- Thousands Protest Against German COVID-19 Restrictions
Thousands Protest Against German COVID-19 Restrictions
Tyler Durden
Mon, 10/05/2020 – 02:45Thousands of demonstrators in southern Germany protested the federal government’s new social distancing restrictions over the weekend, reported Reuters.
Demonstrators in Konstanz protesting against the federal government Demonstrators were seen in Konstanz, a city on Lake Constance, in southern Germany, on Saturday and Sunday, were displeased by Chancellor Angela Merkel’s new restrictions to limit the size of gatherings.
“We want to act regionally, specifically and purposefully, rather than shutting down the whole country again – this must be prevented at all costs,” Merkel told a virtual news conference on Tuesday.
Merkel said she wants to avoid a full national lockdown as infection numbers are rising again in Europe’s largest economy. The lockdown from earlier this year crushed Germany’s economy into the worst recession on record, decimating small and medium-sized businesses.
Police said counter-demonstrators were also seen in Konstanz. These folks showed their support for the government’s virus response efforts to mitigate further spreading.
Between both groups, police said upwards of tens thousand demonstrators hit the streets over the weekend. By Sunday afternoon, the situation remained calm in southern Germany.
“So far, the situation is calm,” a police spokesman said.
Reuters said, “civil rights activists, anti-vaxxers, neo-Nazis and members of far-right groups, including the opposition party Alternative for Germany (AfD), were in attendance” this weekend.
Germany’s total cases surpassed 300,000 on Sunday as the reproduction value rose above 1.0 for the first time in about a week. Health Minister Jens Spahn recently announced new plans for rapid tests in critical areas, such as hospitals and nursing homes.
The latest resurgence in virus cases has been challenging for Germany to reopen its economy, resulting in a waning economic recovery.
Germany is not alone in rising cases. France, the UK, and Spain face a similar threat in rising infections, crushing virus-induced recessions, and increasing resistance to tougher social distancing measures.
h/t Bloomberg Approval of virus strategies to mitigate the spread is severely waning in the UK, France, and Spain.
h/t Bloomberg The longer the virus persists, and the more tougher governments become, the increasing chance social unrest could spark up again this fall.
- Eyewitness To The Agony Of Assange
Eyewitness To The Agony Of Assange
Tyler Durden
Mon, 10/05/2020 – 02:00Journalist John Pilger has spent the last three weeks watching Julian Assange’s extradition trial at London’s Old Bailey. He spoke with Arena Online’s editor, Timothy Erik Ström:
Q: Having watched Julian Assange’s trial firsthand, can you describe the prevailing atmosphere in the court?
The prevailing atmosphere has been shocking. I say that without hesitation; I have sat in many courts and seldom known such a corruption of due process; this is due revenge. Putting aside the ritual associated with ‘British justice’, at times it has been evocative of a Stalinist show trial. One difference is that in the show trials, the defendant stood in the court proper. In the Assange trial, the defendant was caged behind thick glass, and had to crawl on his knees to a slit in the glass, overseen by his guard, to make contact with his lawyers. His message, whispered barely audibly through face masks, was then passed by post-it the length of the court to where his barristers were arguing the case against his extradition to an American hellhole.
Consider this daily routine of Julian Assange, an Australian on trial for truth-telling journalism. He was woken at five o’clock in his cell at Belmarsh prison in the bleak southern sprawl of London. The first time I saw Julian in Belmarsh, having passed through half an hour of ‘security’ checks, including a dog’s snout in my rear, I found a painfully thin figure sitting alone wearing a yellow armband. He had lost more than 10 kilos in a matter of months; his arms had no muscle. His first words were: ‘I think I am losing my mind’.
I tried to assure him he wasn’t. His resilience and courage are formidable, but there is a limit. That was more than a year ago. In the past three weeks, in the pre-dawn, he was strip-searched, shackled, and prepared for transport to the Central Criminal Court, the Old Bailey, in a truck that his partner, Stella Moris, described as an upended coffin. It had one small window; he had to stand precariously to look out. The truck and its guards were operated by Serco, one of many politically connected companies that run much of Boris Johnson’s Britain.
The journey to the Old Bailey took at least an hour and a half. That’s a minimum of three hours being jolted through snail-like traffic every day. He was led into his narrow cage at the back of the court, then look up, blinking, trying to make out faces in the public gallery through the reflection of the glass. He saw the courtly figure of his dad, John Shipton, and me, and our fists went up. Through the glass, he reached out to touch fingers with Stella, who is a lawyer and seated in the body of the court.
We were here for the ultimate of what the philosopher Guy Debord called The Society of the Spectacle: a man fighting for his life. Yet his crime is to have performed an epic public service: revealing that which we have a right to know: the lies of our governments and the crimes they commit in our name. His creation of WikiLeaks and its failsafe protection of sources revolutionised journalism, restoring it to the vision of its idealists. Edmund Burke’s notion of free journalism as a fourth estate is now a fifth estate that shines a light on those who diminish the very meaning of democracy with their criminal secrecy. That’s why his punishment is so extreme.
The sheer bias in the courts I have sat in this year and last year, with Julian in the dock, blight any notion of British justice. When thuggish police dragged him from his asylum in the Ecuadorean embassy—look closely at the photo and you’ll see he is clutching a Gore Vidal book; Assange has a political humour similar to Vidal’s—a judge gave him an outrageous 50-week sentence in a maximum-security prison for mere bail infringement.
For months, he was denied exercise and held in solitary confinement disguised as ‘heath care’. He once told me he strode the length of his cell, back and forth, back and forth, for his own half-marathon. In the next cell, the occupant screamed through the night. At first he was denied his reading glasses, left behind in the embassy brutality. He was denied the legal documents with which to prepare his case, and access to the prison library and the use of a basic laptop. Books sent to him by a friend, the journalist Charles Glass, himself a survivor of hostage-taking in Beirut, were returned. He could not call his American lawyers. He has been constantly medicated by the prison authorities. When I asked him what they were giving him, he couldn’t say. The governor of Belmarsh has been awarded the Order of the British Empire.
At the Old Bailey, one of the expert medical witnesses, Dr Kate Humphrey, a clinical neuropsychologist at Imperial College, London, described the damage: Julian’s intellect had gone from ‘in the superior, or more likely very superior range’ to ‘significantly below’ this optimal level, to the point where he was struggling to absorb information and ‘perform in the low average range’.
This is what the United Nations Special Rapporteur on Torture, Professor Nils Melzer, calls ‘psychological torture’, the result of a gang-like ‘mobbing’ by governments and their media shills. Some of the expert medical evidence is so shocking I have no intention of repeating it here. Suffice to say that Assange is diagnosed with autism and Asperger’s syndrome and, according to Professor Michael Kopelman, one of the world’s leading neuropsychiatrists, he suffers from ‘suicidal preoccupations’ and is likely to find a way to take his life if he is extradited to America.
James Lewis QC, America’s British prosecutor, spent the best part of his cross-examination of Professor Kopelman dismissing mental illness and its dangers as ‘malingering’. I have never heard in a modern setting such a primitive view of human frailty and vulnerability.
My own view is that if Assange is freed, he is likely to recover a substantial part of his life. He has a loving partner, devoted friends and allies and the innate strength of a principled political prisoner. He also has a wicked sense of humour.
But that is a long way off. The moments of collusion between the judge—or magistrate, a Gothic-looking Vanessa Baraitser, about whom little is known—and the prosecution acting for the Trump regime have been brazen. Until the last few days, defence arguments have been routinely dismissed. The lead prosecutor, James Lewis QC, ex SAS and currently Chief Justice of the Falklands, by and large gets what he wants, notably up to four hours to denigrate expert witnesses, while the defence’s examination is guillotined at half an hour. I have no doubt, had there been a jury, his freedom would be assured.
The dissident artist Ai Weiwei came to join us one morning in the public gallery. He noted that in China the judge’s decision would already have been made. This caused some dark ironic amusement. My companion in the gallery, the astute diarist and former British ambassador Craig Murray wrote:
I fear that all over London a very hard rain is now falling on those who for a lifetime have worked within institutions of liberal democracy that at least broadly and usually used to operate within the governance of their own professed principles. It has been clear to me from Day 1 that I am watching a charade unfold. It is not in the least a shock to me that Baraitser does not think anything beyond the written opening arguments has any effect. I have again and again reported to you that, where rulings have to be made, she has brought them into court pre-written, before hearing the arguments before her.
I strongly expect the final decision was made in this case even before opening arguments were received.
The plan of the US Government throughout has been to limit the information available to the public and limit the effective access to a wider public of what information is available. Thus we have seen the extreme restrictions on both physical and video access. A complicit mainstream media has ensured those of us who know what is happening are very few in the wider population.
There are few records of the proceedings. They are: Craig Murray’s personal blog, Joe Lauria’s live reporting on Consortium News and the World Socialist Website. American journalist Kevin Gosztola’s blog, Shadowproof, funded mostly by himself, has reported more of the trial than the major US press and TV, including CNN, combined.
In Australia, Assange’s homeland, the ‘coverage’ follows a familiar formula set overseas. The London correspondent of the Sydney Morning Herald, Latika Bourke, wrote this recently:
The court heard Assange became depressed during the seven years he spent in the Ecuadorian embassy where he sought political asylum to escape extradition to Sweden to answer rape and sexual assault charges.
There were no ‘rape and sexual assault charges’ in Sweden. Bourke’s lazy falsehood is not uncommon. If the Assange trial is the political trial of the century, as I believe it is, its outcome will not only seal the fate of a journalist for doing his job but intimidate the very principles of free journalism and free speech. The absence of serious mainstream reporting of the proceedings is, at the very least, self-destructive. Journalists should ask: who is next?
How shaming it all is. A decade ago, the Guardian exploited Assange’s work, claimed its profit and prizes as well as a lucrative Hollywood deal, then turned on him with venom. Throughout the Old Bailey trial, two names have been cited by the prosecution, the Guardian’s David Leigh, now retired as ‘investigations editor’ and Luke Harding, the Russiaphobe and author of a fictional Guardian ‘scoop’ that claimed Trump adviser Paul Manafort and a group of Russians visited Assange in the Ecuadorean embassy. This never happened, and the Guardian has yet to apologise. The Harding and Leigh book on Assange—written behind their subject’s back—disclosed a secret password to a WikiLeaks file that Assange had entrusted to Leigh during the Guardian’s ‘partnership’. Why the defence has not called this pair is difficult to understand.
Assange is quoted in their book declaring during a dinner at a London restaurant that he didn’t care if informants named in the leaks were harmed. Neither Harding nor Leigh was at the dinner. John Goetz, an investigations reporter with Der Spiegel, was at the dinner and testified that Assange said nothing of the kind. Incredibly, Judge Baraitser stopped Goetz actually saying this in court.
However, the defence has succeeded in demonstrating the extent to which Assange sought to protect and redact names in the files released by WikiLeaks and that no credible evidence existed of individuals harmed by the leaks. The great whistle-blower Daniel Ellsberg said that Assange had personally redacted 15,000 files. The renowned New Zealand investigative journalist Nicky Hager, who worked with Assange on the Afghanistan and Iraq war leaks, described how Assange took ‘extraordinary precautions in redacting names of informants’.
Q: What are the implications of this trial’s verdict for journalism more broadly—is it an omen of things to come?
The ‘Assange effect’ is already being felt across the world. If they displease the regime in Washington, investigative journalists are liable to prosecution under the 1917 US Espionage Act; the precedent is stark. It doesn’t matter where you are. For Washington, other people’s nationality and sovereignty rarely mattered; now it does not exist. Britain has effectively surrendered its jurisdiction to Trump’s corrupt Department of Justice. In Australia, a National Security Information Act promises Kafkaesque trials for transgressors. The Australian Broadcasting Corporation has been raided by police and journalists’ computers taken away. The government has given unprecedented powers to intelligence officials, making journalistic whistle-blowing almost impossible. Prime Minister Scott Morrison says Assange ‘must face the music’. The perfidious cruelty of his statement is reinforced by its banality.
‘Evil’, wrote Hannah Arendt, ‘comes from a failure to think. It defies thought for as soon as thought tries to engage itself with evil and examine the premises and principles from which it originates, it is frustrated because it finds nothing there. That is the banality of evil’.
Q: Having followed the story of WikiLeaks closely for a decade, how has this eyewitness experience shifted your understanding of what’s at stake with Assange’s trial?
I have long been a critic of journalism as an echo of unaccountable power and a champion of those who are beacons. So, for me, the arrival of WikiLeaks was exciting; I admired the way Assange regarded the public with respect, that he was prepared to share his work with the ‘mainstream’ but not join their collusive club. This, and naked jealousy, made him enemies among the overpaid and undertalented, insecure in their pretensions of independence and impartiality.
