in excess savings (of which over $2 trillion was accumulated by the 1%) accumulated during the crisis.

    In any case, one thing is clear: once the millions of Democrat US households that are still collecting extended ‘Rona unemployment see their emergency unemployment welfare benefits end in six weeks on September 4, expect a sharp plunge in overall spending, one which may push the current reflationary spike into all-out stagflation because with commodity prices are still in low earth orbit and will be for a far longer time than most expected (due to crushed supply chains which have unwound decades of disinflationary pressures as a result of China having been the source of cheap US goods ever since the 1980s), wages are set to plummet as millions of unemployed workers – no longer living on the government dole – return to the work force and instantly change the labor force equilibrium, giving employees all the leverage.

    There is just one thing that could short circuit this coming economic conflagration: another “emergency” which results in another trillion or two in stimmies. Which the government is well aware of, and is milking the delta covid “crisis” for all its worth, preserving the optionality to escalate it to the next lockdown and multi-trillion dollar bailout catalyst once needed

    Tyler Durden
    Sun, 07/25/2021 – 16:00

  • Turley: Could The Arrest Of FBI Agent Undermine The Whitmer Kidnapping Case?
    Turley: Could The Arrest Of FBI Agent Undermine The Whitmer Kidnapping Case?

    Authored by Jonathan Turley via jonathanturley.org (emphasis ours),

    The arrest of an FBI agent would always be newsworthy. Richard Trask of Kalamazoo has gone from making cases to being a case for prosecution. He  faces up to ten years for allegedly assaulting his wife with intent to do great bodily harm. However, Trask was also key to the arrest of men in the alleged plot to kidnap Michigan Gov. Gretchen Whitmer. Those defendants — and some observers — have criticized the FBI for entrapping the men by pushing them into the conspiracy and facilitating their efforts.  The question is whether Trask’s arrest could undermine those cases.  The answer is yes.

    There are legitimate concerns over the role of the FBI in the planning and preparation for this alleged conspiracy. As a criminal defense attorney, I have long been a critic of the degree to which the FBI often pushes defendants to take actions to trigger criminal charges. However, it is very difficult to make a case for entrapment and the agents know that.

    In the Michigan case, six men are charged with a conspiracy that involved kidnapping Whitmer but news outlets like BuzzFeed News have raised serious concerns over how much of the conspiracy was directed and facilitated by the FBI. At every critical juncture, agents like Trask appear to push the effort along, even overcoming reluctance of the alleged conspirators. That includes calling meetings where the conspirators first met and structuring the planning stage for the crime. The FBI even paid for room and foods to keep the planning going. Reportedly, the FBI informant ultimately rose to second in command of the conspiracy.

    Courts look to two elements in entrapment cases. While the government can encourage criminal conspirators, the courts ask whether the offense was induced by a government agent and whether “the defendant was disposed to commit the criminal act prior to first being approached by Government agents.”  In Jacobson v. United States, 503 U.S. 540 (1992), the Court ruled that a Nebraska man convicting of receiving child pornography through the mail was entrapped.

    This was a strong case for entrapment but was still a close vote. Writing for the 5-4 majority, Justice Bryon White ruled that

    “by waving the banner of individual rights and disparaging the legitimacy and constitutionality of efforts to restrict the availability of sexually explicit materials, the Government not only excited petitioner’s interest in sexually explicit materials banned by law, but also exerted substantial pressure on petitioner to obtain and read such material as part of a fight against censorship and the infringement of individual rights . . . convincing him that he had or should have the right to engage in the very behavior proscribed by law.”

    These cases have raised a long debate over whether the test should be subjective or objective. In Sorrells v. United States, 287 U.S. 435 (1932), the Court followed a subjective test in showing the defendant had a “predisposition”  to commit the crime. Some states follow the objective standard advocated by figures like Justice Felix Frankfurter in  Sherman v. United States, 356 U.S. 369 (1958), in showing that the crime would not have occurred with the involvement of the law enforcement officials.

    So that brings us back to Trask, 39. Trask’s affidavit was used to arrest the men in the Michigan case. He and other agents are accused to prodding the alleged conspirators and ultimately organizing the effort. The FBI emphasizes that Whitmer’s home was “cased” before the arrests, showing a clear intent of the defendants to move forward with the plan.

    The question is whether a federal judge will be open to the entrapment defense at trial. In any case, Trask will be key to any proceedings as the author of the key affidavit. However, Trask may decide that he is at odds with his former colleagues now that he is persona non grata at the Justice Department.  He could cooperate with the defense through admissions or otherwise damaging testimony. He could even invoke his Fifth Amendment right to remain silent in fear of self-incrimination. While the prosecutors could force his testimony with an immunity grant, they would risk testimony that could undermine the case by highlighting the reluctance of defendants to go forward with their alleged conspiracy.

    Notably, Trask was charged by the Kalamazoo County Sheriff’s Office in Kalamazoo County District Court, not federal court. Those prosecutors may not be unduly concerned about his testimony in the federal case. However, federal prosecutors may be interested in reducing his exposure to keep him from becoming a liability in a major case.  Federal and state prosecutors often confer on such cases.

    The problem is that the allegations are pretty dramatic and serious — and there is no entrapment issues. Trask and his wife were reportedly returning from a “swinger’s party” at an Oshtempo Township hotel when they argued over his wife’s saying that she did not enjoy the party. Once home, Trask is accused of jumping on top of his wife in bed and slamming her head into the nightstand. She reportedly resisted and he choked her. She says that she was able to force him off and seek aid. Police describe her as covered in blood and bruises. He was arrested but then released on bond.

    As the author of the key affidavit, Trask could do considerable harm to the federal case. Even without such testimony in favor of the defense, his current status as an accused felon will likely be raised with the court. A judge could conclude that the two cases are unrelated and disclosure to a jury would be prejudicial and immaterial. However, the defense could argue that the pending charges could influence his testimony. He could seek to satisfy his former federal colleagues in the kidnapping case to improve his position in seeking a plea bargain with their state counterpart. Such testimony could also be cited to mitigate any sentence or charged the assault case.

    Any entrapment defense carries a very heavy burden that defendants can rarely shoulder successfully in federal cases. The advantage remains with the government in this case. However, this case has a credible claim of entrapment and one of the core witnesses for the government has suddenly become a liability. The Widner case is one o the “matinee” prosecutions of the Biden Administration but one of its stars may have just gone off-script.

    Tyler Durden
    Sun, 07/25/2021 – 15:35

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