- What Is The "Great Reset" And What Do The Globalists Actually Want?
What Is The “Great Reset” And What Do The Globalists Actually Want?
Authored by Brandon Smith via Alt-Market.us,
I first heard the phrase “Great Reset” way back in 2014. Christine Lagarde, who was head of the IMF at the time, was suddenly becoming very vocal about global centralization. It was an agenda that was generally only whispered about in the dark corners of institutional white papers and the secretive meetings of banking elites, but now these people were becoming rather loud about it.
Lagarde was doing a Q&A at the World Economic Forum and the notion of the “Reset” was very deliberately brought up; what the project entailed was vague, but the basic root of it was a dramatic shift away from the current economic, social and political models of the world into a globally centralized and integrated system – A “New World Order,” if you will…
It’s important to remember that we had just jumped through the fires of an international credit collapse which started in 2008 and had continued to cause uncertainty in markets for years. The central banks had dumped tens of trillions of dollars worth of stimulus into the system just to keep it on life support. Some of us in the alternative media believed that these actions were not meant to save the economy, only zombify the economy through currency devaluation and inflation. Not long down the road, this zombie creation would turn on us and try to eat us alive, and only the central bankers new exactly when this would occur.
Think of the crash of 2008 as Stage 1 of the Reset agenda; the globalists were getting cocky and were ready to unveil their plans to the public.
Lagarde’s discussion at the WEF was also held around the time that Klaus Schwab was introducing his 4th Industrial Revolution concept, which is a little more forward with what the globalists really want. He talks excitedly of a true “global society” and a world in which people turn to Artificial Intelligence (AI) as a better means of governance. He even suggests that laws would eventually be dictated by AI and that courts would be run by robots.
Of course, he admits that this cannot happen without a period of economic deconstruction in which people and governments will have to choose between sacrifice for the sake of stability or continued pain in the name of holding on to the “old ways.” Look at it this way: The Great Reset is the action or the chaos, and the 4th Industrial Revolution is the intended result or planned “order.” That is to say, it’s a new order created out of engineered chaos.
Yeah, it sounds like bad science fiction, but remember these are the people that enjoy the undivided attention of many of our political leaders and they rub elbows with the central bankers at the Federal Reserve. I’ll say it again: The proponents of the Great Reset and the 4th Industrial Revolution, who want to completely undermine and reconstitute our society and way of life, are close partners with our national leaders and the very bankers that could force such a reset to happen through a deliberate collapse.
The globalists have been trying to rebrand and repackage their New World Order agenda for many years, and the Reset was what they came up with. Rather than being innocuous sounding, the term threatens systemic upheaval and an erasure of the past. When you “reset” something it usually goes back to zero – A blank slate that the engineers can use to rewrite the code and the functions. But what does this really mean?
What do the globalists REALLY WANT? Here are the details, so far as I can prove or support with evidence, of what the “Great Reset” actually is and what programs they hope to enforce:
Total Global Economic Centralization
Some people might claim that we already have global economic centralization, but they don’t understand what this really means. While national central banks are all members of the IMF and the Bank for International Settlements and take their marching orders from these institutions, what the globalists want is open global governance of finance, probably through the IMF.
In other words, it’s not enough that they manipulate economies secretly by using national central banks as proxies; what they want is to stop hiding and to come out into the light as the magnanimous rulers they think they are.
The ultimate goal of full centralization is to erase the very idea of free markets and to allow a handful of people to micromanage every aspect of trade and business. It’s not just about influence, it’s about economic empire. But in order to achieve a global central bank they must first implement a one world currency plan.
A One World Digital Currency System
The IMF has been talking about using their Special Drawing Rights basket as the foundation for a global currency for years (since at least the year 2000). Around a decade ago China started taking on trillions of dollars in debt just to qualify as a member of the SDR system, and the IMF has hinted that when all is said and done that system will go digital. All that is needed is the right kind of crisis to shock the public into compliance.
This was evident at the height of the covid pandemic lockdowns and the threat of economic disaster when globalist institutions began to suggest that the IMF’s SDR could be used as a safety net for nations, with strings attached, of course. But beyond the stresses of the pandemic there is a much bigger crisis; namely the stagflationary crisis now on our doorstep. With multiple national currencies in decline and the dollar’s world reserve status increasingly in question, I have no doubt that the globalists will take the opportunity to offer the public their digital currency as a solution.
The new system would be more like a phantom currency for a time. The SDR would be the glue or the backing while national currencies remain in circulation until the digital framework becomes pervasive. The IMF and the people behind it would become the defacto world central bank, with the power to steer the course of all national economies through a single currency mechanism.
On the micro-economic side, each and every individual would now be dependent on a digital currency or cryptocurrency which removes all privacy in trade. All transactions would be tracked, and by the very nature of blockchain technology and the digital ledger this would be required. The money elites wouldn’t have to explain the tracking, all they would have to say is “That’s how the technology functions; without the ledger it doesn’t work.”
A Global Social Credit System
The evil inherent in globalism was readily apparent during the recent lockdowns and the violent push for medical tyranny. Despite the fact that covid only had a median Infection Fatality Rate of only 0.27% according to dozens of official studies, the WEF contingent of politicians and world leaders were frothing at the mouth, proclaiming that the existence of covid gave them the right to take total control of people’s lives.
Klaus Schwab and the WEF happily announced that the pandemic was the beginning of the “Great Reset” and the 4th Industrial Revolution, stating that the covid crisis presented a perfect “opportunity” for change.
The vaccine passports were thankfully defeated by numerous conservative red states in the US, leading to the complete reversal of such policies across most of the western world. We were free for years while many blue states and other countries were facing authoritarianism and this caused a lot of problems for the globalists. It’s hard to institute a global medical dystopia when people around the world can look at the conservatives in the US and see that we are living just fine without the controls.
The vax passports need to be understood as a first step towards something else – The beginning of a massive social credit system much like the one being used in China right now. If you think cancel culture is a nightmare today, just think what would happen if the collectivist mob had the power to drop a review bomb on your social credit account and declare you to be untouchable? Imagine if they had the power to simply shut down your ability to get a job, to shop in grocery stores and even shut down access to your money? Without your compliance to the collective, access to normal survival necessities would be impossible.
This is what the globalists want, as they openly admitted at the start of the pandemic, and the vax passports would have been an introduction to that technocratic horror had we conservatives not stood our ground.
You Will Own Nothing And Be Happy By 2030
The “Sharing Economy” (also sometimes referenced in parallel with “Stakeholder Capitalism”) is a concept that has been making the rounds in the WEF for a few years now. The media has attempted at every turn to spread lies and disinformation claiming that the plan does not exist; but again, it is openly admitted.
The sharing economy is essentially a communistic economy, but distilled down to a bizarre minimalism even people who lived in the Soviet Union did not have to experience. The structure is described as a kind of commune based society in which people live in Section 8-style housing, with shared kitchens, shared bathrooms, and barely any privacy. All property is rented, or borrowed. All cars are borrowed and shared, most transit is mass transit, basic personal items such as computers, phones, and even cooking utensils might be shared or borrowed items. As the WEF says, you will own nothing.
Being happy about it is another matter.
The argument for this kind of society is of course that “climate change” and the frailties of consumer economics demand that we reduce our living standards to near zero and abandon the sacred ideal of property ownership for the sake of the planet.
Set aside the fact that carbon based global warming is a farce. The world’s temperatures have only risen by 1 DEGREE CELSIUS in the span of a century, according to the NOAA. This was data that climate scientists had attempted to hide or gloss over for years, but now it is out there for everyone to see. There is no proof of man made global warming. None.
The globalists have been scheming to use environmentalism as an excuse for centralization since at least 1972, when the Club Of Rome published a treatise titled ‘The Limits To Growth’. Twenty years later they would publish a book titled ‘The First Global Revolution.’ In that document they specifically recommend using global warming as a vehicle:
“In searching for a common enemy against whom we can unite, we came up with the idea that pollution, the threat of global warming, water shortages, famine and the like, would fit the bill. In their totality and their interactions these phenomena do constitute a common threat which must be confronted by everyone together. But in designating these dangers as the enemy, we fall into the trap, which we have already warned readers about, namely mistaking symptoms for causes. All these dangers are caused by human intervention in natural processes, and it is only through changed attitudes and behaviour that they can be overcome. The real enemy then is humanity itself.”
The statement comes from Chapter 5 – The Vacuum, which covers their position on the need for global government. The quote is relatively clear; a common enemy must be conjured in order to trick humanity into uniting under a single banner, and the elites see environmental catastrophe, caused by mankind itself, as the best possible motivator.
They present the solution of the shared economy concept as if it is a new and bold idea. What the globalists ultimately want for their Great Reset, however, is a tidal wave reversal from freedom and individual prosperity back to a very old manner of doing things, similar to ancient feudalism. You become a peasant working on land owned by the elites, or by the state, and you will never be allowed to own that land.
The only difference would be that in a feudal empire of the past peasants could not own land because of the class system. This time around, you won’t be allowed to own anything, including land, because wanting to own anything is “selfish” and destructive to the planet.
Total Information Control
The truth is a rare commodity these days, but nowhere near as rare as it will be if these elitists get what they want. The globalists are far more open about their agenda today than they have ever been before, and I suspect this is because they believe they will be able to rewrite the history of today’s events with impunity after the Reset unfolds. They think they will own the world of information and will be able to edit our cultural memory as they go.
The mainstream media calls all of this “conspiracy theory.” I call it conspiracy reality. It’s hard to deny openly spoken admissions by the globalists themselves, all they can do is try to spin the information as much as possible to keep the public on the fence in terms of what needs to be done, which is a purge of the globalists from our country and perhaps the entire world.
If we do not do this, there will come a time when nothing I say here is remembered and no evidence of the Reset plan will exist. The establishment will have eliminated all notions of it from written history, leaving only a fantasy tale of how the world collapsed and a small organization of “visionary” globalists saved it from oblivion through a new religion of centralization.
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Tyler Durden
Sat, 04/02/2022 – 23:30 - These Are The Richest People In The World In 2022
These Are The Richest People In The World In 2022
Today, the 10 richest people in the world control $1.3 trillion in wealth.
As Visual Capitalist’s Dorothy Neufeld details below, this scale of wealth is equal to approximately 1.4% of the world economy, Amazon’s entire market cap, or spending $1 million a day for 3,000 years. In fact, it’s double the amount seen just two years ago ($663 billion).
As billionaire wealth accumulates at a remarkable speed, we feature a snapshot of the world’s richest in 2022, based on data from the Forbes Real-Time Billionaires List.
Top 10 Richest People in the World
Elon Musk, with a fortune of $212 billion, is the richest person on the planet.
Tesla delivered nearly one million vehicles globally in 2021. Despite facing a computer chip shortage, Tesla deliveries rose 87% year-over-year. Musk, who is also CEO and chief engineer of SpaceX, plans to send the largest rocket ever built into orbit in 2022. It spans 119 meters tall.
Here are the richest people in the world, based on data as of March 14, 2022:
With a net worth of $168 billion, Jeff Bezos falls in second place. Bezos is the only billionaire in the top 10 to see a decline in wealth (-$9 billion) over the year. Since last March, Amazon shares have risen just 3% in light of weaker earnings and lagging retail performance.
Most notably, Mark Zuckerberg, CEO of Meta (formerly Facebook) fell off the top 10 for the first time since 2016. Meta shares plunged after reporting the first-ever drop in global daily active users since 2004.
Growth Rates of the Top 10 Overall
Among the 10 richest people in the world, here’s who saw their wealth rise the fastest:
Musk saw his fortune rise more than any other in this top 10 list. In 2021, Tesla became a trillion-dollar company for the first time, and Musk’s wealth jumped by 29% over the past year.
Crypto Billionaires in 2022
At least 10 people worldwide have seen their wealth climb into the billions thanks to the stratospheric rise of cryptocurrencies.
Sam Bankman-Fried, founder of the FTX crypto derivatives exchange, is at the top, with a jaw-dropping $24 billion net worth. Bankman-Fried launched the exchange in 2019 when he was 27.
FTX now has one million users and a $32 billion valuation.
Following Bankman-Fried is Brian Armstrong, the co-founder of cryptocurrency exchange Coinbase. It is the second-largest cryptocurrency exchange globally after Binance.