I admired the moral dimension to WikiLeaks. Assange was rarely asked about this, yet much of his remarkable energy comes from a powerful moral sense that governments and other vested interests should not operate behind walls of secrecy. He is a democrat. He explained this in one of our first interviews at my home in 2010.
What is at stake for the rest of us has long been at stake: freedom to call authority to account, freedom to challenge, to call out hypocrisy, to dissent. The difference today is that the world’s imperial power, the United States, has never been as unsure of its metastatic authority as it is today. Like a flailing rogue, it is spinning us towards a world war if we allow it. Little of this menace is reflected in the media.
WikiLeaks, on the other hand, has allowed us to glimpse a rampant imperial march through whole societies—think of the carnage in Iraq, Afghanistan, Libya, Syria, Yemen, to name a few, the dispossession of 37 million people and the deaths of 12 million men, women and children in the ‘war on terror’—most of it behind a façade of deception.
Julian Assange is a threat to these recurring horrors—that’s why he is being persecuted, why a court of law has become an instrument of oppression, why he ought to be our collective conscience: why we all should be the threat.
The judge’s decision will be known on the 4th of January.
- China Still Fears Three Things About America. The Dollar Is One Of Them
China Still Fears Three Things About America. The Dollar Is One Of Them
Tyler Durden
Sun, 10/04/2020 – 23:45Authored by Mark Dittli via TheMarket.ch,
Few Western observers know China better than The Honorable Kevin Rudd. As a young diplomat, the Australian, who speaks fluent Mandarin, was stationed in Beijing in the 1980s. As Australia’s Prime Minister and then Foreign Minister from 2007 to 2012, he led his country through the delicate tension between its most important alliance partner (the USA) and its largest trading partner (China).
Today Mr. Rudd is President of the Asia Society Policy Institute in New York. In an in-depth conversation via Zoom, he explains why a fundamental competition has begun between the two great powers. He would not rule out a hot war: «We know from history that it is easy to start a conflict, but it is bloody hard to end it», he warns.
Mr. Rudd, the conflict between the U.S. and China has escalated significantly over the past three years. To what extent has that escalation been driven by the presence of two strongmen, i.e. Donald Trump and Xi Jinping?
The strategic competition between the two countries is the product of both structural and leadership factors. The structural factors are pretty plain, and that is the continuing change in the balance of power in military, economic, and technological terms. This has an impact on China’s perception of its ability to be more assertive in the region and the world against America. The second dynamic is Xi Jinping’s leadership style, which is more assertive and aggressive than any of his post-Mao predecessors, Deng Xiaoping, Jiang Zemin and Hu Jintao. The third factor is Donald Trump, who obsesses about particular parts of the economy, namely trade and to a lesser degree technology.
Would America’s position be different if someone else than Trump was President?
No. The structural factors about the changing balance of power, as well as Xi Jinping’s leadership style, have caused China to rub up against American interests and values very sharply. Indeed, China is rubbing up against the interests and values of most other Western countries and some Asian democracies as well. Had Hillary Clinton won in 2016, her response would have been very robust. Trump has for the most part been superficially robust, principally on trade and technology. He was only triggered into more comprehensive robustness by the Covid-19 crisis threatening his reelection. If the next President of the U.S. is a Democrat, my judgement would be that the new Administration will be equally but more systematically hard-line in their reaction to China.
Has a new Cold War started?
I don’t like to embrace the language of a Cold War 2.0, because we should not forget that the Cold War of the 20th century had three big defining characteristics: One, the Soviets and the Americans threatened each other with nuclear Armageddon for forty years; two, they fought more than twenty proxy wars around the world; and three, they had zero economic engagement with each other. The current conflict between the U.S. and China on the other hand is characterised by two things: One, an economic decoupling in areas such as trade, supply chains, foreign direct investment, capital markets, technology, and talent. At the same time, it is also an increasingly sharp ideological war on values. The Chinese authoritarian capitalist model has asserted itself beyond China and challenges America.
How do you see that economic decoupling playing out?
The three formal instruments of power in the U.S. to enforce decoupling are entity listing, the new export control regime, and thirdly, the new powers given to the Committee on Foreign Investment in the United States, CFIUS. Those are powerful instruments which potentially affect third countries as well, through sanctions imposed under the entity list. You can take the example of semiconductors, where the recent changes of the entity list virtually limits the exports of semiconductors to a defined list of Chinese enterprises from anywhere in the world, as long as they are based on American intellectual property.
These measures have cut off Chinese companies like Huawei or SMIC from acquiring high-end semiconductor technology anywhere in the world. The reaction in Beijing has been muted so far, with no direct retaliation. Why?
In China there is a division of opinion on the question of how to respond. The hawks have an «eye for an eye» posture, that’s driven both by a perception of strategy, but also with an eye on domestic sentiment. The America doves within the leadership – and they do exist – argue a different proposition. They think China is not yet ready for a complete decoupling. If it’s going to happen, they at least try to slow it down. Plus, they want to keep their powder dry until they see the outcome of the election and what the next Administration will do. That’s the reason why we have seen only muted responses so far.
Isn’t it the case that both sides would lose if they drive decoupling too far? And given that, could it be that there won’t be any further decoupling?
We are past that point. Whoever wins the election, America will resolve in decoupling in a number of defined areas.
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First and foremost in those global supply chains where the products are of too crucial importance to the U.S. to depend on Chinese supply. Think medical supplies or pharmaceuticals.
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The second area is in defined critical technologies. The Splinternet is not just a term, it’s becoming a reality.
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Thirdly, you will see a partial decoupling on the global supply of semiconductors to China. Not just those relevant to 5G and Artificial Intelligence, but semiconductors in general. The centrality of microchips to computing power for all purposes, and the spectrum of application in the civilian and military economy is huge.
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Fourth, I think foreign direct investment in both directions will shrink to zero.
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The fifth area of decoupling is happening in talent markets. The hostility towards Chinese students in the U.S. is reaching ridiculous proportions.
Do you see a world divided into two technology spheres, one with American standards and one with Chinese standards?
This is the logical consequence. Assume you have Huawei 5G systems rolled out across the 75 countries that take part in the Belt and Road Initiative, then what follows from that is a series of industry standards that become accepted and compatible within those countries, as opposed to those that rely on American systems. But then another set of questions arises: Let’s say China is effectively banned from purchasing semiconductors based on American technology and is dependent on domestic supply. Chinese semiconductors are slower than their American counterparts, and likely to remain for the decade ahead. Do the BRI countries accept a slower microprocessor product standard for being part of the Chinese technological ecosystem? I don’t know the answer to that, but I think your prognosis of two technology spheres is correct.
China throws huge amounts of money into the project of building up its semiconductor capabilities. Are they still so far behind?
Despite their acts to buy, borrow or steal intellectual property, they constantly remain three to seven years behind the U.S., Taiwan and South Korea, i.e. behind the likes of Intel, TSMC and Samsung. It’s obviously hard to reverse engineer semiconductors, as opposed to a Tupolev, as the Soviets had to find out, which can be reverse engineered over a weekend.
Wouldn’t America hurt itself too much if it cut off China from its semiconductor industry altogether?
There is an argument that 50% of the profits of the US semiconductor industry come from their clients in China. That money funds their R&D in order to keep three to seven years ahead of China. The U.S. Department of Defense knows that, what’s why the Pentagon doesn’t necessarily side with the anti China hawks on this issue. So the debate between the US semiconductor industry versus the perceived national security interest has yet to be resolved. It has been resolved in terms of AI chips, and Huawei is the first big casualty of that. But for semiconductors in general the question is not solved yet.
Will countries in Europe or Southeast Asia be forced to decide which technology sphere they want to belong to?
Until the 5G revolution, they have managed to straddle both worlds. But now China has banked on the strategy of being the technology leader in certain categories, and the one they are in at the moment is in 5G technology and systems. If you look at the next five years, and if you look at the success of China in the other technology categories in its Made in China 2025 Strategy, then it becomes clear that we increasingly are going to end up in a binary technology world. Policy makers in various nations will have to answer questions around the relative sophistication of the technology, industry standards, concerns on privacy and data governance, and of course a very big question: What are our points of exposure to the U.S. or China? What will we lose in our China relationship by joining the American sphere in certain fields, and vice versa? Those variables will impact the decision making processes everywhere from Bern to Berlin to Bangkok.
But in the end, they will have to choose?
Yes. India for example has done it in the field of 5G. For India, that was a big call, given the size of its market and China’s desire to bring India slowly but surely towards its side of the Splinternet.
The third field of conflict after trade and technology lies in financial markets. We know that Washington can weaponise the Dollar if it wants to. So far, this front has been rather quiet. What are your expectations?
Two measures have been taken so far by the Trump Administration. One, the direction to U.S. government pension funds not to invest in Chinese listed companies; and two, the direction to the New York Stock Exchange not to sustain the listing of Chinese firms unless they conform to global accounting standards. I regard these as two simple shots across the bow.
With more to follow?
Like on most other things including technology, the U.S. is divided in terms of where its interests lie. Just like Silicon Valley, Wall Street has a big interest in not having too harsh restrictions on financial markets. Just look at the volume of business. Financial market collaboration between the Chinese and American financial systems in terms of investment flows for Treasuries, bonds and equities is a $5 trillion per year business. This is not small. I presume the reason we have only seen two rather small warning shots so far is that the Administration is deeply sensitive to Wall Street interests, led by Secretary of the Treasury Steven Mnuchin. Make no mistake: Given the serious Dollars at stake in financial markets, an escalation there will make the trade war look like child’s play.
Which way will it resolve?
The risk I see is that if the Chinese crack down further in Hong Kong. If there is an eruption of protests resulting in violence, we should not be surprised by the possibility of Washington deciding to de-link the U.S. financial system from the Hong Kong Dollar and the Hong Kong financial market. That would be a huge step.
How probable is it that Washington would choose to weaponise the Dollar?
We don’t know. The Democrats in my judgement do not have a policy on that at present. Perhaps the best way to respond to your question is to say this: There are three things that China still fears about America. The US military, its semiconductor industry, and the Dollar. If you are attentive to the internalities of the Chinese national economic self-sufficiency debate at present, it often is expressed in terms of «Let’s not allow to happen to us in financial markets what is happening in technology markets». But if the U.S. goes into hardline mode against China for general strategy purposes, then the only thing that would deter Washington is the amount of self-harm it would inflict on Wall Street, if it is forced to decouple from the Chinese market. If that would happen, it would place Frankfurt, Zurich, Paris or the City of London in a pretty interesting position.
Would you say that there is a form of mutually assured destruction, MAD, in financial markets, which would prevent the U.S. from going into full hardline mode?
If the Americans wanted to send a huge warning shot to the Chinese, they are probably more disposed towards using sectoral measures, like the one I outlined for Hong Kong, and not comprehensive measures. But never forget: American political elites, Republicans and Democrats, have concluded that Xi Jinping’s China is not a status quo power, but that it wishes to replace the U.S. in its position of global leadership. Therefore, the inherent rationality or irrationality of individual measures is no longer necessarily self-evident against the general strategic question. The voices in America to prevent a financial decoupling from China are strong at present, but that does not necessarily mean they will prevail.
China’s strategy, meanwhile, is to welcome U.S. banks with open arms. Is it working?
The general strategy of China is that the more economic enmeshment occurs – not just with the U.S., but also with Europe, Japan and the likes –, then the less likely countries are going to take a hard-line policy against Beijing. China is a master in using its economic leverage to secure foreign policy and national security policy ends. They know this tool very well. The more friends you have, be it JPMorgan, Morgan Stanley or the big technology firms of Silicon Valley, the more it complicates the decision making process in the West. China knows that. I’m sure you’ve heard it a thousand times from Swiss companies as well: How can we grow a global business and ignore the Chinese market? Every company in the world is asking that question.
You wrote an article in Foreign Affairs in August, warning of a potential military conflict triggered by events in the South China Sea or Taiwan. Do you really see the danger of a hot war?
I don’t mean to be alarmist, not at all. But I was talking to too many people both in Washington and Beijing that were engaged in scenario planning, to believe that this was any longer just theoretical. My simple thesis is this: These things can happen pretty easily once you have whipped up nationalist narratives on both sides and then have a major incident that goes wrong. A conflict is easy to start, but history tells us they are bloody hard to stop.
Of course the main argument against that is that there is too much at stake on both sides, which will prevent an escalation into a hot war.
You see, within that argument lies the perceived triumph of European rationality over East Asian reality. All that European rationality worked really well in 1914, when nobody thought that war was inevitable. The title of my article Beware the Guns of August referred to the time between the assassination in Sarajevo at the end of June, the failure of diplomacy in July, and then miscommunication, poor signalling and the dynamics of mobilisation in the end led to a situation that neither the Kaiser nor the Czar could stop. Nationalism is as poisonous today as it was in Europe for centuries. It’s just that you’ve all killed each other twice before you found out it was a bad idea. Remember, in East Asia, we have the rolling problems of our own version of Alsace-Lorraine: it’s called Taiwan.