Also on the list are co-founders of Gemini cryptocurrency exchange Cameron and Tyler Winklevoss, each with a net worth of $4 billion. Like their rival, Mark Zuckerberg, they have their sights on building a metaverse.
Larger Shifts
Will billionaire wealth continue to accumulate at record rates? If the invasion of Ukraine presses on, it will likely have broader structural outcomes.
Some argue that war is a great leveler, a force that has reduced wealth inequality, as seen in the aftermath of WWII. Others suggest that it increases wealth divergence, especially when the war is financed by public debt. Often, costs have become inflated due to war, putting pressure on low and middle-income households.
Whether or not the war will have lasting effects on wealth distribution is an open question, however, if the pandemic serves as any precedent, the effects will be far from predictable.
Tyler Durden
Sat, 04/02/2022 – 23:00 - "A Paradigm Shift Western Media Hasn't Grasped Yet" – Russian Ruble Relaunched, Linked To Gold & Commodities
“A Paradigm Shift Western Media Hasn’t Grasped Yet” – Russian Ruble Relaunched, Linked To Gold & Commodities
By Ronan Manly of Bullionstar.com
With Russia’s central bank having just profoundly altered the international trade and monetary system by linking the Russian ruble to both gold and commodities, journalists in Moscow asked me to write a Q and A article on what these developments mean, and the ramifications of these changes on the Russian ruble, the US dollar, the gold price and the global system of currencies. This article has been published on the RT.com website here.
Since RT.com is now blocked and censored in many Western locations such as the EU, UK, US and Canada, and since many readers may not be able to access the RT.com website (unless using a VPN), my Questions and Answers that are in the new RT.com article are now published here in their entirety.
Who would have thought that citizens of ‘free speech’ Western countries would need a VPN to read a Russian news site?
Why is setting a Fixed Price for Gold in Rubles significant?
By offering to buy gold from Russian banks at a fixed price of 5000 rubles per gram, the Bank of Russia has both linked the ruble to gold and, since gold trades in US dollars, set a floor price for the ruble in terms of the US dollar.
We can see this linkage in action since Friday 25 March when the Bank of Russia made the fixed price announcement. The ruble was trading at around 100 to the US dollar at that time, but has since strengthened and is nearing 80 to the US dollar. Why? Because gold has been trading on international markets at about US$ 62 per gram which is equivalent to (5000 / 62) = about 80.5, and markets and arbitrage traders have now taken note, driving the RUB / USD exchange rate higher.
So the ruble now has a floor to the US dollars, in terms of gold. But gold also has a floor, so to speak, because 5000 rubles per gram is 155,500 rubles per troy ounce of gold, and with a RUB / USD floor of about 80, that’s a gold price of around $1940. And if the Western paper gold markets of LBMA / COMEX try to drive the US dollar gold price lower, they will have to try to weaken the ruble as well or else the paper manipulations will be out in the open.
Additionally, with the new gold to ruble linkage, if the ruble continues to strengthen (for example due to demand created by obligatory energy payments in rubles), this will also be reflected in a stronger gold price.
Gazprom – Natural gas powerhouse and Russia’s largest company What does this mean for Oil?
Russia is the world’s largest natural gas exporter and the world’s third largest oil exporter. We are seeing right now that Putin is demanding that foreign buyers (importers of Russian gas) must pay for this natural gas using rubles. This immediately links the price of natural gas to rubles and (because of the fixed link to gold) to the gold price. So Russian natural gas is now linked via the ruble to gold.
The same can now be done with Russian oil. If Russia begins to demand payment for oil exports with rubles, there will be an immediate indirect peg to gold (via the fixed price ruble – gold connection). Then Russia could begin accepting gold directly in payment for its oil exports. In fact, this can be applied to any commodities, not just oil and natural gas.
What does this mean for the Price of Gold?
By playing both sides of the equation, i.e. linking the ruble to gold and then linking energy payments to the ruble, the Bank of Russia and the Kremlin are fundamentally altering the entire working assumptions of the global trade system while accelerating change in the global monetary system. This wall of buyers in search of physical gold to pay for real commodities could certainly torpedo and blow up the paper gold markets of the LBMA and COMEX.
The fixed peg between the ruble and gold puts a floor on the RUB / USD rate but also a quasi-floor on the US dollar gold price. But beyond this, the linking of gold to energy payments is the main event. While increased demand for rubles should continue to strengthen the RUB / USD rate and show up as a higher gold price, due to the fixed ruble – gold linkage, if Russia begins to accept gold directly as a payment for oil, then this would be a new paradigm shift for the gold price as it would link the oil price directly to the gold price.
For example, Russia could start by specifying that it will now accept 1 gram of gold per barrel of oil. It doesn’t have to be 1 gram but would have to be a discounted offer to the current crude benchmark price so as to promote take up, e.g. 1.2 grams per barrel. Buyers would then scramble to buy physical gold to pay for Russian oil exports, which in turn would create huge strains in the paper gold markets of London and New York where the entire ‘gold price’ discovery is based on synthetic and fractionally-backed cash-settled unallocated ‘gold’ and gold price ‘derivatives.
Russian gold bars stored in wooden boxes in the Gokhran vaults, Moscow What does this mean for the Ruble?
Linking the ruble to gold via the Bank of Russia’s fixed price has now put a floor under the RUB/ USD rate, and thereby stabilized and strengthened the ruble. Demanding that natural gas exports are paid for in rubles (and possibly oil and other commodities down the line) will again act as stabilization and support. If a majority of the international trading system begins accepting these rubles for commodity payments arrangements, this could propel the Russian ruble to becoming a major global currency. At the same time, any move by Russia to accept direct gold for oil payments will cause more international gold to flow into Russian reserves, which would also strengthen the balance sheet of the Bank of Russia and in turn strengthen the ruble.
Talk of a formal gold standard for the ruble might be premature, but a gold-backed ruble must be something the Bank of Russia has considered.
What does this mean for Other Currencies?
The global monetary landscape is changing rapidly and central banks around the world are obviously taking note. Western sanctions such as the freezing of the majority of Russia’s foreign exchange reserves while trying to sanction Russian gold have now made it obvious that property rights on FX reserves held abroad may not be respected, and likewise, that foreign central bank gold held in vault locations such as at the Bank of England and the New York Fed, is not beyond confiscation.
Other non-Western governments and central banks will therefore be taking a keen interest in Russia linking the ruble to gold and linking commodity export payments to the ruble. In other words, if Russia begins to accept payment for oil in gold, then other countries may feel the need to follow suit.
Look at who, apart from the US, are the world’s largest oil and natural gas producers – Iran, China, Saudi Arabia, UAE, Qatar. Obviously, all of the BRICS countries and Eurasian countries are also following all of this very closely. If the demise of the US dollar is nearing, all of these countries will want their currencies to be beneficiaries of a new multi-lateral monetary order.
“It was once said that ‘gold and oil can never flow in the same direction’.” What does this mean for the US Dollar?
Since 1971, the global reserve status of the US dollar has been underpinned by oil, and the petrodollar era has only been possible due to both the world’s continued use of US dollars to trade oil and the USA’s ability to prevent any competitor to the US dollar.
But what we are seeing right now looks like the beginning of the end of that 50-year system and the birth of a new gold and commodity backed multi-lateral monetary system. The freezing of Russia’s foreign exchange reserves has been the trigger. The giant commodity strong countries of the world such as China and the oil exporting nations may now feel that now is the time to move to a new more equitable monetary system. It’s not a surprise, they have been discussing it for years.
While it’s still too early to say how the US dollar will be affected, it will come out of this period weaker and less influential than before.
What are the Consequences of these Developments?
The Bank of Russia’s move to link the ruble to gold and link commodity payments to the ruble is a paradigm shift that the western media has not really yet been grasped. As the dominos fall, these events could reverberate in different ways. Increased demand for physical gold. Blowups in the paper gold markets. A revalued gold price. A shift away from the US dollar. Increased bilateral trade in commodities among non-Western counties in currencies other than the US dollar.
Tyler Durden
Sat, 04/02/2022 – 22:30 - Kamala Harris Contradicts Biden's Putin Remarks: "We Are Not Into Regime Change"
Kamala Harris Contradicts Biden’s Putin Remarks: “We Are Not Into Regime Change”
Vice President Kamala Harris was asked during a Friday appearance on MSNBC by show host Joy Reid her view on President Biden’s regime change comments directed at Russia’s Vladimir Putin the prior Saturday in Warsaw. In line with White House efforts in the days following Biden’s speech, she too sought to walk back any suggestion that Washington is actively seeking Putin’s overthrow, saying “we are not into regime change.”
“Let me be very clear. We are not into regime change. And that is not our policy. Period,” Harris told Reid. She said this after rambling on for a couple of minutes in response to what was initially a simple yes or no question of “whether he [Putin] should remain” in power. The segment started with Reid asking “President Biden said Vladimir Putin should no longer be leader of Russia, do you agree?“
Kamala Harris was asked if she backs regime change in Russia. Harris the US will support the Ukrainian whilst making sure Putin faces consequences. pic.twitter.com/NXftPM6tC5
— Apex World News (@apexworldnews) April 2, 2022
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She explained further in reaction to Biden’s prior “For God’s sake, this man cannot remain in power” remarks…
“Our policy from the beginning has been about ensuring that there are going to be real costs exacted against Russia in the form of severe sanctions, which we know are having a real impact and an immediate impact, not to mention the longer-term impact, which is about saying there’s going to be consequence and accountability when you commit the kinds of atrocities that he is committing,” VP Harris said.
And here’s the moment she dubiously stated that the US doesn’t do regime change…
JOE BIDEN: “For God’s sake, [Putin] cannot remain in power.”
KAMALA HARRIS: “We are not into regime change, and that is not our policy. Period. Yeah.”
So… which is it? pic.twitter.com/syH1EJ6jeh
— RNC Research (@RNCResearch) April 2, 2022
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We should immediately point out the obvious concerning her assertion… given the glaring examples of Iraq, Afghanistan, Libya, Syria – or even going back to the 1953 Iranian coup d’état, or the 1980’s CIA role in Central America – one could argue that in recent history that regime change has in fact been US policy across various parts of the globe.
The Sunday after Biden’s controversial Warsaw speech, which the Kremlin rejected and condemned – but also said wouldn’t match in terms of escalatory rhetoric – Antony Blinken became the highest US official to try and downplay the president’s words.
“I think the president, the White House, made the point last night that, quite simply, President Putin cannot be empowered to wage war or engage in aggression against Ukraine or anyone else,” the top US diplomat told the Sunday news shows.
To recall, here are Biden’s words from the prior Saturday in Warsaw, where he said the quiet part out loud…
Biden said the quiet part out loud “[Putin] cannot remain in power” & now everyone knows the real intention is “Regime Change” in Russia. No amount of spin can change that now. U.S. is run by warmongering psychos pic.twitter.com/Z5NOfcG88E https://t.co/ZnZeOu1fB9
— Jimmy Dore (@jimmy_dore) March 26, 2022
Tyler Durden
Sat, 04/02/2022 – 22:00 - Justice Department Charges 12 People For Arming Gang Members In Chicago
Justice Department Charges 12 People For Arming Gang Members In Chicago
By Naveen Athrappully of The Epoch Times
The U.S. Justice Department has announced a 21-count superseding indictment that charged 12 individuals with conspiring to violate federal firearms statutes after they trafficked over 90 guns from Tennessee and Kentucky areas into Chicago.
Attorney General Merrick Garland speaks about a significant firearms trafficking enforcement action during a news conference at the Justice Department in Washington, on April 1, 2022. Among those charged, three were enlisted members of the U.S. Army at the time of the crime. Stationed at the Fort Campbell military installation in Clarksville, Tennessee, they were involved in the purchase and transfer of “dozens of firearms to the streets of Chicago,” an April 1 press release from the department said. The three individuals—Demarcus Adams, Brandon Miller, and Jarius Brunson—were arrested in May last year by agents from the Bureau of Alcohol, Tobacco, Firearms, & Explosives.
Nine of the remaining 12 individuals are members of the Gangster Disciples street gang based in the neighborhood of Pocket Town, Chicago.
According to the Justice Department, the nine “conspired to purchase and deliver over 90 illegally obtained firearms” to the Chicago area between December 2020 and April 2021.
Their actions facilitated the “ongoing violent disputes” between Gangster Disciples and rival gangs. To secure firearms from federally licensed dealers, the defendants provided false information on firearms purchase application forms.
The multiple counts charged against the defendants include engaging in dealing firearms without a license, making false statements to a federally-licensed firearms dealer, conspiring to commit money laundering, transporting and receiving firearms into another state, and so on. The defendants face a prison term of up to 20 years on one or more of the charged counts.
“The Justice Department recognizes that fighting violent crime requires approaches tailored to the needs of individual communities,” Attorney General Merrick B. Garland said.
“But gun violence can be a problem that is too big for any one community, any one city, or any one agency to solve. That is why our approach to disrupting gun violence and keeping guns out of the hands of criminals rests on the kind of coordination you see here today.”
According to the feds, the guns trafficked as part of the crime have been used in several shootings across Chicago. This includes a mass shooting in March 2021 at the 2500 block of West 79th Street, which left seven people wounded and one dead. The incident had led authorities to investigate and uncover the interstate gun trafficking network.
Gun violence in Chicago has seen a massive surge in recent years. In Cook County, which includes Chicago and surrounding suburbs, 1,002 gun-related homicides were reported in 2021, the county medical examiner’s office said in early January. This is almost double the number reported in 2019 and 121 more incidents than what was recorded in 2020.
In total, Chicago saw 3,561 shooting incidents last year, according to the police department. This is 1,415 more shootings than in 2019.
Tyler Durden
Sat, 04/02/2022 – 21:30 - Shanghai Lockdown Expanded To Cover Entire City As China's Worst Outbreak In 2 Years Drags On
Shanghai Lockdown Expanded To Cover Entire City As China’s Worst Outbreak In 2 Years Drags On
Unfortunately for the CCP bureaucrats in charge of China’s largest city, the punishing 9-day staggered lockdown imposed late last month on Shanghai has failed to suppress the omicron driven outbreak in the city. Instead, cases have continued to rise, prompting authorities to expand the scope of what was supposed to be a short-lived staggered freeze to cover the city’s entire population.
The eastern half of Shanghai remains under tight movement restrictions even after a four-day lockdown was supposed to have ended Friday morning. This means the entire city of roughly 26 million is currently under some form of restrictions as the lockdown in the western half of the city begins, Bloomberg reports.
While the lockdown of Shanghai’s east officially ended at 5 a.m. local time Friday, most residents were not able to leave their homes immediately under what the local government described as a tiered quarantine regime.
People with mild or no symptoms are required to be put under compulsory central quarantine for treatment or monitoring at mostly makeshift facilities built in massive gymnasiums or exhibition centers around the city. If parents with young kids are sent to central quarantine, authorities will try to help find volunteers or staff to look after the children left behind, Zeng Qun, deputy head of Shanghai Civil Affairs Bureau said at a briefing.
The rules also required anyone living in a building where a Covid case has been reported to stay confined in their home for two weeks. Residents of other buildings in the same compound as the block where a positive patient was reported will be subject to seven-day home quarantine.
Thanks to these “targeted” restrictions, nearly all of the nearly 9 million residents living in the eastern half of Shanghai were still subject to some form of COVID restrictions. Nearly 40% of Saturday’s newly reported infections in the city came from Pudong, the eastern part.
Now that the outbreak in Jilin Province has subsided (a punishing multi-week lockdown in that province has finally been lifted), Shanghai has emerged as the epicenter of China’s worst virus outbreak since the early days of the pandemic. The financial center’s daily case count has surged from less than five at the beginning of March to a peak of more than 6,300 on Friday.
“At present, the epidemic situation is severe and complex, and the task of prevention and control is extremely arduous,” Wu Qianyu, an official at the Shanghai municipal health commission, said at a media briefing.
To be sure, it’s likely that the increase in new cases is a result of further screening. Authorities tested more than 14 million people in the western half of the city Friday as part of two-round tests.
Last month, President Xi Jinping instructed local authorities to take a more nuanced approach to combating COVID. While preserving human life must remainthe priority, the president urged policy makers to embrace more “targeted” measures – including an increase in testing and locally-focused lockdowns on residential complexes where cases had been confirmed.
But the continuing spread of the virus in Shanghai is the biggest test yet of Xi’s plan to preserve economic growth without sacrificing lives. Amid reports of deaths of old folks homes and a surge in medical emergencies, local public health authorities have ordered hospitals and clinics across the city to reopen emergency wards amid reports that people were being denied access to treatment during the lockdown. There has even been a case of one individual dying after being turned away from a hospital due to COVID protocols, according to the SCMP.
Meanwhile, authorities have employed robot emissaries like this robot dog to bark instructions at local residents as the citywide testing campaign continues.
¿Alguien sabe si éste video es verdad? Dónde lo encontré mencionaba que son perros robot vigilando las calles de Shanghai para que la gente no salga después de el confinamiento que se les impuso. pic.twitter.com/Zf9qMvUFk8
— Diego (@Diego_da18) April 2, 2022
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While millions of Chinese will likely suffer as the government scrambles to provide enough food, medicine and other emergency supplies to the increasingly desperate population, there’s one individual who stands to benefit: President Joe Biden. Assuming news of the tighter lockdown sends crude oil prices lower, Biden might be able to take credit, given the timing of the SPR release announcement earlier this week (although few sell-side analysts expect the decision to have a meaningful impact on prices long term).
Tyler Durden
Sat, 04/02/2022 – 21:00 - Biden Admin Reverses Trump Fuel Efficiency Rules, New Vehicles Must Average 49 Miles Per Gallon By 2026
Biden Admin Reverses Trump Fuel Efficiency Rules, New Vehicles Must Average 49 Miles Per Gallon By 2026
Authored by Mimi Nguyen Ly via The Epoch Times (emphasis ours),
The Biden administration announced on April 1 it is raising requirements for fuel efficiency, reversing a rollback by the Trump administration.
Cars sit in heavy traffic on Highway 101 in Corte Madera, Calif., on Oct. 24, 2021. (Justin Sullivan/Getty Images) New vehicles sold in the United States will have to travel an average of at least 49 miles per gallon of gasoline in 2026 under the new federal rules. The requirement would have been at 32 mpg if going by rules under the Trump administration.
Specifically, the National Highway Traffic Safety Administration (NHTSA) said fuel efficiency requirements will increase by 8 percent annually for 2024 and 2025 model years, and 10 percent annually for model year 2026.
The Trump administration had in March 2020 rolled back fuel efficiency requirements to 1.5 percent annual increases through 2026. The Obama administration had required 5 percent annual increases.
The new regulation (pdf) marks a slightly bigger increase than the proposal outlined in August 2021 by the NHTSA in a joint rule-making process with the Environmental Protection Agency (EPA), as part of efforts to improve gas mileage and reduce tailpipe pollution.
The EPA announced similar rules (pdf) in December 2021.
Transportation Secretary Pete Buttigieg said the new rule “means that American families will be able to drive further before they have to fill up, saving hundreds of dollars per year.”
NHTSA estimates (pdf) that under the rule, consumers could save $1,387 in fuel costs over the life of a vehicle. but the average cost of a new vehicle would also increase by almost that much—$1,087.
Tyler Durden
Sat, 04/02/2022 – 20:30 - Vacation Home Demand Slows As Mortgage Rates Soar
Vacation Home Demand Slows As Mortgage Rates Soar
Vacation home purchases are cooling as US mortgage rates continued their near-vertical ascent, soaring to levels not seen since late 2018.
A new Redfin Corp. report, cited by Bloomberg, says the rush by affluent Americans, mainly white-collar, to purchase second homes dropped in February to the lowest level since May 2020. Though demand is still up 35% above pre-pandemic levels, the vacation housing market will cool as rates rise.
Before the pandemic, demand for second and primary homes grew at similar rates. But pandemic lockdowns and the Federal Reserve’s easiest monetary policies on record, coupled with FOMO and low inventory, unleashed a surge in buying panic in beach towns and mountain areas.
Redfin Chief Economist Daryl Fairweather said soaring mortgage rates and rising home prices amid low inventory had slowed the boom. He said the second-home market is being impacted “much harder than the primary-home market, largely because vacation homes are optional. People don’t need a second home.”
Redfin data showed secondary home demand peaked in March 2021 when the average 30-year mortgage tagged a record low of 2.65%. Rates have since jumped over the last year, hitting as high as 4.89%, sending ‘affordability’ spiraling lower.
For some context, the Fed’s move to quell inflationary forces by embarking on a super aggressive hiking cycle has driven mortgage rates on one of the fastest three-month rises since 1994.
The rapid rise in rates has also sent primary-home buyers to the sidelines as housing affordability becomes a significant challenge.
Secondary home buyers also face another hurdle, including a fee of an additional 1% to 4% for loans backed by Fannie Mae or Freddie Mac.
Given extraordinary supply challenges, housing prices are likely to remain elevated this year despite plunging housing affordability. This means 2022 could be the hurrah for the housing market as the cracks are beginning to appear as vacation home markets cool.
Tyler Durden
Sat, 04/02/2022 – 20:00 - Long-Term Oil Prices Beginning To Reflect The Coming Oil Shortage, Part 1
Long-Term Oil Prices Beginning To Reflect The Coming Oil Shortage, Part 1
Brent crude oil prices rallied $100/bbl since the lows in 2020. This reflects very tight fundamentals, where petroleum inventories are at extremely low levels relative to consumption and supply is struggling.
The war in the Ukraine has worsened the near-term supply outlook further.
The current conditions in the oil market are critical and we could see real oil shortages by this summer if the disruptions to Russian oil supplies persist or even worsen. This would put even more upward pressure on current prices and overall inflation. However, we think an even bigger and more permanent issue has been brewing in oil markets for years and it is finally filtering through to the back end of the forward curve.
Longer dated prices have broken out of their 5-year range and have been moving up relentlessly.
We think the oil markets finally begin to understand that a lack of investments in large oil projects over the past years is threatening supply over the entire next decade, at a time when demand will still be growing as the electrification of the transportation sector will not impact demand meaningfully for years to come.
The sharp upward moves in oil prices amidst a broader commodity prices rally have pushed realized inflation and near-term (0-2y) inflation expectations up strongly. But inflation expectations beyond that time horizon have proven to be resilient. So far the back end of the oil curve moved up only $15/bbl. However, we think that once back end prices are moving in a similar fashion to what we currently witness in the front, longer term inflation expectations will likely begin to move up too.
In this two part report, we look first at how we got to the current price environment and in the upcoming second part we do a deep dive into the long term outlook for crude oil markets.
Oil prices have reached the highest levels since the all-time highs in 2008. The most obvious explanation for the sharp rally is the military conflict in Ukraine and the threat of a loss of Russian oil supplies. However, oil prices are only up $20 since the war started a month ago. In fact, Brent crude oil prices have been rising relentlessly ever since the lows of around $20/bbl we saw during first lockdowns in spring 2020, to $95/bbl just before the invasion (see Exhibit 1).
Exhibit 1: Oil priced rallied close to $80/bbl from their lows before the Ukraine invasion started
$/bbl
Source: Goldmoney Research
While everybody points to the Ukrainian conflict to explain high prices, just a month ago there was a vigorous debate among analysts, media, and politicians about what was behind the fact that oil had broken out of the $60-80 range it has mostly been trading in for the past years (except the quick lockdown crash in early 2020) and started to rally relentlessly. Was it exceptional demand, reflective of a strong economy coming out of the pandemic as some claimed? Or rather supply bottlenecks, similar to the supply issues that plagued many other industries at the moment. Was it OPEC? Or just broad based inflation filtering into oil, given that almost any other commodity has shown similar or even higher price increases over the past two years.
First, it wasn’t (and still isn’t) exceptionally strong demand. While global oil demand has significantly recovered from the lows in spring 2020, for 2022 it is still slightly below where it was before the pandemic (see Exhibit 2).
Exhibit 2: Global oil demand has strongly recovered but remains below pre-pandemic levels so far
Mb/d, 12 month moving average, change vs 2019
Source: Goldmoney Research
This means it is lagging overall economic activity, which, according to the World Bank and the IMF, is roughly 7% higher in 2022 than it was in 2019 (see Exhibit 3). A rule of thumb is that global oil demand grows roughly at the rate of GDP -2% efficiency gain per annum. In this case, a 7% GDP growth over two years plus 2% compounded efficiency gains would suggest that oil demand – if it wasn’t for the remnants of the pandemic – should be roughly 1 million b/d above 2019 levels.