Influential voices in Washington say that the time of ambiguity is over. The U.S. should make its support for Taiwan explicit. Do you agree?
I don’t. If you change your declaratory policy on Taiwan, then there is a real danger that you by accident create the crossing of a red line in Chinese official perception, and you bring on the very crisis you are seeking to avoid. It’s far better if you simply had an operational strategy, which aims to maximally enhance Taiwan’s ability to deter a Chinese attack.
Over the past years, the Chinese Communist Party has morphed into the Party of Xi. How do you see the internal dynamics within the CCP playing out over the coming years?
Xi Jinping’s position as Paramount Leader makes him objectively the most powerful Chinese leader since Mao. During the days of Deng Xiaoping, there were counterweighting voices to Deng, represented at the most senior levels, and there was a debate of economic and strategic policy between them. The dynamics of collective leadership applied then, they applied under Jiang Zemin, they certainly applied under Hu Jintao. They now no longer apply.
What will that mean for the future?
In the seven years he’s been in power so far, China moved to the left on domestic politics, giving a greater role to the Party. In economic policy, we’ve seen it giving less headroom for the private sector. China has become more nationalist and more internationally assertive as a consequence of it becoming more nationalist. There are however opposing voices among the top leadership, and the open question is whether these voices can have any coalescence in the lead-up to the 20th Party Congress in 2022, which will decide on whether Xi Jinping’s term is extended. If it is extended, you can say he then becomes leader for life. That will be a seminal decision for the Party.
What’s your prediction?
For a range of internal political reasons, which have to do with power politics, plus disagreements on economic policy and some disagreements on foreign policy, the internal political debate in China will become sharper than we have seen so far. If I was a betting man, at this stage, I would say it is likely that Xi will prevail.
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- Measuring The Emotional Impact Of COVID-19 On The U.S. Population
Measuring The Emotional Impact Of COVID-19 On The U.S. Population
Tyler Durden
Sun, 10/04/2020 – 23:20The COVID-19 pandemic has ripped through almost every country on the planet, causing devastating decay to the mental health of millions of people.
While most of us are experiencing higher levels of emotional distress than normal, Visual Capitalist’s Katie Jones details below that the severity of stress may change based on factors such as age, race, education level, or even where you live. This graphic uses data from the National Pandemic Emotional Impact Report to illustrate how each demographic subgroup in the U.S. is feeling.
The Methodology
The emotional upheaval of such a unique event impacts people in different ways, and is difficult to measure given the many direct and indirect factors associated with it.
For the report referenced in the graphic, researchers created a detailed methodology to measure the impact of COVID-19 across a sample of 1,500 adults. Surveys were conducted in May 2020, when the majority of people were under strict lockdown orders. Unemployment levels mirrored those seen only during the Great Depression, and of course, the death rate was rising quicker than anyone could have anticipated.
A Pandemic Distress Index Score (PDIS) was calculated based on participant’s responses, which were then divided into low (bottom 25%), moderate, and high (top 25%) quartiles of pandemic distress.
Emotional Distress Levels, by Demographic Group
Findings uncovered that almost 40% of participants have lost their jobs, or experienced a reduction in income due to the COVID-19 outbreak. However, the reverberations of such stressors vary by demographic subgroup.
Age
According to the report, pandemic-related emotional distress decreases by age group. People in the 18-34 year bracket reported the most pandemic-related distress overall—with respondents citing high stress at nearly double the rate of people over 50 years old. Meanwhile, respondents in the 65+ age group had reported the lowest distress scores of all.
Race
Of all ethnicities in the survey, Hispanics/Latinos and Blacks had the highest average Pandemic Distress Index Scores, and Whites had the lowest average scores.
It is also worth noting that the research concluded five days after the death of George Floyd, so the majority of responses may not include the influence of this event, and the subsequent movement against systematic racism.
Other Categories
In other subgroups, there were slight differences worth mentioning. For example, from a communities perspective, people who live in rural areas were less likely to experience high pandemic distress compared to people living in towns or cities.
When it comes to the battle of the sexes, men and women experience similar levels of distress. Moreover, the level of emotional distress related to COVID-19 did not differ much between people with children under 18 and those with older children. However, women with children under 18 reported more symptoms of anxiety compared to women with no minor children.
What Does the Data Mean?
While the research presents several important insights, understanding what it means is crucial in providing people with the support they need.
For example, participants with high pandemic-related distress are 40 times more likely to have clinically significant levels of anxiety and 20 times more likely to have clinically significant symptoms of depression, compared to those on the lower end of the spectrum.
In fact, a report from the Center for Disease Control and Prevention shows that 1 in 4 people in the 18-24 age bracket have seriously considered committing suicide at some point during the month of June 2020, which is in line with the emotional distress scores for this age group.
Building Immunity
While nobody can escape the devastating impacts of COVID-19 on mental health, it is clear that some people are more at risk than others.
Unfortunately, younger adults and people of racial and ethnic minorities have carried higher psychological burdens from the pandemic so far, and we have yet to see the long-term effects that could transpire as a result.
“Even when the pandemic is brought under control, grief, anxiety and depression will continue to affect people and communities.”
—António Guterres, United Nations
Although at times the pandemic may feel inescapable, we must continue to prioritize both our physical and mental health—so we can build immunity for what’s to come.
- Financialization & The Road To Zero, Part 2: From Capitalism To Financialization
Financialization & The Road To Zero, Part 2: From Capitalism To Financialization
Tyler Durden
Sun, 10/04/2020 – 22:55Authored by ‘ICE-9’ via The Burning Platform blog,
This is Part 2 of a 4-part series.
…but 4,500 years of mercantilism were not going down without a fight. Fractional reserve banking had been steadily growing since the 14th century but was exclusively a private business affair unrelated to the state. These early fractional reserve “banks” began as safe stores for gold and silver but it did not take long for their unscrupulous owners to start speculating with their customers’ deposits, thus the nascent fractional reserve nature of these deposits where redemption coupons in circulation outnumbered physical gold and silver held in “trust”. After many rounds of speculative losses with other people’s gold and silver, “banks” crashed, losses accumulated, and the Renaissance city states ultimately stepped in to ban this fractional reserve practice and re-enforce the Catholic prohibitions against usury. As a result, the early 16th century mercantile “banking” industry evolved into a transparent and audited business based upon fees received for the facilitation of foreign coin exchange, notary services, and the provision of letters of account credibility. With usury removed, the business of transparent and audited mercantile banking spread from Northern Italy throughout Western Europe and control of the banking industry transferred to Catholic and later, Protestant businessmen. So from 1585 to 1650 the golden age of transparent and audited mercantile banking laid the groundwork for the rise and exploitation of the Dutch and English colonial empires, and the success of mercantile banking also sowed the seeds for its eventual corruption by unscrupulous players in usury friendly Protestant England.
With the resurrection of the European super-state after centuries of dormancy, the various crowns found it increasingly difficult to secure funding to fight their continental wars of ego, secure their growing colonial empires, and fund their increasing opulence at home, so sovereigns began to form nascent “central banks” within their court administrations. These nascent “central banks” served the crown and the crown alone and existed as polite shake-down operations as wealthy subjects placed themselves in peril if they refused to lend their gold and silver despite high probability the sovereign would default as was his divine right. So after depleting the royal treasury during the Second Anglo-Dutch War, the English crown initiated a shakedown of the goldsmith bankers when Parliament passed The Great Stop of the Exchequer in 1672 which repudiated all outstanding loans and all but destroyed the English mercantile banking system. What gold and silver was left to the Exchequer immediately went to use in prosecuting both the Third Anglo-Dutch War and the Franco-Dutch War, which by 1678 left the Exchequer in such dire financial circumstances that it put national security at serious risk. A funding void followed where loans to the crown in gold and silver were nearly impossible to secure, so a first attempt at pure fiat money promoted as “legal tender” followed without success. Then in 1685 Charles II died and the Catholic James II ascended the throne putting usury and national finances at risk of eliminating any recourse at replenishing the depleted Exchequer. So under cover of religion, the Catholic king’s authority was nullified, his Protestant daughter ascended the throne, usury was preserved, and Parliament with its powers to raise funds acquired legal supremacy over the crown.
With a weakened monarchy, new relative strength in Parliament, and a depleted Exchequer, Parliament pulled itself together and got to work and, once lingering legal succession issues surrounding James II were resolved, it passed the Bank of England Act of 1694. The overt exigencies in this act were related to funding the new war with France and controlling rebellion in Ireland. But the act also replaced the old rarely used pure fiat money of Charles II with bills redeemable in gold which also paid interest to their holders. Thus usury was legally preserved by an act of Parliament which a weakened future potentially Catholic monarch could not overturn. These bills backed with gold gained in popularity and filled the Exchequer’s immediate funding gap and allowed England to continue prosecuting its wars against the Dutch. For a brief eleven years, from 1696-1707, England had returned to sound mercantile banking practice and acceptance of these interest bearing bills spread, filling the Exchequer with physical gold and silver.
But then enter one Sir William Paterson. This same Sir William – chief organizer of the ill-fated Darien Scheme where investors lost everything and 1,200 Panamanian colonists perished – in 1694 was the primary promoter behind the joint stock incorporation and charter of the privately owned Bank of England. A major conflict of interest – not recognized by divine right – arose here whereby King William III was himself a major shareholder in this newly chartered bank. But this bank was merely one of many banks chartered at the time operating under the ruinous fractional reserve practice, and nearly all these banks eventually failed save one – the Bank of England. What made this bank charter special was its inside connection to the House of Stuart and its location inside the untouchable City of London Corporation – that one square mile of sovereign within a sovereign ceded in 1067 by William the Conqueror to the inhabitants of London. And, this special Bank of England had discovered the magic formula that transformed Parliament into a perpetual debtor, turned the bank’s liabilities into assets, and as the money they created had zero cost, afforded the owners of this special Bank of England an infinite rate of return on fiat issuance. Not since the Pharaohs convinced the Egyptians they were Gods had such an elaborate fraud been perpetrated upon mankind.
To coincide with the Union of England and Scotland in 1707, this special Bank of England – one of many chartered banks at the time – was awarded responsibility for managing the issue and redemption of the popular interest bearing bills of what was now the Exchequer of Great Britain. Given the enticement of near infinite rates of return, it did not take the Bank of England long to begin issuing its own fiat money for use by Parliament and to retire the old interest bearing bills with redemptions. The magic formula was set – the Bank of England had figured out not how to receive interest from lending its own money, but how to receive interest by creating new money. And the opaque nature of the magic formula with its unknown gold and silver reserves held in “trust”, together with pomp and trappings, gave the fiat money financial process the appearance of authority and legitimacy. Parliament got its means to fund a new round of wars of attrition with France, the people got taxed at a slower rate of increase, and the House of Stuart and their banker friends got wealthy beyond belief. And to the holders of accumulated fiat money, they discovered a way how to transfer the bulk of a society’s real wealth – land, gold, labor, and raw materials – into their own possession for free, using this fiat money of no inherit value to purchase things having real intrinsic value. Therefore, at its most fundamental level, capitalism became the mechanism by which one trades the family cow for a bag of magic beans.
This special relationship between Parliament and its wars of attrition and the House of Stuart and its banker friends had solved the riddle of Exchequer funding so Great Britain could now focus on its primary 18th century endeavor – war with France. From 1701 to the final defeat of Napoleon in 1815, Great Britain prosecuted eighteen officially declared wars against France. The stakes were serious now as France and its livre had wrested control of the world’s reserve currency from the mercantile banking Dutch after their late 17th century wars with both England and France had exhausted the Dutch treasury and the Dutch, with their mercantile banking model, could not print their way back from defeat. The House of Stuart and its banker friends now saw defeating France and appropriating the world reserve currency to their Bank of England as the overriding collective purpose of Great Britain, and Parliament was ready and eager to assist for the “Glory of Britannia”. But neither France’s nor Great Britain’s empires contained large quantities of gold or silver, so privateers on both sides played a large role in wartime funding but this stolen loot was especially important to the French corsairs and their mercantile banking system. Thus the inherent empire self-destruct mechanism latent in all physical money based commercial models – depleting the crown treasury – would play a major strategy in the prosecution of Great Britain’s prolonged wars of attrition with France. Thus 18th century Europe pitted infinite paper fiat money versus limited physical gold and silver to the death in winner-take-all stakes for control of the world reserve currency.
The first Industrial Revolution from 1760–1820 did not create a large “virtuous cycle” for British fiat money, and given the fractured nature of the British chartered banking system, this early land empire was not yet conducive to establishing a fiat money empire. For an idea of the imbalance in economic scale versus land size existing within the 18th century British colonies, at the cusp of the 1755 tobacco price crash the tiny Caribbean island of Barbados brought in more customs and excise income to the crown than all American colonies combined. And, economic depressions in the colonies caused by events in and taxes imposed by the home country were common which prompted early colonialists to build up a high degree of productive diversification and self-sufficiency. However, after more than 100 years of war against France and the final defeat of Napoleon, the mantle of world reserve currency passed to the House of Hanover and its banker enablers, so Parliament’s favorite charter bank began in earnest to churn out incredible amounts of bank notes that were now no longer needed to fund wars of attrition. Other charter banks knew well of this special relationship between Parliament and the Bank of England so these banks began accumulating the Bank of England fiat money to use as their “reserves” held in “trust”. The inflation caused by this round of excessive money printing, combined with little to no increase in wages, reached the point of starvation in the London streets, and Parliament’s disastrous Corn Act of 1815 drove grain prices even higher resulting in food riots and complete economic stagnation. Thus to this point first the House of Stuart and their banking friends, then the House of Hanover and its banker enablers, through the magic formula of fiat money, had brought the United Kingdom 121 years of near continuous war, recurring national bankruptcies, and now open starvation. Something had to be done.
So Parliament set about to save its favorite banking charter. Six years after the London food riots, it required the Bank of England to maintain a minimum reserve held in “trust” and to facilitate conversion of its fiat money into gold. So the House of Hanover and its banker enablers discovered the new magic trick of borrowing gold to fulfil this new inconvenience, and promptly went back to churning out more fiat money and by 1825 had precipitated a collapse of the United Kingdom banking system that effectively eliminated nearly all competing charter banks. For their disastrous actions, in 1833 the Bank of England was again rewarded by Parliament with the Bank of England Act granting its fiat money monopoly status as “legal tender” for a “limited period” under “certain conditions”, which over time became unlimited and unconditional as no certain conditions were ever enumerated. Thus the act wiped out all competing charter banks and forced every person and entity in the British empire to either use or pay exchange fees to use the Bank of England’s fiat money. And on top of all this, the House of Hanover and its banker enablers, ensconced within the untouchable City of London Corporation, from the safety of this “anachronism gifted by the Normans”, found even more profitable ventures than fraudulent banking and war funding in the forms of the slave and opium trades. So by 1833 the same people behind slavery and opium were handed gratis sole control over the fiat money that would soon engulf 26% of the world’s land surface. What could possibly go wrong?
The Bank of England itself, that’s what went wrong. Another major financial crisis initiated by the House of Hanover and its banker enablers’ boom-bust magic formula was “solved” by Parliament’s Bank Act of 1844 that set a fictional amount of imaginary gold as a fabricated “reserve” held in opaque “trust” and thereby “limited” the amount of fake fiat money the Bank of England could issue out of thin air against its imaginary gold reserves, but excluded loans to the public whose losses bothered no one in the House of Lords. The Bank Act worked so well that by 1847 the Bank of England itself teetered on the brink of insolvency, so to retain their special relationship, Parliament repealed the Bank Act of 1844 and now the Bank of England was legally free again to print as much fiat money as it wanted. And so economic crises and near collapse followed again from 1857-8, 1867-9, and 1873-96, each time fixed by Parliament with a tweak here, and act there, and a new unenforced regulation or two. Thus following the 1833 grant of “legal tender” status, during their 67 years of 19th century money monopoly the House of Hanover and its banker enablers gave the United Kingdom 32 years of recession, depression, bankruptcy, and financial collapse. But despite its delivery record its special relationship with Parliament continued into the 20th century where it once again found its raison d’être – war funding.
One side benefit inadvertently derived from the never ending 19th century financial crises precipitated by Bank of England fiat money mis-managers was Parliament spent so much time dealing with economic problems at home and unrest in the colonies abroad that it had little time to prosecute new European wars of attrition. With the Crimean War excepted, a sort of Pax Decoctur gripped the United Kingdom’s European aspirations as it focused on its Second Industrial Revolution at home and small scale conflicts abroad to secure far flung provinces against both people that mostly didn’t use money and people that mostly did use opium. This “Peace through Insolvency” enabled the United Kingdom to continuously reduce its national debt without exception from a level of about 265% of GDP in 1820, down to around 40% of GDP at the start of the 20th century. As a result, the House of Hanover and its banker enablers were able to finally develop the “virtuous cycle” necessary for the proper function of a true fiat money empire – the colonies ship raw materials to the home country and receive fiat money in payment, the home country took those raw materials and produces value added manufactured goods, then exported those manufactured goods back to the colonies that paid for these value added goods with fiat money received from the sale of raw materials. All value added activities remained in the home country, and with European populations increasing across the colonies, this “virtuous cycle” generated economic “growth” and “profit” across the United Kingdom’s industrialized areas. However, these cheap raw materials from abroad also sealed the demise of domestic producers, promoting urbanization at home that stagnated factory wages and led to large scale emigration to the colonies abroad, both phenomena adding to the “virtuous cycle” and increasing “value add” to those with access to capital and ownership of the means of production.
A key component to this British “virtuous cycle” was the House of Hanover and its banker enablers were able to capture the bulk of world raw material sales and thus expand its fiat money empire outside the colonies by the process of commoditization. Large brokerage houses, often controlled by subsidiaries of the Bank of England, bought and sold such huge quantities of these raw materials on forward contracts that they were able to manipulate their prices. These hedge purchases and sales not only provided trading income, but also ensured all contracts were settled in Bank of England fiat money regardless of point of sale or purchase. To squeeze even more profit from this “value chain”, other Bank of England subsidiaries expanded into corporate plantation holdings throughout the colonies, especially in India following the 1862 Cotton Famine. This practice then spread to mining tenements following the discovery of huge gold deposits throughout Australia and the annexation of the Transvaal. Thus the vast majority of the “virtuous cycle” was captured and maximum “value” squeezed out the entire “value chain” and into the hands of the House of Hanover and its banker enablers. And so began a new line of exploitation for capitalism – the manipulation of commodity prices via the coordinated bulk purchase and sale of these commodities in concert with the manipulation of the “value” of fiat currency. Entire sectors of commodity production around the world were sent into financial ruin by a coordinated attack from both the brokerages and Bank of England monetary policy, these sectors bought nearly en toto for a shilling on the pound, then pumped and dumped using the same coordinated mechanism but in the opposite directions. Large swaths of entire industries like cotton, land, oil, wheat, coal, iron ore, et cetera regularly passed into and out of the hands of the House of Hanover and its banker enablers generating tremendous profits for them and debilitating losses for others.
At the dawn of the 20th century, capitalism had fully matured, sound money mercantile banking no longer existed, and the magic formula had made the United Kingdom the most powerful financial, economic, and political empire ever assembled. The covert secret formula however was it had fought only one major European war – The Crimean War – since the defeat of Napoleon, and since then the Exchequer had reduced its outstanding budget deficit relative to GDP a full 85%. And for the first time in the fiat empire’s history, it began delivering large amounts of gold into the City of London Corporation. The sun never set on Britannia, it ruled the waves, it had commoditized every basic raw material important to the Second Industrial Revolution, and it had subjugated nearly every primary producer on the planet to its service through price manipulated contracts denominated in Bank of England fiat money. The United Kingdom was in a commanding position but had not yet proven itself as undisputed world military power, and the German Empire was beginning to accumulate victories and influence on the Continent. So it was inevitable that the egos in Parliament would go back to their old bad habits of 100 years ago and start looking for a major fight to revive the “Glory of Britannia”. And thus began a 50 year effort to destroy the rising European star of Germany, with its formidable military, efficient and technologically advanced industry, growing colonial empire, and Hegelian guiding principles of “objectivity, truth, and ethical life” which now threatened to not only swallow up and assimilate all the Germanic peoples of Europe, but to swallow up and eliminate their privately owned central banks as well. The City of London Corporation would tolerate no fiat money rival and Germany could not continue to grow unchecked in influence – nigh, could not continue to exist – and put at risk ownership of the Bank of England’s magic money formula.
This is where the banking story of the United States merges with that of the House of Hanover and its banker enablers. To its great credit, the United States had three times in its early history repelled the external imposition of a privately owned central bank. After Andrew Jackson allowed the Federal charter for the den of vipers – aka Second Bank of the United States – to expire in 1837, the existing network of disunited state chartered banks grew across the young country with the addition of every new state, each charter issuing its own semi-fiat money backed by reserve requirements dictated by each state. Fiat money from the states varied in exchange value and bank failures were common, but the distributed and discretized nature of this Free Banking Era localized the crises and generally did not lead to national economic disasters as did the regular and recurring management failures of the Bank of England. It was during this laisse-faire period that the United States experienced incredible growth of territory, population, political clout, and economic output, and the Federal Treasury had financially strengthened to the point where the country had the temerity to negotiate for territory, wage its own wars of conquest, and purchase new territories without serious economic repercussion. With regards to banking it seemed the United States had found the magic money formula by not finding the magic money formula and had instead wandered into a kind of balanced budget quasi-capitalism where state charter banks issued local fiat money that few wanted as it had to compete with the gold and silver specie put in circulation by the Federal Treasury. But then every balanced budget just begs for a good war of attrition and that’s exactly what came next.
At the cusp of the American Civil War, the Bank of England had coopted the South into its commoditized fiat empire as most of their raw cotton exports went to British textile mills. Thus the Bank of England’s fiat empire had crept quietly into America when the London financiers gave full support to Confederate war funding by purchasing its heavily subscribed and sterling denominated Cotton Bonds. To facilitate war funding at home, both the Union and Confederacy resorted to fiat money issue, with the Confederacy printing greybacks and the Union printing greenbacks. To enforce these new greenbacks as Union fiat money, Congress passed the National Banking Act of 1863 establishing a system and network of national banks using a uniform fiat money with a stipulated uniform fractional reserve requirement mandating these banks purchase and hold US Treasury bills as “reserves”. Both sides struggled with inflation, but the Confederacy, if not defeated in battle, would likely have succumbed eventually to inflation that by war’s end ran at 9,000% of prewar levels rendering the greybacks effectively worthless. But the old magic money formula of turning liabilities into assets worked just well enough for the Union and with this National Banking Act their greenbacks replaced the former hocus pocus uncoordinated sideshows from state charter bank fiat issue antics commonly backed with no more than borrowed gold. Ironically, counterfeiting during the Civil War was a persistent problem, so the National Banking Act not only removed gold convertibility and gold and silver reserve requirements, but also established the United States Secret Service to ensure the Union’s new fake paper money was not fake fake paper money. And just like the creation of its progenitor the Bank of England, greenbacks were only to be in circulation for a limited time, which in 1878 became legally unlimited time but with the re-imposition of convertibility into gold. America had officially entered into the world of capitalism, and for the first time had a uniform national banking system under the control of the US Treasury using a single fiat currency convertible into gold with a fractional reserve requirement. But the greenback was finding itself more and more controlled by Wall Street proxies of the City of London Corporation, Wall Street’s influence was growing immensely within the US Congress, and the bankers of the City of London Corporation had set their sights on gaining control of the levers of America’s new magic formula.
But full control of that magic formula would take some time to acquire as the American people proved more intractable than the pliant Dickensian subjects of the City of London Corporation. The weakened post bellum United States with its new national bank network, huge Federal budget deficit, new fiat money empire throughout the defeated Confederate States, and fast expanding Northern modern industrial base presented the City of London Corporation bankers with proverbial low hanging fruit. After both sides weathered the depression caused by the Panic of 1873, the City of London Corporation bankers’ first salvo at usurping the American money creation mechanism was the financially engineered Panic of 1893 where a coordinated commodity price crash was timed with a run on the US Treasury gold holdings that nearly drew down the country’s entire gold reserve and sent the United States into prolonged depression. But there’s no depression a good war can’t fix, so the politically popular 1898 Spanish-American War was prosecuted and with a quick victory the US spirits and economy sprang back to life. The City of London Corporation bankers’ initial crude efforts was thwarted, so a second better organized salvo was launched in 1907, this time at the undertaking of Wall Street proxies, complete with a ready-made plan to fix everything and paid agents ready in Congress to promote the benevolence and virtue of the Money Trust. And to show the American people their selfless good intentions, both J. P. Morgan and John D. Rockefeller magnanimously gifted their own money to acquire and “save” insolvent banks after the US Secretary of the Treasury secretly pledged taxpayer bailout money should Morgan’s and Rockefeller’s bank investments fail. Wall Street began its marketing campaign through Congress for the privatization of both the national currency issue and monetary policy, promising America that once control of these powers passed into secret hands all these recurring depressions caused by these very same secret hands would immediately cease. But not all members of Congress were yet paid agents of Wall Street, and in 1913 the Pujo Committee released the results of its scathing Money Trust investigations. The American public was in no mood to submit their sovereignty to the Wall Street Money Trust on behalf of the City of London Corporation bankers, and time was running out for the bankers to get America ensnared into their plans to deal with the new, powerful Continental upstart that threatened the Bank of England’s fiat empire gravy train – Germany.