Exhibit 3: cumulative changes to real GDP vs 2019
%
Source: IMF
The reason why oil demand is lagging is mostly due to the lack of jet fuel demand. Jet fuel accounts for about 10% of global oil demand and air traffic is still quite a bit lower than it was before the pandemic. Globally commercial air traffic is still down 20% vs. pre-pandemic levels according to Flightradar24, a site tracking commercial air traffic (see Exhibit 4).
Exhibit 4: Commercial flight activity is still 20% below pre-pandemic levels
Source: Flightradar24.com
During the first wave of the Covid19 pandemic, oil demand crashed like it never had before. At it’s lowest point, oil demand was down 20%. As a comparison, during the great recession of 2008-2009, oil demand was down just about 3.5% at any point in time (see Exhibit 5).
Exhibit 5: The demand destruction from the lockdowns dwarfed the demand destruction from the recession that followed the 2008-2009 credit crisis
Kb/d year-over-year
Source: Goldmoney research
This demand destruction in early 2020 lead to a massive build in global inventories. Global total petroleum stocks rose at the fastest rate and reached their highest levels in history as producers didn’t curb production fast enough (see Exhibit 6).
Exhibit 6: Total commercial petroleum’s stocks, including floating storage, reached their highest levels in history in 2020
Kb
Source: Goldmoney Research
Which is where OPEC+ comes in. After taking a very different direction during the February meeting (Saudi Arabia, upset about Russia’s refusal to agree to production cuts, ramped up production to all-time highs and flooded the market with crude, promptly crashing prices), OPEC+ swiftly decided to act when it became clear what the global lockdowns did to demand. The group cut oil production by around 10 million b/d (see Exhibit 7). And surprisingly, all group members stuck to their quotas since that decision was made.
Exhibit 7: OPEC swiftly cut production by a record amount when the effects of the lockdowns on demand became clear
Kb/d (OPEC crude oil only, auxiliary states in OPEC+ not included)
Source: Goldmoney Research
Subsequently, the group provided a roadmap for the return of these barrels. For the first couple months of this oil production recovery, OPEC+ was careful that the oil market remained in deficit. As a result, oil inventories kept falling until they reached their 5-year average in mid-summer 2021 (se Exhibit 8).
Exhibit 8: Global petroleum stocks were back to 5-year averages by mid-summer 2021
Kb, levels vs 5-year average
Source: Goldmoney Research
However, actual OPEC+ production is lagging the quotas for many months now, and the gap between actual and target becomes increasingly wider. The reason is that some of the smaller OPEC members struggle to produce as much as they would be allowed under the plan (see exhibit 9). These are not voluntary cuts. It has become obvious that the capacity of many OPEC members simply isn’t there as these countries are plagued with domestic issues that prevent full production. On top of that, the non-OPEC members of OPEC+ are also producing about 200kb/d below their quotas, and that was before the war in Ukraine reduced Russian exports.
Exhibit 9: Many OPEC members keep producing below their quotas
Kb/d
Source: OPEC
Interestingly, the core OPEC members Saudi Arabia, UAE, and Kuwait are for once not stepping in to fill the gap. In our view, this may be partially politically driven due to some tensions between the US and some OPEC members, but more likely it is also due to their own capacity constraints. In April 2020, Saudi Arabia briefly ramped up production to 12mb/d as the Kingdom reacted to Russia’s’ refusal to commit to a production cut (see Exhibit 10). This strategy backfired as it meant raising output right into the largest demand crash in history. However, it does give some insights to what Saudis production capacity is. We think Saudi Arabia went beyond their sustainable production capacity at that time. It is unlikely that they could sustain this output level for an extended period. Their production capacity for the medium term is likely closer to 11-11.5mb/d. Any capacity increase would require substantial investments in our view, and it would take years to achieve.
Exhibit 10: Saudi Arabia demonstrated that they can push production to 12mb/d over a very brief period, but sustainable production capacity is likely significantly lower
Source: Goldmoney Research, OPEC
While Saudi Arabia is still producing below their sustainable capacity, the country can’t really step in and fill the production gaps left by the less stable OPEC producers, as it would mean it could not increase production anymore when it is supposed to according to the OPEC+ roadmap. The country has no choice but to stick to their own predetermined production path. The same is true for other core-OPEC members. As a result, demand continued to exceed production in 1Q22 at a time when in theory, we should have already shifted to an oversupply in the first two months of the year.
This has pushed global inventories lower and lower. As we have explained in earlier reports, there is a very strong relationship between the level of inventories and crude oil time-spreads, the difference between the prompt prices and longer-dated prices on the forward curve (see Exhibit 11). In a nutshell, when inventories are low, consumers of a commodity – in this case petroleum products – are willing to pay a premium for immediate delivery. It is preferable to pay this premium than to face the risk of having to shut down the business because they run out of oil (jet fuel, diesel etc.). In such a situation, prompt prices trade over future prices which is called “backwardation”. When inventories are high, consumers have no preference for immediate delivery. Instead, storage, insurance, and financing costs mean that consumers rather not sit on inventories, but would prefer delivery in the future. In that situation, prompt prices will trade below forward prices and the curve is in “contango”.
Exhibit 11: Crude oil time-spreads are inversely correlated to inventories
% time-spread 1-60 months, prediction based on inventory levels
Source: Goldmoney Research
The extent to which a forward curve is in backwardation or contango is strongly correlated to the level scarcity or abundance of inventories relative to demand. At the moment, we see an extreme level of backwardation in the front of the curve. The market signals extreme scarcity of oil stocks and the risk of further supply shortages. This is the result of the persisting undersupply discussed above that led to a situation of very low inventories, but also due to concerns over potentially even larger shortages due to missing Russian crude oil supplies.
To what extent the Ukraine conflict has exacerbated this issue from a fundamental perspective is difficult to assess at the moment. So far the US is the only nation that has outright banned imports of Russian oil and products. While this might create challenges for some refiners that rely on specific grades of imported Russian crude, it doesn’t alter the global supply and demand picture. US refiners will be forced to switch to an alternative grade but the Russian crude that used to go to the US (only about 670kb/d in 2021, of which 200kb/d was crude and the rest products, mostly fuel oil and VGO that was used in the US refinery system) will find its way to Asia (see Exhibit 12).
Exhibit 12: US import volumes of Russian petroleum are relatively small
Kb/d
Source: Goldmoney Research, EIA
The EU has imposed some sanctions on Russia that impact the commodity sector overall, but it has so far refrained from banning energy imports. However, over the past weeks it has become apparent that the voluntary sanctioning by Western companies – sometimes as a result of public outcries – is having an impact on Russia ability to export crude to the West regardless. There have been several reports that international commodity trading giants were forced to offer Urals (a Russian crude oil grade) at discounts of up to $30/bbl as they could not find a willing buyer. Russian crude exports are dependent on pipeline flows to Europe. These flows can’t be entirely substituted by seaborne exports at the moment. Hence the reluctance of Western oil firms, merchants, banks, shippers, seaports, and insurance companies to refrain to deal with Russian entities or outright stop dealing with anything that could be related to Russia can still lead to substantial reduction of Russian exports even as there is no legal ban. At the moment this probably affects around 1mb/d of Russian crude supplies. On top of that, Russia just announced that the CPC pipeline – a Kazakh-Russian Caspian Pipeline Consortium – is undergoing unplanned maintenance of up to two months, reducing global supplies by a further 0.5mb/d.
Exhibit 13: Russian oil and gas exports are dependent on pipeline flows to Europe
Source: National Geographic https://www.nationalgeographic.org/photo/europe-map/
On the flip side, IEA member states agreed to release 60mb of petroleum from their strategic reserves to alleviate the current shortages. Most of it will come from the US, and 29 other countries have committed to smaller volumes. However, that covers the current losses from Russia by just one to two months. The US had already orchestrated a coordinated SPR release last November to deal with high prices prior to the Ukraine war. The reaction was a short sell-off and an immediate recovery with prices pushing much higher.
There is no easy way to predict how this picture changes over the coming months.
-
It’s certainly key how the Ukrainian conflict progresses. On one hand, Europe is unlikely to ban oil and gas imports unless the conflict escalates in a dramatic way. On the other hand, while European sanctions are unlikely to be eased in the short term even if Ukraine and Russia come to some sort of agreement, such a scenario would likely ease the pressure on Western firms to maintain their voluntary sanctions.
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Core-OPEC members do have spare capacity, and they will bring it back as planned and not faster. But they run out of spare capacity in 2H2022.
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US production is also growing again, but not unlike OPEC, the shale oil producers made clear that they are also sticking to their production targets and are undeterred by higher prices, Non-OPEC (non-shale) production is growing as well, but it is recovering from the declines over the past 2 years rather than incrementally growing. This means it’s a one off and most of the increase have already happened.
-
Finally, there is a significant chance that the Iranian nuclear deal will be reactivated, allowing for about 1 million b/d of crude production to come back online relatively quickly.
-
This uncertain supply picture is facing a rapid improvement in global demand on the back of what seems to be the rapid abandonment of Covid19 mandates worldwide, which would allow air travel to rebound strongly over the coming months.
We think the near-term risks are skewed to the upside as demand keeps exceeding supply despite the OPEC ramp up, and Russia supply issues only exacerbate this situation. This would lead to even stronger backwardation until prices start to impact demand enough to balance the market. The current conditions in the oil market are critical and we could see real oil shortages by this summer if the disruptions to Russian oil supplies persist or even worsen.
So it appears that the strong crude oil prices are mainly the result of a very backwardated curve because supply is struggling over the short term. While this adds to the overall inflation pressure coming from generally higher commodity prices, breakeven inflation expectations suggest that the market is expecting these pressures to remain only over the near term. In other words, the market thinks the supply issues will be transitory. However, we think an even bigger and more permanent issue has been brewing in oil markets for years and it is finally filtering through to the back end of the forward curve. Longer dated prices have broken out of their 5-year range and have been moving up relentlessly. We think the oil markets have finally begun to understand that a lack of investments in large oil projects over the past years is threatening supply over the entire next decade, at a time when demand will still be growing as the electrification of the transportation sector will not impact demand meaningfully for years to come. The sharp upward moves in oil prices amidst a broader commodity prices rally have pushed realized inflation and near-term (0-2y) inflation expectations up strongly. But inflation expectations beyond that time horizon have proven to be resilient.
So far the back end of the oil curve moved up only $15/bbl. However, we think that once back end prices are moving in a similar fashion to what we are currently witnessing in the front, longer term inflation expectations will likely begin to move up too.
We will do a deep dive into the strong move at the back end of the oil curve in an upcoming report
Tyler Durden
Sat, 04/02/2022 – 19:30 -
- "Life Is Short": US Hotel Prices Soar To Record Highs On Consumer Driven-Demand
“Life Is Short”: US Hotel Prices Soar To Record Highs On Consumer Driven-Demand
Despite rising airline tickets, rental cars, food, and fuel prices, Americans are splurging on hotels as the mantra ‘life is short’ is driving up demand.
Lodging analytics company STR reports that the average daily hotel rate (ADR) increased to $149.38 last week, the third-highest ever, besides March 19 and the week after Christmas.
Demand appears to be coming from consumers who are booking on weekends, which has made up for the lack of corporate travelers.
Jan Freitag, senior vice president at STR, told Bloomberg, “the pandemic has reminded people that life is short.”
“They want to splurge, and they have a lot of pent-up savings. If a market has a leisure appeal, then the hotels in that market are doing well,” Freitag said.
All pandemics end eventually, and the latest signs of sustained declines in COVID-19 infections and deaths, and a large percentage of people are estimated to have some form of immunity, are promising signs people want to see before returning to hotels and resorts.
The CDC recently released a new framework that says most Americans can drop their masks indoors is another belief to some that the pandemic is subsiding.
CDC Eases Mask Guidelines for Indoor Public Spaces *Including Schools –WSJ
— zerohedge (@zerohedge) February 25, 2022
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What will dictate if the pandemic is over isn’t ‘science’ or the government but rather society. This was the same after the 1918 pandemic, when people stopped paying attention and moved on after infections and deaths declined.
Amber Asher, the CEO of Standard International (parent company of Standard Hotels), said, “We’re not raising rates because of labor costs. “It’s really just demand-driven.”