The second half of the European 20th century following the brutal wars of unification saw the Prussian state and its German coalition fiefdoms start to grind out military victories over first Denmark and next Austria, but it wasn’t until the German Empire coalesced after its decisive and highly efficient defeat of world power France in 1871 that alarms began ringing in the City of London Corporation. The German people, united under one state and the Hegelian principles of “objectivity, truth, and ethical life”, was one thing, but this Hegelian destiny to unite all Germanic peoples under that state – including Germanic peoples living in states with privately owned central banks – was another thing entirely. But the German Empire with its sound monetary policy, advanced high tech ground based military capability, and expanding colonial empire presented a formidable adversary, one that guaranteed mutually assured destruction if challenged alone. Initial efforts to destabilize the German Empire from within using communist agitators all fell flat as the German government enacted liberal labor and social reforms blunting each new call for a general strike. Against this rising German Empire stood a United Kingdom that had won just one major war in 85 years, was crawling out of the 20 years Long Depression, and whose banks and investment houses were clear culprits in ever recurring financial panic, one after the other, that had disastrously rippled throughout the global economy. The limits of growth had been reached with the industrial-colonial model of the British Empire, the system was devolving into stasis, and the Exchequer’s budget deficit had been reduced to the point where a new major war of attrition could now be prosecuted.
On the American home front the Jekyll Island conspiracy between the Wall Street proxies for the City of London Corporation bankers and the US Congress had been in play since 1910. Its success was a crucial step for the Exchequer to gain a reliable overseas source of credit and for the Ministry of Defense to establish a supply chain prior to prosecuting its coming war of attrition against the German Empire. It is likely these conspirators knew full well their plans would commit the United States to not only massive war funding to Great Britain, but also pit the Americans as enemy against whatever countries Parliament might declare war upon for the “Glory of Britannia”. So in practice, when Congress passed the Federal Reserve Act in August 1913 despite the Pujo Committee findings, it not only robbed the American people of control over its monetary policy, but to a large extent robbed it of control over much of its foreign policy as well. Thus this fateful act of betrayal to both American citizens and British subjects joined the eventual downfall of the British fiat empire with an American commitment to Endless Wars in defense of its coming fiat empire. This was a master stroke for the City of London Corporation bankers that brought the Federal Reserve System into its cross ownership nexus that now facilitated trans-continental coordination of both monetary and foreign policies that assured aggregate coordinated outcomes always resulted in a net gain to the City of London Corporation bankers, regardless of which side of the Atlantic experienced victory or defeat. And this new Federal Reserve System was isolated from all direct European land based military threats and had the ability to create huge quantities of fiat money adsorbed by a brand new tax base within the expanding American industrial economy which was now inescapably locked into ever growing Federal debt by the XVI Amendment. Thus not since the fall of Troy had a free and independent people willingly invited such unseen dangers into their midst, and by subterfuge the Federal Reserve Act ended 137 years of fierce American independence with a single unconscionable law and just 30 words contained in a new constitutional amendment.
Within four years of the Federal Reserve Act’s passage, the City of London Corporation bankers were victorious, the German Empire crushed absolutely, and the flame of “objectivity, truth, and ethical life” extinguished. There would be no consolidation of the Germanic peoples under a single state controlled central bank, and no challenge to the Bank of England’s control over its fiat empire. The costs were staggering – 20 million dead, 21 million injured, 1.2 million Queen’s subjects killed, USD $3.2 trillion. Despite these losses, the combined ownership nexus of the Bank of England and the Federal Reserve System saw the City of London Corporation bankers in an even more powerful position that before the war, and for the first time since wresting control of the world reserve currency from France in 1815, the Bank of England began to share this status with the United States dollars it also controlled. And to ensure the permanent dominance of the Federal Reserve System and avoid any resurrection of populist economic policy threats like the Free Silver Movement, or for that matter, to forever eliminate serious economic policy discussion from public debate, in 1920 Congress ratified the XIX Amendment. Accumulated post-WWI budget deficits on both sides of the Atlantic ballooned – the Exchequer’s climbed from a prewar 20% of GDP to 180%, and the Treasury’s increased from 10% to 40% of GDP, with both countries finding themselves in the usual post-war recessions. Time to fire up the post-war printing presses – but this time, only on the other side of the Atlantic as the City of London Corporation had grand plans for its new American vassal.
And for all that post-war M2 fiat money now flooding into America – from a total of $18 billion circulating in 1915 to $47 billion in 1929 – the United States got things like flappers, guys going over waterfalls in barrels, jazz clubs, ultra-rich organized crime families, a mass entertainment industry, and through that cultural miasma somehow managed to build thousands of factories, make millions of cars, pave thousands of miles of roads, erect skyscrapers, and electrify cities. But the average Queen’s subject didn’t even get so much as an extra helping of pudding. What were the Roaring 20s in America, where industrial and service jobs abounded with the flood of fiat money created out of thin air, were more like the Boring 20s in the United Kingdom, where the printing presses remained idle and recession and mass unemployment were the order of the decade. But then under orders from the City of London Corporation bankers the Federal Reserve System raised interest rates from 4% to 6%, and suddenly the jazz music stopped, the flappers quit flapping, and the bills for all that art deco came due in October 1929. We all know the story of what happened next.
One side benefit of the Great Depression in the United States was so many people were unemployed that few paid income taxes, so Congress could not immediately start a new war of attrition to right the ship of finance at Wall Street’s behest. Learned advisors first had to resort to their old bag of tricks with a tweak here, a Congressional rider there, a new regulation or two, and even introduced the new academic driven massive Keynesian make-work stimulus programs. Nothing worked no matter how rarefied or how many respected monetary scientists offered lofty solutions, so with the Federal Reserve insolvent and out of gold, President Roosevelt resorted to the old goldsmith shakedown tactic and issued Executive Order 6102 in April 1933, followed by Congress and its Gold Reserve Act of January 1934. The EO effectively confiscated all gold in the United States, gave it to the privately owned Federal Reserve System at $20.67 per troy ounce, removed the gold standard again, then raised the gold price to $35 a troy ounce and began printing massive amounts of pure fiat money. That gave the appearance of working, and industrial output slowly rose to greater than 1929 pre-crash gold standard levels entirely on the back of the inflation unleashed by pure fiat issuance until everything collapsed again in 1937. It began to look more and more like the fog of war was the only solution to pull America out of this depression and unbeknownst to most, the country had been rearming itself since early 1940, nearly two years before the bombing of Pearl Harbor.
The United Kingdom was in serious economic trouble too, having spent the entirety of the 1920s in deep recession and now hopelessly mired in a depression it could not shake. The old 18th century playbook would have to be dusted off, but at a great cost – financial destruction of the British Empire and sacrifice of the Bank of England for the greater good of the City of London Corporation’s central bank cross ownership nexus. Starting in the early 1920s, the City of London Corporation bankers had recalled their communists to kick in the teeth and pick whatever flesh was remaining from the bones of the Weimar Republic, and the now worthless Reichsbank was put to work printing up never before seen hyper-inflation. These actions not only plunged Germany into the economic stone ages, but deprived nexus owned Bank of France of war reparations desperately needed to modernize its industrial base. Such was the threat posed by even the remains of a German Empire that such actions were deemed acceptable losses so long as “objectivity, truth, and ethical life” were sent to the unequivocal dustbin of history. Now, on its knees before the world’s creditors and on the brink of devolving into a failed state, Germany was needed once again by these same creditors – and needed fast by Great Britain. Despite having few natural resources within its borders, Germany’s military machine would be resurrected from the dead and come roaring back with a vengeance on a mission to once again unite all Germanic peoples under the banner of a revisionist version of “objectivity, truth, and ethical life”, and it could only do that through the magic formula of central banking foreign credit.
Within six years of Hitler’s ascension to the German Chancellery, Wall Street and the City of London Corporation bankers had financed the greatest mechanized military ever assembled – the Wehrmacht. The Dawes plan of 1924 had initiated the linkage between German industry and Wall Street finance for which the American banker Charles G. Dawes shared the 1925 Nobel Peace Prize. Under the Dawes Plan, prior to the 1929 crash, the Weimar Republic had paid its war reparations not to France or England, but to a consortium of Wall Street investment banks. This Dawes Plan gave Germany a life-sustaining infusion of US dollar credit that would in theory produce trade that would hypothetically generate customs and excise taxes that were surmised to eventually go towards war reparations to England and France. But then Hitler repudiated the Versailles Treaty, and the Gold Reserve Act allowed millions more pure fiat US dollars to flow out of Wall Street to their agents in “neutral” Stockholm and into the Nazi controlled Deutsche Reichsbank. Wall Street and the City of London Corporation loved Hitler and the House of Windsor openly saluted him. Nazism was to be a great boon to the trans-Atlantic financiers as Hitler would devoured the expendable and unprofitable Slavic peoples and ensured a never ending stream of new revenue with every eastern conquest. It was a foolproof plan – the Atlantic Ocean was wide, the Kriegsmarine small, the Luftwaffe would run out of gas before it arrived over New York City, and the communist martyrs installed in Russia would put up a fierce and expensive fight until Lebensraum ran out of room. But what Wall Street had not figured into its equations was that Hitler would sign an Anti-Comintern Pact, a Phony War would transform into a hot war, and another go at uniting all the Germanic peoples of Europe would commence under the new banner of Blut und Boden. The City of London Corporation bankers would have to fix this Wall Street mess themselves and call up the blue blooded true believers, those who existed for one purpose and one purpose only – the “Glory of Britannia”.
We all know the story of what happened next and how WWII dragged in the entire central bank cross ownership nexus to secure victory for the “Glory of Churchill”. But for all the tens of thousands of pages published in the learned journal tomes, there is not one observation made how the Federal Reserve System failed to deliver the expectations sold to America that it would end the boom-bust cycles inherent under post bellum 19th century quasi-capitalism. There was not one erudite call to re-examine the “special relationship” now cemented between Congress and the Federal Reserve System, and not one monetary scientist noticed the Federal Reserve System cross ownership nexus came out of the Great Depression – the depression it created – more powerful than when it entered. Instead, the world got lofty excuses like The General Theory of Employment, Interest, and Money proclaiming that more of the same failures would make everything indubitably jolly good. Not one political scientist noticed the Great Depression was used to eliminate banks not in favor with the elite ownership hierarchy within the trans-Atlantic central bank cross ownership nexus. And, not one scholarly paragraph examined how depressions are, and have always been, financially engineered mechanisms to destroy competitor banks and consolidate increasing power into a handful of fewer banks owned by a shrinking secret ownership pool.
With the conclusion of WWII, the Exchequer was broke as it had issued such an immense quantity of debt to finance the war that it could never be repaid without resorting to harsh austerity measures at home that would threaten social unrest during a period of national weakness. But with the Bank of England in control of monetary policy, any semblance of economic recovery would be impossible, so after 252 years of their “special relationship”, Parliament made the only logical choice available to it and in 1946 the Bank of England was nationalized and played no further dominant role in world capitalism. But the central bank cross ownership nexus made out just fine as the Bank of England wiggled out of holding the bag on all those unpayable war debts as the nationalization dumped them onto the backs of the Queen’s subjects in another miraculous “heads they win, tails you lose” event. Thus 1946 begins the British period of state controlled capitalism that was in effect a transition period into de-industrialization where large segments of its economy were nationalized to ensure they were not revived through modernization and thus would never be placed into competition with industry in the United States or other European countries that were using their post-WWII rebuilding programs to modernize their industries.
After both the Bank of England and Bank of France were lost to nationalizations, Wall Street tool the pre-eminent role within the central bank cross ownership nexus and got straight to work on elevating the US dollar to the status of undisputed world reserve currency, thus ending the 130 year run of the pound sterling.
And a modern world reserve currency needed a colonial fiat empire, so the United States started with Western Europe via the Anglo-American Loan Agreement of 1946 and later the Marshall Plan of 1948 to kick off its “virtuous cycle”. The Russian financial system remained unchanged, and it absorbed Eastern Europe into its new expanded fiat empire. Thus, the true winners at the cessation of hostilities from a purely financial perspective were the United States and the Soviet Union.