Americans appear to be going to big cities and staying at hotels — for whatever reason — if it’s a staycation or vacation, it is a welcoming sign and perhaps a proxy that some in society are ready to take the next giant leap in their lives and move on after losing two years of their lives due to pandemic-related lockdowns enforced by the government.
Being cooped up in a house or condo for two years has reminded everyone that life is short. Get out there and spend, which is the current mood of the consumer, though the 2-year to 10-year spread, the most closely watched part of the yield curve, inverted this week, and sends an ominous sign that the bond market sees economic turmoil ahead.
So is 2022 the last hurrah for consumers?
Tyler Durden
Sat, 04/02/2022 – 19:00 - Iowa House Passes Bill Requiring Schools To Post Curriculum Materials Online For Parent Review
Iowa House Passes Bill Requiring Schools To Post Curriculum Materials Online For Parent Review
Authored by Katabella Roberts via The Epoch Times (emphasis ours),
The Iowa House on March 29 voted to pass a bill that would require public schools in the state to publish their curriculum materials and library books online for parents to view, and give them the power to request that certain books be removed from classrooms.
A file photo of 4- and 5-year-old preschool students listening to their teacher read at a Des Moines, Iowa, elementary school. (Steve Pope, File/AP Photo) The House voted 60–36 to pass HF2577, which would introduce a string of changes for both parents and teachers, as well as students and the school districts.
Every Republican member of the House voted in favor of the measure except Rep. Chad Ingels, while all Democrats except Reps. Bruce Hunter and Charlie McConkey voted against it.
The bill comes amid a push from GOP lawmakers in the state to create more transparency and parental involvement in what children are being taught in schools.
It is also a modified version of a previous proposal from Gov. Kim Reynolds that would require schools to publish their curriculum materials and lists of library book titles online.
Specifically, HF2577 would require teachers to give parents access to all “instructional materials”—printed or electronic textbooks and related core materials—that are to be taught in classrooms and allow them to opt out of certain content.
Teachers would need to provide parents with a course syllabus or written summary of the material that will be taught and also explain how the student’s class meets or exceeds the educational standards established in the Iowa Code.
If passed, the policy should be “prominently displayed” on the school’s website and the board of directors should, at least annually, provide a written or electronic copy of the policy to the parents of each student, according to the bill.
If any changes to the materials are made during the school year, the teacher must update the information for the parents to view before the end of the school week in which the changes occurred.
By 2024, teachers will have to use classroom software systems to provide parents with view-only access to the material.
Schools would also be required publish a list of all books that are available in their library and provide parents with a link to access the library and request a book be reviewed or removed, although school years beginning prior to July 1, 2025 that do not have such an electronic library catalog can apply for a waiver.
School districts that violate the rules could face fines of $500 to $5,000 if they do not correct the violations within 14 days.
The nonpartisan Legislative Services Agency estimates the bill would cost Iowa school districts $16.4 million annually to hire classroom cover so that teachers can prepare the materials that need to be reported.
Democrats fear the bill would leave teachers feeling micromanaged and having to spend more time focusing on providing parents with the specific set of information as opposed to spending more time helping children.
“Teachers will be spending all their time trying to enter this information and then reenter what they didn’t do or what they changed,” Democratic Rep. Sharon Sue Steckman said. “[They’ll] be [so] worried about being attacked for what they’re doing that they won’t have any time to show their allegiance to our children.”
However, Republicans have championed the move for creating more transparency among parents and teachers.
“I welcome a change like this that will encourage parents to engage,” said GOP Rep. Garrett Gobble. “Transparency will strengthen trust … and rightfully turn down the temperature and rhetoric surrounding education discussions. I believe this will begin a great new period for parents and teachers to work together for the benefit of our students.”
Tyler Durden
Sat, 04/02/2022 – 18:30 - "Today's The Last Day" – BuzzFeed Disaster Worsens As News App Shuts Down
“Today’s The Last Day” – BuzzFeed Disaster Worsens As News App Shuts Down
Buzzfeed is being forced to tighten its belt (again) by axing its BuzzFeed News app, which comes a little more than a week after reports indicated the money-losing news organization would shut down its newsroom.
On Friday evening, the BuzzFeed News app posted its final notification:
“Well, folks, today’s the last day of the BuzzFeed News app. Thanks for the memories and see y’all out there.”
The app’s demise comes after the company released abysmal first-quarter results. CNBC noted several large investors urged BuzzFeed CEO Jonah Peretti to shutter the company’s newsroom — what a novel idea to reduce expenses as the company loses more than $10 million a year.
In February, a hiring freeze was reported as investors were furious with the media company’s lack of profitability, ill-advised shopping spree of other media firms, and crashing stock price post-SPAC debut.
Investor redemptions have occurred concurrently as the share price has been halved since the SPAC debut in December.
BuzzFeed’s downward spiral is particularly troubling for Peretti’s buying spree of media companies without a robust valuation. The firm recently bought out Complex and the Huffington Post, two deals that have yet to pay off in terms of revenue.
And as management claimed in a recent presentation to investors, it has grandiose ambitions of expanding its commerce business and its advertising and content businesses.
Troublingly, the abysmal performance of the company’s stock price has placed this post-SPAC growth strategy – hoovering up other failing digital brands – further out of reach (since Buzzeed’s stock is the currency it was supposed to depend on).
The death of BuzzFeed’s News app and newsroom, along with a hiring freeze, may only suggest the money-losing media company is in dire straits.
Tyler Durden
Sat, 04/02/2022 – 18:00 - Chicago Fed's Woke Enemy Of Free Speech Heading For Promotion To Federal Reserve Board
Chicago Fed’s Woke Enemy Of Free Speech Heading For Promotion To Federal Reserve Board
By Mark Glennon of Wirepoints
The United States Senate on Tuesday voted to advance Lisa Cook’s nomination by President Biden to the Federal Reserve Board after a committee deadlocked on her nomination earlier this month. Cook is currently an Executive Committee member of the regional Chicago Federal Reserve Bank Board of Directors. As a member of the national Federal Reserve Board, she would have key influence on the Fed’s monetary policy, which is supposed to be about price stability, i.e., controlling inflation.
In 2020, you may recall that the Chicago Fed bowed to the cancel mob in a particularly egregious manner by cutting ties with a prominent University of Chicago economics professor, Harald Uhlig. We wrote about it here.
What was Uhilg’s sin? He wrote a series of tweets criticizing Black Lives Matters’ call to defund police departments. That’s all.
Cook was one of the leaders in the resulting character assassination that led to firing Uhlig. She said free speech “should have its limits” and accused Uhlig of using it to “spread hatred and violate the dignity of other people.”
Nationally recognized legal scholar Jonathan Turley called the Chicago Fed affair “one of the most notorious cancel campaigns” he has covered in his work defending free speech. Uhlig himself described the matter in the Wall Street Journal, listing it among other reasons why she should not be promoted to the Fed.
Senators opposed to Cook’s nomination are furious about not only the Chicago Fed affair but the rest of Cook’s record on free speech, race and political activism. Sen. Pat Toomey (R-PA), the ranking member of the Senate Banking Committee, said this about Cook on the Senate Floor:
Professor Cook’s history of extreme left-wing political advocacy and hostility to opposing viewpoints also makes her unfit to serve on the Fed….
Professor Cook’s record indicates that she is likely to inject further political bias into the Fed’s work—at a time when hyper-focus on inflation and adherence to the Fed’s dual mandate is at its most critical.
In over 30,000 public tweets and retweets, Professor Cook has supported race-based reparations, promoted conspiracies about Georgia voter laws, and sought to cancel those who disagree with her views, such as publicly calling for the firing of an economist who dared to tweet that he opposed defunding the Chicago police.
After Banking Committee Republican staff highlighted these tweets for the public’s attention, Professor Cook blocked the Banking Committee Republican Twitter account—one day before her nomination hearing. Apparently Prof. Cook not only realizes how inflammatory her own tweets are, but also has no regard for the Senate’s constitutional responsibility to vet her public statements.
Cook indeed has no background or work history in monetary affairs. That concentration is increasingly displaced by woke politics at the national Fed board and the Chicago Fed. Here’s how the Chicago Fed describes itself in its About web page:
The Bank takes a holistic approach to its varied responsibilities, seeking to connect its internal and external practices with key initiatives that include:
Inflation is now at a 40-year high, thanks in large part to the Fed’s creation, out of thin air, of some $5 trillion dollars just in the last three years. Would it be asking too much for Fed nominees to be expert in monetary policy — or at least have some common sense — instead of a record opposing free speech and promoting racial division? Apparently, it is. The Senate appears likely to approve Cook’s nomination, voting on party lines.
Uhlig recently asked these more specific questions about Cook, the answers to which should be obvious:
Should these activist stances be a cause of concern, before appointing someone to one of the highest offices in the country? I do think so. Might she use her then considerable power to shut down speech and disagreement in the Federal Reserve and elsewhere? Is it reasonable to appoint a person as Fed Governor, who so forcefully spoke up against someone critical of defunding the police, when some police protection might occasionally be welcome to, say, help guard the gold reserves and cash delivery trucks, protect bank employees and assure the safety of buildings?
What, then, will happen, when she is appointed Governor? Will Fed researchers continue to speak freely about their findings concerning racial disparities or the importance of policing, or will speech by sullied, for fear of taking a wrong step and seeing a career come to an end? To the degree that these issues matter for monetary policy at all, will the Board be provided with a balanced and reasoned assessment by its researchers, or will only an activist voice be welcome?
*Mark Glennon is founder of Wirepoints.
Tyler Durden
Sat, 04/02/2022 – 17:30 - Ghislaine Maxwell Pedo Conviction Upheld Despite Juror's Post-Verdict Admission
Ghislaine Maxwell Pedo Conviction Upheld Despite Juror’s Post-Verdict Admission
Jeffrey Epstein’s “partner in crime” won’t get a new sex trafficking trial, despite one of the jurors – a Carlyle Group staffer – admitting he may have influenced the jury with a tale of his own childhood sexual abuse that materialized during deliberations despite checking “no” on the juror questionnaire.
The juror told news interviews that he had talked about this during jury deliberations to show why the memories of Maxwell’s accusers may not have been perfect.
He told the Reuters news agency that he did not remember being asked about his experiences with sexual abuse when he filled in the juror questionnaire, insisting he would have answered honestly. –Sky News
Maxwell had requested a retrial after she was convicted of helping late financier and convicted pedophile Jeffrey Epstein abuse underage girls.
During a March hearing, the juror said he had ‘rushed’ through the questionnaire, and made a mistake when he claimed he hadn’t been the victim of sexual abuse or assault.
The juror said in the questionnaire that he had not been sexually abused (via Sky News) Maxwell’s attorneys argued that the juror would have been excluded from the trial had he answered correctly, and that the false statement tainted the trial. Prosecutors said there was no proof that the juror was biased – which US Circuit Judge Alison Nathon agreed with.
According to Nathan, ‘Juror 50’ had testified “credibly and truthfully” at a March hearing to address the matter.
“His failure to disclose his prior sexual abuse during the jury selection process was highly unfortunate, but not deliberate,” wrote Nathan on Friday. “The court further concludes that Juror 50 harboured no bias toward the defendant and could serve as a fair and impartial juror.”
Maxwell’s attorneys have not addressed Friday’s decision, but have previously said they will appeal the conviction.
If the verdict sticks, Maxwell faces as many as 65 years in prison after being convicted on five of six counts related to the sex-trafficking scheme.
Tyler Durden
Sat, 04/02/2022 – 17:00 - Pentagon Clarifies There's No "Offensive" Bioweapons At US-Linked Ukraine Labs
Pentagon Clarifies There’s No “Offensive” Bioweapons At US-Linked Ukraine Labs
Authored by Dave DeCamp via AntiWar.com,
A Pentagon official told Congress on Friday that there are no “offensive” biological weapons in any of the dozens of US-linked labs in Ukraine.
“I can say to you unequivocally there are no offensive biologic weapons in the Ukraine laboratories that the United States has been involved with,” Deborah Rosenbaum, the assistant secretary of defense for nuclear, chemical, and biological defense programs, told the House Armed Services subcommittee.