In 1951 during the fog of the Korean War and with the Secretary of the Treasury in the hospital, the Assistant Secretary of the US Treasury – not Congress – handed the power to set interest rates independently of government economic policy entirely to the Federal Reserve System. Like the original Federal Reserve Act, this additional power grab was sold to the American people on the premise the privately owned Federal Reserve System would “tame inflation” and “foster economic stability without responding to short-term political pressure”. This single act by an adjutant set the stage for the Federal Reserve System to wield incredible power over government policy and essentially hold Congress to ransom, where although the US Treasury was responsible for raising government money, the privately owned Federal Reserve System was now responsible for setting that money’s price paid to it for creating it out of thin air. So the Federal Reserve System now had the power to create or destroy national wealth by reducing or raising interest rates and there was no legal stipulation for whom their policies should benefit. Thus unbeknownst to the American people, this unnecessary power relinquishment was, in effect, the crucial piece that would set the stage for enabling the financialization of the America economy.
Post-WWII capitalism under the American fiat leadership functioned much like it did prior to the war except where the fiat empire was concerned. Instead of conquest and physical occupation of resource rich lands and filling these lands up with colonists, the United States resorted to a proxy conquest model where it initiated coup d’états, assassinations, foreign espionage, fraudulent elections, and foreign propaganda campaigns to install pliable dictators and friendly juntas. These leaders were amicable to pursuing “growth” policies, allowed American military bases on their soil, and had no qualms about crushing dissent at home or piling billions of US dollar denominated debt onto the heads of their citizenry. In exchange for their compliance, these dictators and juntas were kept in power with generous foreign aid packages, and they in turn doled out lucrative resource development concessions, purchased US made military hardware, and awarded contracts to US corporations for industrial, civil, and defense projects. In a new twist on colonization, many of these American proxy conquests created large numbers of emigres into the United States and provided a mechanism to ensure the consumer base at home continued to grow and devour excess production capacity as American living standards rose and native born birth rates declined. A new “virtuous cycle” evolved whereby industry in the conquered fiat empire eventually began to generate export income sold into the US dollar denominated commodity markets, and those US dollars returned to the United States to purchase US value added exports and services. And to secure this new “virtuous cycle”, in 1947 the Central Intelligence Agency was born out of the National Security Act, and it quickly evolved into its main directive of waging clandestine foreign hybrid wars to consolidate and grow the American fiat empire, install and keep friendly governments investing in US exports – especially military equipment – and defeat the competing Soviet fiat money empire. Thus with its responsibility of maintaining its new global fiat empire, the United States entered into its historical phase of Endless War.
The United Kingdom on the other hand could no longer afford control over its fiat empire as it had no viable value added export capability at war’s end and thus its “virtuous cycle” stopped functioning. It instead resorted to de-colonialization, but only in terms of physical land holdings. The City of London Corporation bankers either kept effective control over these former colonies’ new central banking systems or was its primary beneficiary, and in either case it retained the majority of financial profits derived from these newly created banking systems. This “de-colonized” banking model was similar to the false “independence” of the Federal Reserve System, but here the City of London Corporation bankers retained control through majority stock ownership of the member banks that comprised the new banking systems. In the English speaking constitutional monarchies where the serious financial profits were generated, an additional failsafe was guaranteed by the Queen’s appointment of Governor Generals who could – and once did in Australia – sack recalcitrant duly elected governments that did not put the City of London Corporation’s interests above those of their own people.
One post-WWII change with huge repercussions to American capitalism was the US dollar denomination takeover of global commodities trade from the pound sterling. As world population and industrialization increased and Western Europe crept back into consumer manufacturing, the volume of forward contracts traded in dollars grew in step. However, all that American ingenuity put into its fiat empire’s “virtuous cycle” began to work too well in the Middle East and North African oil sectors. By 1965 the combined dollar revenues received from new oil exports, taken together with all Western European dollar revenue streams, were greater than what the US domestic export capacity could absorb through its “virtuous cycle”. Instead of buying US value added exports, these surplus overseas dollars went searching for investments and with limited low risk opportunities available, they eventually found the US Treasury Gold Window. The 1934 Gold Reserve Act had ended domestic dollar convertibility into physical gold but not international convertibility, which was retained as per the Bretton Woods agreement, and during the second half of the 1960s these foreign dollars began to drain the US Treasury of its gold reserves. Despite the gold rush, the US Treasury held its official exchange price constant at $35 an ounce – the same price set after the depression era Gold Reserve Act. When the House of Rothschild finally raised the gold price in 1968, it signaled US gold reserves were in decline and prompted frenzied buying from Western Europe up until the day that American capitalism ended.
- Why Is Nobody Talking About This…
Why Is Nobody Talking About This…
Tyler Durden
Sun, 10/04/2020 – 22:30Far be it from us to try and ruffle feathers on a Sunday, but the inescapable reality of the events over the last four days continues to nag at us; and in news that should come as a surprise to nobody, reality isn’t being covered by the mainstream media.
The uncomfortable reality of the situation is that the President of the United States – arguably the most powerful man on the planet – has contracted COVID-19 and, for one reason or another, it is serious enough for him to put in a semi-permanent stay at Walter Reed Medical Center.
To say that the sitting President of the United States isn’t in a more vulnerable or precarious state than normal would simply be false. Ergo, to some degree, the country is also in a slightly more precarious and vulnerable state, despite numerous well thought out succession plans.
From there, one has to examine exactly how the President of the United States wound up being in a situation where he has been compromised.
As we have reported on this site numerous times (here, here and here), there is a growing mountain of evidence – aside from simply common sense – that COVID-19 may have not have originated from bats; but instead was altered, engineered, or created at the Wuhan Institute of Virology. (As a reminder, for our efforts in trying to discover the truth – and have civil discourse around one of the biggest issues of our time – we were rewarded by being ‘mistakenly’ banned from Twitter for months.)
Then there was this “rogue” Chinese virologist who published a paper just weeks ago that contained “smoking gun” evidence that the virus was man made. For her thoughts, she was also promptly kicked off Twitter.
Given this information, the uncomfortable reality may be that there is a greater than zero chance that a Chinese made virus may be in the process of dethroning a sitting US president.
And while the rest of the mainstream media is busy trying to find conflicting reports between Trump’s doctors about meaningless minutiae and gleefully detailing succession plans for what would happen if Trump was incapacitated, nobody appears to have the guts, bravery or plain old common sense to examine and question what could be the uncomfortable reality of the situation.
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Based on the mainstream media‘s handling of the Wuhan Institute of Virology story, we aren’t especially confident that anybody will ever broach the subject. But at some point in the future, we’re going to look back and it’s going to be crystal clear to us that a Chinese-made virus – or at the very least a virus-born-out-of-China – has nearly incapacitated a sitting US president.There are tons of conspiracy theories that can run amok from here, none of which we will entertain at this point.
But one great question is whether or not US media is so enamored with communism that they will dispense with the patriotic duty of at least considering this scenario, when it could be one of the most important issues many generations face during their lifetime.
We hope we’re wrong about everything.
But we sure won’t stray from our patriotic duty to at least broach the subject anymore.
Get well soon, Mr. President.
- The Police Are Requesting Data From People's Smart-Speakers At An Alarming Rate
The Police Are Requesting Data From People’s Smart-Speakers At An Alarming Rate
Tyler Durden
Sun, 10/04/2020 – 22:05Authored by Robert Wheeler via The Organic Prepper blog,
Remember all those conspiracy theorists and Luddites who told you they didn’t want Echo or Alexa devices in their home because those gadgets were spying on them? Well, they were right. That’s not even up for debate.
If you were one of those friends who mocked them and called them crazy, you were wrong. Just admit it.
If you are bewildered by what you just read, please, read on.
Nearly ten years ago, writers like Brandon Turbeville and others were warning that “smart technology” and the “internet of things” were being developed for surveillance and manipulation purposes. (Despite the companies’ claims of greater convenience.) We’ve been in a virtual dragnet for years.
Those devices and technologies are ubiquitous and are being used to soak up data, private and personal conversations, interactions, and even movement. All of this openly discussed in mainstream outlets. Lately, this website has reported on the Nest, your phone’s location tracker, and other “smart” technology. We’ve even talked about how we all have “surveillance scores.“
Take a look at WIRED’s article by Sidney Fussell, “Meet the Star Witness: Your Smart Speaker.” In this article, Fussell details a murder case in which an Amazon Echo device was presented as evidence.
He writes,
In July 2019, police rushed to the home of 32-year-old Silvia Galva. Galva’s friend, also in the home, called 911, claiming she overheard a violent argument between Galva and her boyfriend, 43-year-old Adam Crespo. The two lived together in Hallandale Beach, Florida, about 20 miles from Miami.
When officers arrived, Galva was dead, impaled through her chest by the 12-inch blade at the sharp end of a bedpost. Police believe Crespo tried to drag Galva from their bed. She held onto the bedpost to resist, but the sharp end snapped, somehow killing her. Police charged Crespo with second-degree murder. He pleaded not guilty and was released on $65,000 bail, awaiting trial. In the months since the arrest, Crespo’s lawyer has presented a surprising piece of evidence in his defense: recordings from a pair of Amazon Echo speakers.
“I had a lot of interviews where people said, ‘Oh, are you aware that this could be the first time Alexa recordings are going to be used to convict somebody of murder?’” says Christopher O’Toole, Crespo’s lawyer. “And I actually thought of it the opposite way, that this could be the first time an Amazon Alexa recording is used to exonerate somebody and show that they’re innocent.”
When police and prosecutors collect smart home or speaker data, it’s typically used as evidence against suspects. The Hallandale Beach Police Department filed a subpoena for Crespo’s speakers, as they may have picked up audio of the argument Galva’s friend overheard.
The incident shows the growing role of smart home devices and wearables in police investigations.
In 2016, police in Bentonville, Arkansas, requested Amazon Echo data in connection with a man’s death, believed to be the first such request. Amazon initially tried to block the request, but later handed over the data. A murder charge against the defendant was later dropped, but the speaker, smart home, and wearable data has figured into multiple cases since then.
Requests for smart and wearable data has increased rapidly.
Fussell continues,
Earlier this month, Amazon said it had received more than 3,000 requests from police for user data in the first half of this year, and complied almost 2,000 times. That was a 72 percent increase in requests from the same period in 2016, when Amazon first disclosed the data, and a 24 percent jump in the past year alone.
Amazon doesn’t provide granular data on what police are seeking, but Douglas Orr, head of the criminal justice department at the University of North Georgia, says police now look for smart home data as routinely as data from smartphones. Data on a smartphone often points officers towards other devices, which they then probe as the investigation continues.
By amending a search warrant, police can “keep going to keep collecting data,” Orr says. “That usually leads to an Echo or at least some other device.”
As Orr explains, officers are getting more savvy about smart home devices, creating templates that simplify requesting data. Police departments often share these templates, he says, tailoring requests for the specifics of the case they’re investigating.
Google’s Nest unit reported increasing police demands for data from its smart speakers through 2018. Google then stopped reporting Nest data separately, including such requests in its broader corporate transparency report, which shows increased requests for Google user data.
In their terms of service, most major apps and websites include a clause warning users that companies may hand over their data if requested by the government. Law enforcement agencies file subpoenas or search warrants for data, detailing to judges what evidence they expect to find on the devices and how it may serve the investigation. Amazon and Google both notify users of a request for data unless the order itself forbids it. Any number of entities can request user data, but the companies say they prioritize requests based on urgency.
“Things like Homeland Security, they’re going to take high priority,” explains Lee Whitfield, a forensic analyst. “Other law enforcement requests will come in under that. And then things like divorce cases or civil cases, they have a lower ranking.”
In an emailed statement, an Amazon spokesperson said the company “objects to overbroad or otherwise inappropriate demands” from law enforcement and referred WIRED to its policy on government requests. A Google spokesperson also referred WIRED to its updated policy on requests.
Forensic experts tell WIRED that information from the devices is valued because it can offer a timeline of a person’s activities, their location, if they’re alone, and can verify statements made during questioning.
. . . . .
Orr has studied the types of data police can pull from smart speakers like the Amazon Echo. “Voice clips are only the beginning,” he says. Speakers keep time-stamped logs of user activity. Police can examine these logs to get a sense of what someone was doing around the time of an alleged crime.
Fussell then provides another example of how these devices are used by law enforcement.
He writes,
Consider a potential suspect who can’t prove where they were at 11 pm on a Thursday, because they live alone. Something as simple as ordering pizza through a speaker would show the time and location of the request and, if voice recognition is enabled, who made the request. “It might be benign information that someone was ordering a pizza, but it might also be an alibi for somebody,” Orr says.
Police increasingly rely on wearables and smart devices to verify the claims people make during an investigation. Sometimes, the tools can reveal a lie.