The Stepnogorsk biological weapons complex in Kazakhstan. Image source: DOD. The Pentagon funds labs in Ukraine through its Defense Threat Reduction Agency (DTRA). According to a Pentagon fact sheet released last month, since 2005, the US has “invested” $200 million in “supporting 46 Ukrainian laboratories, health facilities, and diagnostic sites.”
Moscow has accused Ukraine of conducting an emergency clean-up of a secret Pentagon-funded biological weapons program when Russia invaded. The World Health Organization said it advised Ukraine to destroy “high-threat pathogens” around the time of the invasion.
For their part, the US maintains that the program in Ukraine and other former Soviet states is meant to reduce the threat of biological weapons left over from the Soviet Union. While downplaying the threat of the labs, Pentagon officials have also warned that they could still contain Soviet-era bioweapons.
Robert Pope, the director of the DTRA’s Cooperative Threat Reduction Program, told the Bulletin of the Atomic Scientists in February that the labs might contain Soviet bioweapons and warned that the fighting in Ukraine could lead to the release of a dangerous pathogen.
Ukraine has “biological research facilities,” says Undersecretary of State Victoria Nuland, when asked by Sen Rubio if Ukraine has biological or chemical weapons, and says she’s worried Russia may get them. But she says she’s 100% sure if there’s a biological attack, it’s Russia. pic.twitter.com/uo3dHDMfAS
— Glenn Greenwald (@ggreenwald) March 8, 2022
https://platform.twitter.com/widgets.js
The Biden administration has tried to portray any concerns about the labs as “Russian propaganda.” When the issue gained more media attention, Biden officials started accusing Moscow of plotting to use chemical or biological weapons, but the US hasn’t presented any evidence to back up its claims.
Tyler Durden
Sat, 04/02/2022 – 16:30 - Tech Rout Leads To Record 34% Loss At Tiger Global's Hedge Fund
Tech Rout Leads To Record 34% Loss At Tiger Global’s Hedge Fund
Back in December, when stocks were still trading at all time highs and few traders were concerned about selling, we waved goodbye to liquidity and wrote that “one of the main reasons sophisticated, wealthy investors would pick hedge funds over private equity firms to manage their wealth – despite variances in fee schedules of course – is access to near immediate liquidity: unlike PE funds which lock up capital for years, hedge funds provide clients with the option to cash out just days or weeks after sending in their redemption request – after all, the money is in “public” equities which can be sold with the flick of a switch. However, as a result of the unprecedented bifurcation of the hedge fund market, where the vast majority of hedge funds continue to underperform their benchmarks and are bleeding AUM while a handful of giant multi-strat funds are swimming in profits, have long lines of willing investors and can therefore change the rules at will without fear of losing clients, access to liquidity at the best performing hedge funds is about to become a thing of the past.”
We were referencing the recent quiet transitions taking place among some of the world’s best performing, and most levered hedge funds…
… such as Millennium and Citadel, which are gradually transitioning away from a conventional redemption schedule toward draconian, PE-like lock ups as long as 5 years. That means that if you send in your redemption notice now, you may get your money some time in 2027, if you are lucky.
Millennium and Citadel were not the only ones that can impose whatever terms they want on their naive clients, who are willing to accept never again seeing their money because if there is a crash and either of these funds is impaired or worse, has an LTCM moment, the probability that the money will be there in 5 years is nil. According to Bloomberg, at least four other large multi-manager funds have changed their terms or started new share classes this year, all extending the time it takes for investors to get out.
But while it is obvious why funds would seek such long lock ups, why are clients agreeing to this format? Well, as Bloomberg explained at the time, investors are complying because, in an industry where many funds have underperformed, these managers produce the steadiest returns and to the winner go the spoils.
“Part of it is just because they can,” said Rishabh Bhandari, a senior portfolio manager at Capstone Investment Advisors, which runs multi-strategy funds as part of its $9.4 billion portfolio. Bhandari added that investments on average have become riskier and less liquid.
* * *
Well, just four months later, following the most brutal bear market in tech names since the covid crash, it has become all too clear why hedge funds are seeking to lock clients in for as long as possible: take one of the world’s most prominent tech investors, Chase Coleman’s Tiger Global, where things have gone from bad to worse very, very fast.
According to Bloomberg, Tiger’s flagship hedge fund fell nearly 34% in the first quarter, due to poor-performing stocks and markdowns of private holdings. But mostly due to poor-performing stocks, i.e., the tech crash.
The hedge fund tumbled more than 13% in March, according to a person familiar with the matter, capping three straight losing months and a tough 2021. The decline was 7% last year, its first annual drop since 2016.
Tiger Global’s long-only fund sank about 36% in the first quarter, while its Crossover fund, which invests in public and private companies, fell about 21%, according to the letter.
“Stock declines in our focus areas have been steeper, faster, and longer lasting than in prior drawdowns,” the firm said in Friday’s letter, signed by the investing team. While Tiger Global’s shorts generated gains, “they have not kept pace with the decline in our longs.”
Considering that the hedge funds held more than $50 billion in tech names, the dismal Q1 performance is actually surprisingly good. A quick look at Tiger’s 13F shows why a 34% drop is actually surprisingly low for a hedge funds who only holdings are some of the highest beta names, both in the US and in China.
Tiger Global Management 13F All of Tiger Global’s biggest stock holdings at year-end, including JD.com and Microsoft, have declined this year and most fell by double digits, with many sliding into a bear market if not far worse.
In addition to the public mauling, Tiger also “adjusted valuations down” for its private investments to account for pressure on their public-market peers, the firm said in the letter, although it is unlikely that the firm applied nearly the right haircuts on its private investments. The hedge fund owns shares of private companies including ByteDance, Stripe, Checkout, and Databricks.
“In hindsight, we should have sold more shares across our portfolio in 2021 than we did,” the firm said. “We are reassessing and refining our models using all the inputs available to us.”
Yes, Tiger, in hindsight you should have been selling more shares starting as far back as July when we first reported that Goldman had been doing just that as it was quietly liquidating a quarter of its prop equity investments, or a net of $4 billion…
… a number which more than doubled by year-end, at which point Goldman indicated a net $11 billion in “dispositions.”
But nobody cared, and the party continued. Then everything crashed, and suddenly everyone cares, and the fingerpointing begins.
“In this moment, we are humbled, but steady in our conviction and confident about the go-forward opportunity,” the firm wrote.
The question is whether the firm’s clients share this view and whether Tiger’s latest catastrophic performance will lead to a reassessment of capital allocations. The good news is that the firm manages $35 billion across its hedge, long-only and crossover funds, while the rest of the assets are in its rapidly expanding venture-capital unit. Tiger also said it recently closed its PIP 15 venture fund with $12.7 billion. The bad news is that after losing more than third of their assets in one quarter, LPs won’t be happy and many of them will see to redeem what money they have left especially with the Fed facing down at least 9 more rate hikes which will crippled tech stocks.
Luckily for Tiger, we are confident that it, along with Millennium and Citadel, has locked its clients in for a long time. If not, however, brace for impact as the waterfall of redemptions will lead to relentless selling among the formerly best performing tech stocks for the foreseeable future, leading to a feedback loop where more redemptions lead to more selling, leading to more redemptions and so on.
Tyler Durden
Sat, 04/02/2022 – 16:00 - The 19 Millionth Bitcoin Has Been Mined: Why It Matters
The 19 Millionth Bitcoin Has Been Mined: Why It Matters
Authored by ‘NAMCIOS’ via BitcoinMagazine.com,
With less than two million bitcoin left to be mined, Bitcoin’s limited supply has just gotten even more limited…
The 19 millionth bitcoin has just been mined, data from Bitbo shows, leaving less than two million BTC remaining for miners to put in circulation as the Bitcoin network tick-tocks its way through a fixed issuance schedule until it reaches the 21 million supply limit and doesn’t create any new bitcoin ever again.
The milestone demonstrates how Bitcoin’s creator, Satoshi Nakamoto, was able to join together decades of research in different areas of computer science to achieve scarcity in the digital realm, a unique feature central to Bitcoin’s value proposition.
Before Bitcoin, digital cash suffered from the flaw of double spending. Until its creation, the only way to ensure a party wouldn’t spend money twice was through a central authority that had to keep track of coins being sent and received thereby updating users’ balances – much like the traditional financial system. However, Nakamoto’s invention, through the usage of the Proof-of-Work (PoW) mechanism in a distributed ledger, enabled computers running a piece of software to enforce strict spending conditions that prevented a digital representation of value to be spent twice for the first time – or at least made it prohibitively expensive to do so.
While miners and nodes together work through the issuance and enforcement of bitcoin, investors interested in acquiring ever-more scarce BTC have to bid their way through the limited supply of the asset. Historically, miners used to offload their freshly minted bitcoin on the market to cover operating expenses in U.S. dollars, however, nowadays it has become commonplace to see mining companies add their produced coins to their balance sheet and issue bitcoin-backed loans as needed. As a result, Bitcoin has gotten even more scarce as a larger percentage of the total bitcoin supply gets locked up long term.
Currently, a miner earns 6.25 BTC per block mined. The block reward, as it is called, has been cut in half every 210,000 blocks – roughly every four years – ever since Nakamoto mined the first one which yielded a 50 BTC reward. Now, ever less new bitcoin are distributed each epoch, further increasing the scarcity of the asset. Therefore, even though it has taken roughly a dozen years to mine 19 million bitcoin, the remaining 2 million won’t be minted until 2140 if the protocol remains as is today.
Curiously, the 21 million supply cap of the Bitcoin protocol isn’t written in its white paper or its code. Rather, it is the ever-decreasing number of bitcoin rewarded by each block in conjunction with the decentralized network of computers enforcing that reward that allows the network to implicitly prevent the issuance of bitcoin above the limit.
“Bitcoin implementations control new issuance by checking that each new block does not create more than the allowed block subsidy,” cypherpunk and Casa co-founder and CTO, Jameson Lopp, wrote in a blog post.
By ensuring that bitcoin cannot be spent twice and that the block reward does not yield more than it should at any given time, the distributed network of Bitcoin nodes can indirectly enforce the supply limit as the block reward trends towards zero over the next century.
In addition to bringing scarcity to the digital realm, Bitcoin therefore also enables a predictable monetary policy scheduled ahead of time, which breaks away from the current monetary system where governments and policymakers can increase the issuance of money as we’ve tangibly experienced over the past couple of years. As a result, currency debasement is not possible in Bitcoin and its users’ purchasing power is protected.
This image plots the trajectory of Bitcoin’s total supply (blue) against its rate of monetary inflation (yellow). Notably, Bitcoin’s inflation rate is known ahead of time through a software protocol enforced by thousands of computers scattered around the globe. As the block reward trends to zero until the next century, new bitcoins will not be issued and miners would reap only the fees of transactions on the Bitcoin blockchain. Image source: BashCo.
In addition to protecting people’s purchasing power, with its predictable policy Bitcoin enables planning for the future as users can rest assured that nobody will debase their money. Important developments in society are arguably enabled by a strong commitment to long-term work and investment, rather than short-term bets.
But given the paramount scarcity of BTC, why has its price been trading in a range between $30,000 and $60,000 over the past year?
The Bitcoin price in U.S. dollars can be thought of as a lagging indicator of humanity’s understanding of the technology and its innovative value proposition. Currently, only a small percentage of the world’s population truly grasp the unique concepts of programmatically decentralized and scarce money, so while the Bitcoin price might trend to infinity over the long term, that won’t likely become a reality until most of the global population – or most of the world’s capital – starts understanding that. When they do, a sharp supply shock might ensue as an unlimited amount of money flows into a limited amount of bitcoin.
Tyler Durden
Sat, 04/02/2022 – 15:30 - Tesla Reports 310,048 Deliveries For Q1 2022, Model 3 Deliveries Slip Sequentially
Tesla Reports 310,048 Deliveries For Q1 2022, Model 3 Deliveries Slip Sequentially
Tesla reported Q1 2022 delivery figures this weekend, posting a record 310,048 deliveries for the first quarter. The results were posted on Saturday and slightly exceeded expectations, which stood at an average of 309,158 deliveries, according to Bloomberg.
Tesla said the record was “despite ongoing supply chain challenges and factory shutdowns”.
The share of Model S/X of total global vehicles continues to wane at 14,724 deliveries for the quarter. This represented 4.7% of all total deliveries.
Model 3 deliveries dropped slightly from the prior quarter, as Model S/X took up slightly more of the company’s total deliveries.