Heather Mahalik, a forensics instructor, recalls a Florida case in which a man killed his wife, then tried to impersonate her. The husband sent texts and Facebook messages from his wife’s phone in an attempt to blur the timeline of her disappearance. While the woman’s phone activity continued, her Apple Watch showed a sudden drop in heart rate activity that the husband claimed was due to a dead battery. Activity on the man’s phone synced perfectly with when he used the wife’s phone to post to Facebook. Her phone showed no activity except for when the husband picked it up to post, with timestamps matching his activity to the use of the wife’s phone.
“We were able to tell from his device that he would pick up the phone, take 18 steps, and it corresponded with the time he posted a Facebook post,” Mahalik says.
Connecting information from multiple devices is a common practice, analysts say. Information on one device can suggest evidence on another. This ability to string together discoveries leads to what another expert calls a phased approach to digital forensics.
“They ask for something, the investigation moves along, they find something else interesting, and then they request the next thing,” says Whitfield, the forensic analyst.
O’Toole, Crespo’s lawyer, says police subpoenaed Crespo’s social media accounts right away, then requested his voice recordings about four weeks later. Officers wrote in the search warrant that the speaker data may include “audio recordings capturing the attack on victim Silvia Crespo.”
O’Toole says he intends to introduce the smart speaker recordings in his client’s favor. Via email, a spokesperson for Hallandale Beach Police confirmed the case was still active but did not provide further comment.
O’Toole says smart speaker recordings are part of several cases he’s working on, including a divorce in which a woman subpoenaed data from a smart speaker that may have picked up the sounds of her husband with another woman..
Whitfield says police are becoming more savvy about the information in the smart speakers’ activity logs. He recalls a case where police found drugs in a household with multiple residents. Officers identified a suspect after seizing data from a smart speaker. Its log not only listed recent queries related to drugs but identified who spoke them. Google and Amazon speakers let users create profiles so the devices recognize their individual voices. This information helped police identify the suspect.
“I just don’t see this going away,” Whitfield says. “I think this is going to be more and more prolific as time goes on.”
Whitfield is right.
It will never go away.
Advertisement of these technological devices as a tool for convenience was a manipulative tactic to introduce technological devices for their real purpose – the tracking, monitoring, and recording of citizens so that no action – no matter how small – goes unnoticed. We are already living in a surveillance state and it’s only going to get worse.
Once begun, this bell cannot be unrung.
- Trump Taps Conservative Watchdog Tom Fitton For Court Oversight Agency
Trump Taps Conservative Watchdog Tom Fitton For Court Oversight Agency
Tyler Durden
Sun, 10/04/2020 – 21:15President Trump plans to appoint conservative legal watchdog Tom Fitton of Judicial Watch to serve on a D.C. court oversight body which has the power to remove judges within the district, according to Politico.
Fitton’s upcoming appointment to the D.C. Commission on Judicial Disabilities and Tenure was announced by the White House in a Friday afternoon letter. The commission includes four attorneys, one federal judge and two laypeople who can vote to remove judges for misconduct, or force judges into retirement if they become mentally or physically incapacitated.
The president can appoint one of the members to a five-year term.
Fitton heads up Judicial Watch, a conservative watchdog organization founded in 1994, which has made headlines bringing Freedom of Information Act (FOIA) lawsuits to force the government to release evidence which may point to misconduct by government officials.
The groups has sued both Republican and Democratic administrations, including the Clinton IRS alleging a retaliatory audit, the Bush administration and former Vice President Dick Cheney and his former company, Haliburton, and the Obama administration over former Secretary of State Hillary Clinton’s emails, after she deliberately circumvented the Freedom of Information Act with a private server in order to conceal her communications from public records requests.
- How The DNC Hired CrowdStrike To Frame Russia For The Hack: Excerpt
How The DNC Hired CrowdStrike To Frame Russia For The Hack: Excerpt
Tyler Durden
Sun, 10/04/2020 – 20:50Submitted by Thomas Farnan, originally published in The National Pulse
U.S. Director of National Intelligence John Ratcliffe recently declassified information indicating the CIA obtained intelligence in 2016 that the Russians believed the Clinton campaign was trying to falsely associate Russia with the so-called hack of DNC computers. CIA Director John Brennan shared the intelligence with President Obama. They knew, in other words, that the DNC was conducting false Russian flag operation against the Trump campaign. The following is an exclusive excerpt from The Russia Lie that tells the amazing story in detail:
On March 19, 2016, Hillary Clinton’s campaign chairman, John Podesta, surrendered his emails to an unknown entity in a “spear phishing” scam. This has been called a “hack,” but it was not. Instead, it was the sort of flim-flam hustle that happens to gullible dupes on the internet.
The content of the emails was beyond embarrassing. They showed election fraud and coordination with the media against the candidacy of Bernie Sanders. The DNC and the Clinton campaign needed a cover story.
Blaming Russia would be a handy way to deal with the Podesta emails. There was already an existing Russia operation that could easily be retrofitted to this purpose. The problem was that it was nearly impossible to identify the perpetrator in a phishing scheme using computer forensic tools.
The only way to associate Putin with the emails was circumstantially.
The DNC retained a company that called itself “CrowdStrike” to provide assistance. CrowdStrike’s chief technology officer and co-founder, Dmitri Alperovitch, is an anti-Putin, Russian expat and a senior fellow at the Atlantic Council.
With the Atlantic Council in 2016, all roads led to Ukraine. The Atlantic Council’s list of significant contributors includes Ukrainian billionaire Victor Pinchuk.
The Ukrainian energy company that was paying millions to an entity that was funneling large amounts to Hunter Biden months after he was discharged from the US Navy for drug use, Burisma, also appears prominently on the Atlantic Council’s donor list.
Arseniy Yatsenyuk, the Western puppet installed in Ukraine, visited the Atlantic Council’s Washington offices to make a speech weeks after the coup.
Pinchuk was also a big donor (between $10 million and $20 million) to the Clinton Foundation. Back in ’15, the Wall Street Journal published an investigative piece, “Clinton Charity Tapped Foreign Friends.” The piece was about how Ukraine was attempting to influence Clinton by making huge donations through Pinchuk. Foreign interference, anyone?
On June 12, 2016, WikiLeaks founder Julian Assange announced: “We have upcoming leaks in relation to Hillary Clinton . . . We have emails pending publication.”
Two days later, CrowdStrike fed the Washington Post a story, headlined, “Russian government hackers penetrated DNC, stole opposition research on Trump.” The improbable tale was that the Russians had hacked the DNC computer servers and got away with some opposition research on Trump. The article quoted Alperovitch of CrowdStrike and the Atlantic Council.
The next day, a new blog – Guccifer 2.0 – appeared on the internet and announced:
Worldwide known cyber security company CrowdStrike announced that the Democratic National Committee (DNC) servers had been hacked by “sophisticated” hacker groups.
I’m very pleased the company appreciated my skills so highly))) But in fact, it was easy, very easy.
Guccifer may have been the first one who penetrated Hillary Clinton’s and other Democrats’ mail servers. But he certainly wasn’t the last. No wonder any other hacker could easily get access to the DNC’s servers.
Shame on CrowdStrike: Do you think I’ve been in the DNC’s networks for almost a year and saved only 2 documents? Do you really believe it?
Here are just a few docs from many thousands I extracted when hacking into DNC’s network.
Guccifer 2.0 posted hundreds of pages of Trump opposition research allegedly hacked from the DNC and emailed copies to Gawker and The Smoking Gun. In raw form, the opposition research was one of the documents obtained in the Podesta emails, with a notable difference: It was widely reported the document now contained “Russian fingerprints.”
The document had been cut and pasted into a separate Russian Word template that yielded an abundance of Russian “error “messages. In the document’s metadata was the name of the Russian secret police founder, Felix Dzerzhinsky, written in the Russian language.
The three-parenthesis formulation from the original post “)))” is the Russian version of a smiley face used commonly on social media. In addition, the blog’s author deliberately used a Russian VPN service visible in its emails even though there would have been many options to hide any national affiliation.
Under the circumstances, the FBI should have analyzed the DNC computers to confirm the Guccifer hack. Incredibly, though, the inspection was done by CrowdStrike, the same Atlantic Council-connected private contractor paid by the DNC that had already concluded in The Washington Post that there was a hack and Putin was behind it.
CrowdStrike would declare the “hack” to be the work of sophisticated Russian spies. Alperovitch described it as, “skilled operational tradecraft.”
There is nothing skilled, though, in ham-handedly disclosing a Russian identity when trying to hide it. The more reasonable inference is that this was a set-up. It certainly looks like Guccifer 2.0 suddenly appeared in coordination with the Washington Post’s article that appeared the previous day.
FBI Director James Comey confirmed in testimony to the Senate Intelligence Committee in January 2017 that the FBI’s failure to inspect the computers was unusual to say the least. “We’d always prefer to have access hands-on ourselves if that’s possible,” he said.
But the DNC rebuffed the FBI’s request to inspect the hardware. Comey added that the DNC’s hand-picked investigator, CrowdStrike, is “a highly respected private company.”
What he did not reveal was that CrowdStrike never corroborated a hack by forensic analysis. In testimony released in 2020, it was revealed that CrowdStrike admitted to Congressional investigators as early as 2017 that it had no direct evidence of Russian hacking.
CrowdStrike’s president Shawn Henry testified, “There’s not evidence that [documents and emails] were actually exfiltrated [from the DNC servers]. There’s circumstantial evidence but no evidence that they were actually exfiltrated.”
The circumstantial evidence was Guccifer 2.0.
This was a crucial revelation because the thousand ships of Russiagate launched upon the positive assertion that CrowdStrike had definitely proven a Russian hack. Yet this fact was kept from the American public for more than three years.
The reasonable inference is that the DNC was trying to frame Russia and the FBI and intelligence agencies were going along with the scheme because of political pressure.
Those who assert that it is a “conspiracy theory” to say that CrowdStrike would fabricate the results of computer forensic testing to create a false Russian flag should know that it was caught doing exactly that around the time it was inspecting the DNC computers.
On Dec. 22, 2016, CrowdStrike caused an international stir when it claimed to have uncovered evidence that Russians hacked into a Ukrainian artillery computer app to help pro-Russian separatists. Voice of America later determined the claim was false, and CrowdStrike retracted its finding.
Ukraine’s Ministry of Defense was forced to eat crow and admit that the hacking never happened.
If you wanted a computer testing firm to fabricate a Russian hack for political reasons in 2016, CrowdStrike was who you went out and hired.
To read the rest of the story, click The Russia Lie: How the Military Industrial Complex Targeted Trump and buy the ebook for just $5.
- "Don't Tell Anyone" – Trump Didn't Disclose Initial Positive COVID-19 Test Results: Report
“Don’t Tell Anyone” – Trump Didn’t Disclose Initial Positive COVID-19 Test Results: Report
Tyler Durden
Sun, 10/04/2020 – 20:25The White House Correspondents Association is having a full-blown fit over President Trump’s decision to leave Walter Reed and do a little drive-by visit for the “Great Patriots” gathered outside.
And as if that weren’t enough, WSJ late Sunday published a “scoop” reporting what anybody who watched Dr. Conley’s Saturday press briefing probably had already expected: That President Trump didn’t immediately inform the public of the results of a rapid COVID-19 test taken Thursday.
Trump revealed in a tweet sent early Friday morning that both he and the First Lady had tested positive for the virus. But in a press briefing on Saturday, Trump’s physician, Dr. Sean Conley, “misspoke”, saying Trump was 72 hours in already, suggesting that Trump may have known about his illness as early as Wednesday.
So far, there’s no evidence to suggest that Trump tested positive Wednesday. But according to WSJ, Trump first tested positive via a rapid test (probably the Abbott Labs rapid test) for the first time on Thursday evening, shortly before he sat for a phone interview with Fox News Host Sean Hannity. During the interview, Trump acknowledged that his aide, Hope Hicks, had tested positive. But he claimed that he wouldn’t get his test results back until “either tonight or tomorrow morning”.
“I’ll get my test back either tonight or tomorrow morning,” Mr. Trump said during the interview. At 1 a.m. on Friday, the president tweeted that he indeed had tested positive.
To be sure, WSJ reported that the White House protocol is to first test Trump and his staff with the Abbott Labs test, then – if that test comes back positive – they’re tested again with a more accurate test. WSJ’s sources claimed that Trump’s tests followed this protocol. After testing positive for the first time, Trump reportedly told one of his aides: “Don’t tell anyone”.
Apparently, “anyone” included other top officials in the West Wing and the Campaign. One source told WSJ that Bill Stepien, Trump’s campaign manager, wasn’t aware of Hope Hicks’ positive test until he read about it on Twitter.
Stepien has since tested positive. Now, other WSJ sources are saying that a sense of anxiety has gripped the West Wing, as nobody is willing to talk about positive tests, even among their colleagues.