Recall, to end 2021, Tesla reported a record quarter of over 308,000 vehicles.
For 2021, the automaker delivered “over 936,000” vehicles. Those numbers were up about 87% from the year prior, according to Bloomberg. The report also reminded that Tesla has said “repeatedly it expects 50% annual increases in deliveries over a multi-year period”.
For Q1 2022 – that was not yet the case. Deliveries were up less than 50% from Q1 2021’s total of 182,780.
Recall, in March we noted that GLJ Research analyst Gordon Johnson had said that Tesla’s Q1 2022 delivery estimates “may need to be revised lower”. Earlier in the month, we reported that Tesla officially sold 56,515 Chinese made vehicles in February, according to data from the China Passenger Car Association (CPCA).
Jonson had called into question the distribution of how the China-made vehicles were sold in a note to clients in early March:
“In short, in the opposite of what many TSLA pundits expected to occur, an increasingly larger portion of TSLA’s made-in-China cars are being exported to global markets, calling into question both: (a) the viability of TSLA’s demand inside of China, and (b) TSLA’s gross margins later this year given Germany is the most expensive place in the World to mass produce automobiles.”
He also noted the impact of rising nickel prices on the auto manufacturer, stating that based on his analysis and checks with traders and EV experts in London/Shanghai, that current nickel prices “equate to ~$998.97/car in added costs for TSLA”.
But the nickel theory has apparently been debunked, thanks to a little known “secret deal” that Tesla reportedly has with miner Vale for supply of nickel that we wrote about just days ago.
But Johnson’s assertions of Tesla’s Q1 2022 numbers were pretty close. He stated in March that he expected a material revision lower in first quarter 2022 production estimates. Johnson said that estimates were too high by “at least 12k to 20k vehicles”, and he put Tesla’s Q1 2022 delivery number at an estimate of 304k to 312k.
Tyler Durden
Sat, 04/02/2022 – 15:00 - Edging Towards A Gold Standard
Edging Towards A Gold Standard
Authored by Alasdair Macleod via GoldMoney.com,
Commentators are trying to make sense of Russian moves… However, there is a back story which differs from much of the speculation, which this article addresses.
The Russians have not put the rouble on some sort of gold standard. Instead, they have repeated the Nixon/Kissinger strategy which created the petrodollar in 1973 by getting the Saudis to agree to accept only dollars for oil. This time, nations deemed by Russia to be unfriendly will be forced to buy roubles – roughly 2 trillion by the EU alone based on last year’s natural gas and oil imports from Russia — driving up the exchange rate. The rouble has now doubled against the dollar from its low point of RUB 150 to RUB 75 yesterday in just over three weeks. The Russian Central Bank will soon be able to normalise the domestic economy by reducing interest rates and removing exchange controls.
The Russians and Chinese will be acutely aware that Western currencies, particularly the yen and euro, are likely to be undermined by recent developments. The financial war, which has always been in the background, is emerging into plain sight and becoming a battlefield between fiat currencies, and it is full on.
The winner by default is almost certainly gold, now the only reliable reserve asset for those not aligned with Russia’s “unfriendlies”. But it is still a long way from backing any currency.
Putin is losing the battle for Ukraine
President Putin is embattled. His army as let him down — it turns out that his generals lack the necessary leadership qualities, the squaddies are suffering from lack of food, fuel, and are suffering from frostbite. It is reported that one brigade commander, Colonel Yuri Medvedev, was deliberately run down by one of his own men in a tank, a measure of the chaos at the front line. And Putin is not the first national leader to have misplaced his confidence in military forces.
Conventional wisdom (from Carl von Clausewitz, no less) suggested Putin might win the battle for Ukraine but would be unable to hold the territory. That requires the willingness of the population to accept defeat, and a lesson the Soviets had learned in Afghanistan, with the same experience repeated by America and the UK. But Putin has not even won the battle and word from the Kremlin is of accepting a face-saving fall-back position, perhaps taking Donetsk and the coast of the Sea of Azov to join it up with Crimea.
There was little doubt that if Putin came under pressure militarily, he would probably step up the commodity and financial war. This he has now done by insisting on payments in roubles. The mistake made in the West was to believe that Russia must sell commodities, and even though sanctions harm the West greatly, the strategy is to put maximum pressure on the Russian economy for a quick resolution. It is obviously flawed because Russia can still trade with China, India, and other significant economies. And thanks to rising commodity prices the Russian economy is not in the bad place the West believed either.
Besides nations representing 84% of the world’s population standing aside from the Western alliance’s sanctions and with some like India sorely tempted to buy discounted Russian oil, we would profit from paying attention to some very basic factors. Russia can certainly afford to sell oil at significant discounts to market prices, and there are buyers willing to break the American-led embargoes. The non-Western world is no longer automatically on-side with American hegemony; that is a rotting hulk which the Americans are desperately trying to keep afloat. Observing this, the Kremlin seems relaxed and has said that it is willing to accept currencies from its friends, but Western enemies (the “unfriendlies”) would have to pay for oil in roubles or, it has also been suggested, in gold.
On 23 March the Kremlin drew up a list of these unfriendly countries, which includes the 27 EU members, Switzerland, Norway, the United States, the United Kingdom, Canada, Australia, New Zealand, Japan, and South Korea.
Payment in roubles is easy to understand. We can assume that all oil and natural gas long-term supply contracts with the unfriendlies have force majeure clauses, because that is normal practice. In the light of sanctions, the Russians are entitled to claim different payment terms. And it is this that the Russians are relying upon for insisting on payment in roubles.
Germany, for example, would have to buy roubles on the foreign exchanges to pay for her gas. Buying roubles supports the currency, and this was the tactic that created the petrodollar in 1973 when Nixon and Kissinger persuaded the Saudis to take nothing else but dollars for oil. It was that single move which more than anything confirmed the dollar as the world’s international and reserve currency in the aftermath of the temporary suspension of the Bretton Woods Agreement. That’s not quite the objective here; it is to not only underwrite the rouble, but to drive it higher relative to other currencies. The immediate effect has been clear, as the chart from Bloomberg below shows.
Having halved in value against the dollar on 7 March, all the rouble’s fall has been recovered. And that’s even before Germany et al buy roubles on the foreign exchanges to pay for Russian energy.
The gold issue is more complex. The West has banned not only Russian transactions settling in their currencies but also from settling in gold. The assumption is that gold is the only liquid asset Russia has left to trade with. But just as ahead of the end of the cold war Western intelligence completely misread the Soviet economy, it could be making a mistake again. This time, intel seems to be misled by full-on Keynesian macro analysis, suggesting the Russian economy is vulnerable when it is inherently stronger in a currency shoot-out than even the dollar. There is no need for Russia to sell any gold at all.
The Russian economy has a broadly non-interventionist government, a flat rate of income tax of 13%, and a government debt of 20% of GDP. There are flaws in the Russian economy, particularly in the lack of respect for property rights and the pervasive problem of the Russian Mafia. But in many respects, Russia’s economy is like that of the US before 1916, when the highest income tax rate was 15%.
An important difference is that the Russian government gets substantial revenues from energy and commodity exports, taking its income up to over 40% of GDP. While export volumes of energy and other commodities are being hit by sanctions, their prices have risen substantially. But it remains to be seen what form of money or currency for future payments will be used for over $550bn equivalent of exports, while $297bn of imports will be substantially reduced by sanctions, widening Russia’s trade surplus considerably. Euros, yen, dollars, and sterling are ruled out, worthless in the hands of the Central Bank. That leaves Chinese renminbi, Indian rupees, weakening Turkish lira and that’s about it. It’s hardly surprising that Russia is prepared to accept gold. Putin’s view on the subject is shown in Figure 1 of stills taken from a Tik Tok video released last weekend.
Furthermore, Russia’s official reserves are only a small part of the story. Simon Hunt of Simon Hunt Strategic Services, who I have found to be consistently well informed in these matters, is convinced based on his information that Russia’s gold reserves are significantly higher than reported — he thinks 12,000 tonnes is closer to the mark.
The payment choice for those on Russia’s unfriendly list, if we rule out gold, is effectively of only one — buy roubles to pay for Russian energy. By sanctioning the world’s largest energy exporter, the effect on energy prices in dollars is likely to drive them far higher yet. Additionally, market liquidity for roubles is likely to be restricted, and the likelihood of a bear squeeze on any shorts is therefore high. The question is how high?
Last year, the EU imported 155 billion cubic meters of natural gas from Russia, valued at about $180bn at current volatile prices. Oil exports from Russia to the EU were about 2.3 million barrels per day, worth an additional $105bn for a combined total of $285bn, which at the current exchange rate of RUB 75.5 is RUB 2.15 trillion. EU Gas consumption is likely to fall as spring approaches, but payments in roubles will still drive the exchange rate significantly higher. And attempts to obtain alternative sources of LNG will take time, be insufficient, and serve to drive natural gas prices from other suppliers even higher.
For now, we should dismiss ideas over payments to the Russians in gold. The Russian gold story, initially at least, is a domestic issue. Though it might spill over into international markets.
On 25 March, Russia’s central bank announced it will buy gold from credit institutions at a fixed rate of 5,000 roubles per gramme starting this week and through to 30 June. The press release stated that it will enable “a stable supply of gold and smooth functioning of the gold mining industry.” In other words, it allows banks to continue to lend money to gold mining and related activities, particularly for financing new gold mining developments. Meanwhile, the state will continue to accumulate bullion which, as discussed above, it has no need to spend on imports.
When the RCB’s announcement was made the rouble was considerably weaker and the price offered by the central bank was about 20% below the market price. But that has now changed. Based on last night’s exchange rate of 75.5 roubles to the dollar (30 March) and with gold at $1935, the price offered by the central bank is at a premium of 7.2% to the market. Whether this opens the situation up to arbitrage from overseas bullion markets is an intriguing question. And we can assume that Russian banks will find ways of acquiring and deploying the dollars to do so through their offshore facilities, until, under the cover of a strong rouble, the RCB removes exchange controls.
There is nothing in the RCB’s statement to prevent a Russian bank sourcing gold from, say, Dubai, to sell to the central bank. Guidance notes to which we cannot be privy may address this issue but let us assume this arbitrage will be permitted, because it might be difficult to stop. And if Russia does have undeclared bullion reserves more than those allegedly held by the US Treasury, then given that the real war is essentially financial, it is in Russia’s interest to see the gold price rise in dollars.
Not only would Eurozone banks be scrambling to obtain roubles, but the entire Western banking system, which takes the short side of derivative transactions in gold will find itself in increasing difficulties. Normally, bullion banks rely on central banks and the Bank for International Settlements to backstop the market with physical liquidity through leases and swaps. But the unfortunate message from the West to every central bank not on Russia’s unfriendly list is that London’s or New York’s respect for ownership rights to their nation’s gold cannot be relied upon. Not only will lease and swap liquidity dry up, but it is likely that requests will be made for earmarked gold in these centres to be repatriated.
In short, Russia appears to be initiating a squeeze on gold derivatives in Western capital markets by exploiting diminishing faith in Western institutions and their cavalier treatment of foreign property rights. By forcing the unfriendlies into buying roubles, the RCB will shortly be able to reduce interest rates back to previous policy levels and remove exchange controls. At the same time, the inflation problems faced by the West will be ameliorated by a strong rouble.
It ties in with the politics for Putin’s survival. Together with the economic benefits of an improving exchange rate for the rouble and the relatively minor inconvenience of not being able to buy imports from the West (alternatives from China and India will still be available) Putin can retreat from his disastrous Ukrainian campaign. Senior figures in the Russian army will be disciplined, imprisoned, or disappear accused of incompetence and misleading Putin into thinking his “special operation” would be quickly achieved. Putin will absolve himself of any blame and dissenters can expect even greater clampdowns on protests.
Russia’s moves are likely to have been thought out in advance. The move to support the rouble is evidence it is so, giving the central bank the opportunity to reverse the interest rate hike to 20% to protect the rouble. Foreign exchange controls on Russians can shortly be lifted. Almost certainly the consequences for Western currencies were discussed. The conclusion would surely have been that higher energy and other Russian commodity prices would persist, driving Western price inflation higher and for longer than discounted in financial markets. Western economies face soaring interest rates and a slump. And depending on their central bank’s actions, Japan and the Eurozone with negative interest rates are almost certainly most vulnerable to a financial, currency, and economic crisis.
The impact of Russia’s new policy of only accepting roubles was, perhaps, the inevitable consequence of the West’s policies of self-immolation. From Russia’s failure in Ukraine, Putin appears to have had little option but to go on the offensive and escalate the financial, or commodity-currency war to cover his retreat. We can only speculate about the effect of a strong rouble on the international gold price, but if Russian banks can indeed buy bullion from non-Russian sources to sell to the RCB, it would mark a very aggressive move in the ongoing financial war.
China’s position
China will be learning unpalatable lessens about its ambition to invade Taiwan, and Taiwan will be encouraged mightily by Ukraine’s success at repelling an unwelcome invader. A 100-mile channel is an enormous obstacle for a Chinese invasion that Russia didn’t have to navigate before Ukrainian locals exploited defensive tactics to repel the invader. There can now be little doubt of the outcome if China tried the same tactics against Taiwan. President Xi would be sensible not to make the same mistake as Putin and tone down the anti-Taiwan rhetoric and try the softer approach of friendly relations and economic integration to reunite Chinese interests.
That has been a costless lesson for China, but another consideration is the continuing relationship with Russia. The earlier Chinese description of it made sense: “We are not allies, but we are partners”. What this means is that China would abstain rather than support Russia in the various supranational forums where the world’s leaders gather. But she would continue to trade with Russia as normal, even engaging in currency swaps to facilitate it.
More recently, a small crack has appeared in this relationship, with China concerned that US and EU sanctions might be extended to Chinese entities in joint ventures with Russian businesses linked to sanctioned oligarchs and Putin supporters. The highest profile example has been the suspension of a joint project to build a petrochemical plant in Russia involving Sinopec, because of the involvement of Gennady Timchenko, a close ally of Putin. But according to a report from Nikkei Asia, Sinopec has confirmed it will continue to buy Russian crude oil and gas.
As always with its geopolitics, we can expect China to play its hand with great care. China was prepared for the consequences of US monetary policy in March 2020 when the Fed reduced its funds rate to zero and instituted quantitative easing of $120bn every month. By its actions it judged these moves to be very inflationary, and began stockpiling commodities ahead of dollar price rises, including energy and grains to project its own people. The yuan has risen against the dollar by about 11%, which with moderate credit policies has kept annualised domestic price inflation subdued to about 1% currently, while consumer price inflation in the West is soaring out of control.
China is not therefore in the weak financial position of Russia’s “unfriendlies”; the highly indebted governments whose finances and economies are likely to be destabilised by rising energy prices and interest rates. But it does have a potential economic crisis on its hands in the form of a collapsing property market. In February, its response was to ease the credit restrictions imposed following the initial pandemic recovery in 2021, which had included attempts to deleverage the property sector.
Property aside, we can assume that China will not want to destabilise the West by her own actions. The West is doing that very effectively without China’s assistance. But having demonstrated an understanding of why the West is sliding into an inflation crisis of its own making China will be keen not to make the same mistakes. Her partnership with Russia, as joint leaders in the Shanghai Cooperation Organisation, is central to detaching herself from what its Maoist economists forecast as the inevitable collapse of imperial capitalism. Having set itself up in the image of that imperialism, it must now become independent from it to avoid the same fate.
Gold’s wider role in China, Russia, and the SCO
Gold has always been central to China’s fallback position. I estimated that before permitting its own people to buy gold in 2002, the state had acquired as much as 20,000 tonnes. Subsequently, through the Shanghai Gold Exchange the Chinese public has taken delivery of a further 20,000 tonnes, mainly through imports from outside China. No gold escapes China, and the Chinese government is likely to have added to its hoard over the last twenty years. The government maintains a monopoly on refining and has stimulated the mining industry to become the largest national producer. Together with its understanding of the West’s inflationary policies the evidence is clear: China is prepared for a world of sound money with gold replacing the dollar’s hegemony, and it now dominates the world’s physical market with that in mind.
These plans are shared with Russia, and the members, dialog partners and associates of the Shanghai Cooperation Organisation — almost all of which have been accumulating gold reserves. Mine output from these countries is estimated by the US Geological Survey at 830 tonnes, 27% of the global total.
The move away from pure fiat was confirmed recently by some half-baked plans for the Eurasian Economic Union and China to escape from Western fiat by setting up a new currency for cross-border trade backed partly by commodities, including gold.
The extent of “off balance sheet” bullion is a critical issue, because at some stage they are likely to be declared. In this context, the Russian position is important, because if Simon Hunt, quoted above, is correct Russia could have more gold than the US’s 8,130 tonnes, which it is widely thought to overstate the latter’s true position. Furthermore, Western central banks routinely lease and swap their gold reserves, leading to double counting, which almost certainly reduces their actual position in aggregate. And if fiat currencies continue to decline we could find that the two ringmasters for the SCO have more monetary gold than all the other central banks put together — something like 30,000-40,000 tonnes for Chinese and Russian governments, compared with perhaps less than 20,000 tonnes for Russia’s adversaries (officially ,the unfriendlies own about 24,000 tonnes, but we can assume that at least 5,000 of that is double counted or does not exist due to leasing and swaps).
The endgame for the yen and the euro
Without doubt, the terrible twins in the major fiat currencies are the yen and the euro. They share much in common: negative interest rates, major commercial banks highly leveraged with asset to equity ratios averaging over twenty times, and central bank balance sheets overloaded with bonds which are collapsing in value. They now face rising interest rates spiralling beyond their control, the consequences of the ECB and Bank of Japan being trapped under the zero bound and being in denial over falling purchasing power for their currencies.
Consequently, we are seeing capital flight, which has accelerated dramatically this month for the yen, but in truth follows on from relative weakness for both currencies since the middle of 2021 when global bond yields began rising. Statistically, we can therefore link the collapse of both currencies on the foreign exchanges with rising bond yields. And given that rising interest rates and bond yields are in their early stages, there is considerable currency weakness yet to come.
Japan and its yen
The Bank of Japan has publicly stated it would buy an unlimited amount of 10-year Japanese Government Bonds at a 0.25% yield to contain the bond sell-off. A higher yield would be more than embarrassing for the BOJ, already requiring a recapitalisation, presumably with its heavily indebted government stumping up the money. Figure 2 shows that the 10-year JGB yield is already testing the 0.25% yield level (charts from Bloomberg).
Fig 2. JGB yields hits BoJ Limit and Yen collapsing
As avid Keynesians, the BOJ is following similar policies to that of John Law in 1720’s France. Law issued fresh livres which he used to prop up the Mississippi venture by buying shares in the market. The bubble popped, the venture survived, but the livre was destroyed.
Today, the BOJ is issuing yen to prop up the Japanese government bond market. As the issuer of the currency, the BOJ is by any yardstick bankrupt and in desperate need of new capital. Since it commenced QE in 2000, it has accumulated so much government and corporate debt, and even equities bundled into ETFs, that the falling value of the BOJ’s holdings makes its liabilities significantly greater than its assets, currently to the tune of about ¥4 trillion ($3.3bn).
Ignoring the cynic’s definition of madness, the BOJ is doubling down on its commitment, announcing on Monday further unlimited purchases of 10-year JGBs at a fixed yield of 0.25%. In other words, it is supporting bond prices from falling further, echoing Mario Draghi’s “whatever it takes” and confirming its John Law policy. Last Tuesday’s Summary of Opinions at the Monetary Policy Meeting on March 17 and 18 had this gem:
“Heightened geopolitical risks due to the situation surrounding Ukraine have caused price rises of energy and other items, and this will push down domestic demand while raising the CPI. Under the circumstances, it is necessary to improve labour market conditions and provide stronger support for wage increases, and therefore it is increasingly important that the bank persistently continue with the current monetary easing.”
No, this is not satire. In other words, the BOJ’s deposit rate will remain negative. And the following was added from Government Representatives at the same meeting:
“The budget for fiscal 2022 aims to realise a new form of capitalism through a virtual circle of growth and distribution and the government has been making efforts to swiftly obtain the Diet’s approval.”
A virtuous circle of growth? It seems like intensified intervention. Meanwhile, Japan’s major banks with asset to equity ratios of over twenty times are too highly geared to survive rising interest rates without a bank credit crisis threatening to take them down. It is hardly surprising that international capital is fleeing the yen, realising that it will be sacrificed by the BOJ in the vain hope that it can continue to maintain bond prices far above where they should be.
The euro system and its euro
The euro system and the euro share similar characteristics to the BOJ and the yen: interest rates trapped under the zero bound, Eurozone G-SIBs with asset to equity ratios of over 20 times and market realities forcing interest rates and bond yields higher, as Figure 3 shows. Furthermore, Eurozone banks are heavily exposed to Russian and Ukrainian debt due to their geographic proximity.
Fig 3: Euro declining as bond yields soar
There are two additional problems for the Eurosystem not faced by the BOJ and the yen. The ECB’s shareholders are the national central banks in the euro system, which in turn have balance sheet liabilities more than their assets. The structure of the euro system means that in recapitalising itself the ECB does not have a government to which it can issue credit and receive equity capital in return, the normal way in which a central bank would refinance its balance sheet by turning credit into equity. Instead, it will have to refinance itself through the national central banks which being insolvent themselves in turn would have to refinance themselves through their governments.
The second problem is a further complication. The euro system’s TARGET2 settlement system reflects enormous imbalances which complicates resolving a funding crisis. For example, on the last figures (end-February), Germany’s Bundesbank was owed €1,150 billion through TARGET2, while Italy owed €568 billion. It would be in the interests of a recapitalisation for the Italian government to want its central bank to write off this amount, while the Bundesbank is already in negative equity without writing off TARGET2 balances. Germany’s politicians might demand the balances owed to the Bundesbank be secured. This problem is not insoluble perhaps, but one can see that political and public wrangling over these imbalances will only serve to draw attention to the fragility of the whole system and undermine public trust in the currency.
With Germany’s CPI now rising at 7.6% and Spain’s at 9.8%, negative deposit rates are wildly inappropriate. When the system breaks it can be expected to be sudden, violent and a shock to those in thrall to the euro system.
Conclusion
For decades, a showdown between an Asian partnership and hegemonic America has been building. We can date this back to 1983, when China began to accumulate physical gold having appointed the Peoples’ Bank for the purpose. That act was the first indication that China felt the need to protect itself from others as it ventured into capitalism. China has navigated itself through increasing American assertion of its hegemony and attempts to destabilise Hong Kong. It has faced obstacles to its lucrative export trade through tariffs. It has been cut off from Western markets for its advanced technology. China has resented having to use the dollar.
After Russia’s ill-advised invasion of Ukraine, it now appears that the invisible war over global financial resources and control is intensifying. The fuse has been lit and events are taking over. The destabilisation of the yen and the euro are now as certain as can be. While the yen is the victim of John Law-like market-rigging policies and likely to go the same way as France’s livre, perhaps the greater danger is for the euro. The contradictions in its set-up, and the destruction of Germany’s sound money principals in favour of the inflationism of the PIGS was always going to be finite. The ECB has got itself into a ridiculous position, and no amount of conjuring and cajoling of financial institutions can resolve the ECB’s own insolvency and that of all its shareholders.
History shows that there are two groups involved in a currency collapse. International holders take fright and sell for other currencies and assets they believe to be more secure. They drive the exchange rate lower. The second group is the public in a nation, those who use the currency for transactions. If they lose confidence in it, the currency can rapidly descend into worthlessness as ordinary people accelerate its disposal for anything tangible in a final crack-up boom.
In the past, an alternative currency was always the sounder one, one backed by and exchangeable for gold coin. That is so long ago that we in the West have mostly forgotten the difference between money, that is gold and silver, and unbacked fiat currencies. The great unknown has been how much abuse of money and credit it would take for the public to relearn the difference. Cryptocurrencies have alerted us, but they are not a widely accepted medium of exchange and don’t have the legal standing of gold and gold substitutes.
War is to be our wake-up call — financial rather than physical in character. Western central banks and their governments have been fiddling the books, telling us that currency debasement is good for us. That debasement has accelerated in recent years. But by upping the anti against Russia with sanctions that end up undermining the purchasing power of all the West’s major currencies, our leaders have called an end to the reign of fiat.
Tyler Durden
Sat, 04/02/2022 – 14:30
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