The initial secrecy within Mr. Trump’s inner circle has created a sense of anxiety within the West Wing. Publicly, the White House has issued evolving and contradictory statements about the president’s health that has some officials worried about their own credibility.
“I’m glued to Twitter and TV because I have no official communication from anyone in the West Wing,” an administration official said.
The White House didn’t respond immediately to a request for comment.
Before closing out the story, WSJ offered a hint that Trump’s team was already curtailing access to the president on Wednesday. Despite this, when Trump arrived in Minneapolis, he shook hands and posed for photos, confounding his greeters’ expectations.
Minnesota state Rep. Kurt Daudt said Saturday he was awaiting a Covid-19 test after greeting Mr. Trump at the Minneapolis airport on Wednesday. Mr. Daudt and other greeters had been tested before meeting the president, and were instructed not to shake hands with him or get close to him, but when the president came down the stairs from the plane, he offered to take photos.
“You’ve been tested, right?” Mr. Trump said, according to Mr. Daudt.
Several of the greeters posed for photos with the president, with some standing less than a foot away from him, according to photos from the event. None wore a mask. Mr. Trump then attended a fundraiser at the home of Mike Davis, owners of a quartz countertop company, according to his campaign schedule.
Notably, the timeline offered by WSJ at least confirms that Trump didn’t test positive until after returning from a fundraiser at his golf club in Bedminster, NJ. When pressed by reporters, WH press secretary Kayleigh McEnany only said that Trump didn’t test positive until after returning from Bedminster.
None of this is damning evidence that Trump lied to the country, of course. Though we wouldn’t be surprised to see the NYT follow this up with a similarly anonymously sourced report claiming that Trump actually tested positive Thursday morning – or perhaps even Wednesday evening.
- Report A Social Worker For Sexual Harassment And He Might Take Your Kids
Report A Social Worker For Sexual Harassment And He Might Take Your Kids
Tyler Durden
Sun, 10/04/2020 – 20:00Submitted by Sovereign Man
Natia Sampson volunteered to become the legal guardian of her niece after the girl’s parents were incarcerated. And the social worker on the case took a liking to Natia.
At first she politely rejected his advances, fearing that reporting these instances would be met with retaliation. But soon it turned into sexual harassment, and she was forced to contact his superiors. But nothing changed. Until one day, the social worker exploded at Natia, saying, “I don’t know where you get off sending all these complaint emails and making all these calls, but you are going to find out that we at [Child Services] stick together, and cover for each other.”
Soon after, he lodged claims of child neglect against Natia. She eventually fought off the completely unsubstantiated charges.
Natia then sued the social worker and the Department of Children and Family Services for so obviously violating her rights. But the case was dismissed last month. The Judge’s decision reads:
“the right of private individuals to be free from sexual harassment at the hands of social workers was not clearly established at the time of defendants’ conduct in this case.”
What this means:
Clearly if the parents are in prison, this family has some problems. It is easy to dismiss these cases as the stuff of broken homes. But we have also highlighted a case in the past where children were kidnapped by a SWAT team after the parents disagreed with a doctor over the seriousness of a fever.
Then there was the child taken away because a father wouldn’t cooperate with a civil asset forfeiture proceeding– when the cops steal your money without a conviction, or even a criminal charge.
A town in Alabama removed countless children from innocent parents because a lab owner falsified drug test results for years.
One judge removed a child from the home in an attempt to force a confession from her parents. The courts found no evidence of abuse, but didn’t return the child to her parents for two years.
This same judge removed a child from a home because the court hearing was running too late into the evening. In another case, she arbitrarily denied placing a child with his grandparents, instead placing him in a stranger’s foster home where he was sexually abused.
While hopefully these cases are rare, you can’t deny that foster care horror stories exist. It’s terrible enough to be separated from your child. But to imagine what could be happening to your child in a stranger’s care is even more terrifying.
Earlier this year, the US Marshal Service launched a national effort to rescue trafficked children. They recently confirmed that the majority of sexually trafficked children they rescued came from foster care.
In the Ohio operation, “25 of the 31 children recovered were in DCFS [foster] care in either a group homes or foster case… in Georgia: 28 of the 39 recovered were in the care of DFACS [Department of Family and Children’s Services].”
What you can do about it:
There has recently been a massive increase in homeschooling because of COVID. In the past, you could reasonably worry that homeschooling would make you a target of the state, just for being outside the mainstream. But these days, homeschooling is more likely to shield you from any incidents in the first place.
Just this past Friday we talked about a case where a social worker was brought in because a teacher saw a BB gun in a child’s bedroom during virtual learning.
Teachers peering into your home through the child’s computer screen is already ensnaring innocent kids and parents in the social services system. So it’s reasonable to assume that states with the highest homeschool freedom are some of the safest from social services overreach as well.
The following states do not require any notice that you are homeschooling: Alaska, Connecticut, Idaho, Illinois, Indiana, Iowa, Michigan, Missouri, New Jersey, Oklahoma, and Texas. (Usually in these states you do have to formally withdraw your child from public school if they were previously enrolled.)
Also, joining the Home School Legal Defense Association (or a similar group) gives you legal protection, resources, and a network with strength in numbers if Child Protective Services does ever unjustly target you.
But when it comes to something as important as having agency over your own children, you may want to look outside the US entirely.
In a Sovereign Man Confidential Alert from August, we profiled a man who we referred to as David. As a child, he witnessed the government kidnap his five-year-old nephew. David’s parents had been raising the little boy– their grandson– because the boy’s parents were unable to do so. But the boy’s father (David’s sister’s ex) didn’t like the arrangement. He convinced his girlfriend, a Child Protective Services official, to remove the child from the home. The little boy was never returned.
“I saw first-hand that child welfare in the US is a Soviet-style system,” he says. “They got away with it. I vowed at that moment never to have a child in the US.”
David and his wife opted to have their first baby in Brazil, where they have been living for most of this year. And for their next child, they are considering Argentina or Chile. In the meantime, the family plans to live in Spain.
Of course, this is only anecdotal information. But as someone who witnessed the abuses of the US child services system first- hand, David feels better about his parental rights in these countries. And even when a country’s official child services laws look similar to laws in the US, in practice, it may be much more rare for a child to be removed without actual serious cause.
In that sense, you may want to look at a country’s culture regarding parental rights, rather than just its laws.
- DHS Grants Millions To Groups Fighting 'Right-Wing Extremism'
DHS Grants Millions To Groups Fighting ‘Right-Wing Extremism’
Tyler Durden
Sun, 10/04/2020 – 19:30Since the largest threat facing the country is white supremacists, according to FBI Director Chris Wray and Homeland Security acting chief Tom Wolf, the Department of Homeland Security has agreed to provide $10 million in grants to organizations which combat ‘far-right extremism and white supremacy,‘ according to the Wall Street Journal.
The department’s Targeted Violence and Terrorism Prevention program will fund groups such as Life After Hate – founded by reformed white supremacists, which helps people trying to do the same. Another group, the School of Communication at American University, will develop a strategy to combat disinformation ‘circulated by the far right online,’ and others. Life After Hate was awarded nearly $750,000, while the School of Communication received a $500,000 grant.
One of the largest grants, nearly $750,000, went to Life After Hate, which was founded by former white supremacists and neo-Nazis and works with people trying to leave violent far-right movements. The group was first awarded funding under the Obama-era program but had its grant rescinded soon after Mr. Trump took office. –Wall Street Journal
Life After Hate says they will use the funding for its ExitUSA initiative. Executive director Sammy Rangel says their work “has never been more important,” adding “This project follows years of innovation in a space that was largely uncharted.”
Another group, the Counter Extremism Project, was awarded $277,755 to collaborate with Parallel Networks, which works with inmates at a San Diego County correctional facility who adhere to both white supremacist of jihadi ideology.
Former al Qaeda recruiter Jesse Morton’s group will work to help pull inmates away from extremist mindsets and give them the tools to reintegrate into society. The organizations will develop a curriculum—one for white supremacists, and the other for jihadis—aimed at providing alternative narratives to extremist ideology that will be administered both in person and through email correspondence.
Jesse Morton, a former recruiter for al Qaeda in New York who now heads Parallel Networks, said the goal is to help pull these inmates away from an extremist mindset and give them the tools to reintegrate into society after leaving prison. –Wall Street Journal
According to a DHS spokesman, the funding is targeted at preventing “violent white supremacy alongside a number of recognized and emergent forms of terrorism and targeted violence.”
Joe Biden holds hands with former White Supremacist and mentor, Sen. Robert Byrd In September, FBI Director Christopher Wray told the House Homeland Security Committee that the majority of deadly or violent incidents against others in 2018 and 2019 were racially and ethnically motivated, and are “the most lethal of all domestic extremists since 2001.”
- Nasdaq Shorts Collapse By 40% From 2nd Highest Ever After SoftBank-Inspired Squeeze
Nasdaq Shorts Collapse By 40% From 2nd Highest Ever After SoftBank-Inspired Squeeze
Tyler Durden
Sun, 10/04/2020 – 19:16Last weekend, we pointed out following the recent modest correction in the Nasdaq, institutional traders had gone full bear – at least in NQ futures – pushing the net non-commercial contracts to the second shortest position ever, which prompted both us and others to caution that a short squeeze in NQ futs was imminent. This is what the otherwise bearish (on tech) Bear Traps Report said last week after observing our chart:
Nasdaq non-commercial futures positioning is now the shortest since 2008, the index has rapidly blown through the March lows. We are definitely not bullish Nasdaq, but this certainly gives us pause. It is quite possible that this is just momentum players hedging their FANG gains etc, but still quite a move. Keep in mind, that was out a week ago. We’d imagine most dealers and former dealers are bearish risk and are short futures because every piled into puts very quickly (i.e dealers had to hedge themselves on the other side of the trade). Setting up for a squeeze to short into…
A few days later, that’s precisely what happened because according to the latest CFTC Commitment of Traders report, the Nasdaq 100 mini net spec short position in the week ending Sept 29 indeed collapsed by almost 40%, as the net future position shrank from -134.3K to -79.6K.
What happened? Well, as we reported on Friday using both SpotGamma data and a report from CNBC’s David Faber, SoftBank appears to have attempted another forced short squeeze, this time not so much in gamma but in actual future shorts, although it may well have been aiming for both. As SpotGamma observed on Friday, “this chasm between call & put gamma is starting to look similar to that of early August” while CNBC’s David Faber explained what caused it: on Thursday SoftBank bought $200M worth of calls in NFLX, AMZN, FB and GOOGL.
This likely explains why the Nasdaq ripped higher on Thursday after trading water for much of past week…
… however, SoftBank probably did not expect the Friday fireworks, when Trump’s covid diagnosis actually resulted in a pro-cyclical trade sweeping market as traders assumed (perhaps erroneously) that a fiscal stimulus deal (and its associated inflation) is now more likely.
In any case what we find most notable, is that while the Nasdaq indeed rose modestly last week (vs the Sept 25 Friday close), the fact that a whopping 40% of NQ short were covered and the Nasdaq barely rose, likely means that any future attempts by Softbanks to spark a gamma or futures squeeze could have very painful consequences for Masa Son… and potentially all those who furiously keep buying tech stocks and QQQs (and even the 3x levered TQQQ) after every dip.
- "This Is A CDO": Cerberus Selling $300MM In "Potentially Worthless" BBB- Rated CMBS IO-Strips As AAA Securities
“This Is A CDO”: Cerberus Selling $300MM In “Potentially Worthless” BBB- Rated CMBS IO-Strips As AAA Securities
Tyler Durden
Sun, 10/04/2020 – 18:40Back in May, when the Fed was struggling to rekindle animal spirits and force investors into every possible toxic debt instrument it could find, we explained how through the magic of modern monetary alchemy, a portfolio consisting of 96% Junk Loans had been converted into 87% investment grade bonds.
The magic catalyst in question: CLOs, which are structured credit products that take a portfolio of mostly junk loans – which are used to fund much of corporate America – and repackage them in such a way that the resulting product looks and feels much higher in credit quality, even though it consists of the exact same junky underlying securities, just presented in a different way.
Of course, this is hyperbole there is nothing “magical” about what CLOs do – in a nutshell, such structured products merely take advantage of the diversification nature of a broad pool of loans and make the assumption that absent a catastrophic economic crash, it is unlikely that more than a given percentage of loans will default at any one time. Now, we got perilously close to just such a mass default event after the covid shutdowns, which is also why the Fed had no choice but to step in and effectively bailout both corporate bonds and loans, or else it risked a complete collapse of the corporate bond and loan markets, and trillions of downstream losses in the CLO space.
In retrospect, and looking where risk assets trade now, the Fed has succeeded in kicking the can (whether it can continue doing that even as we head into the peak turbulence period of the US election and a potential second wave and new shutdowns, remains an open question).
One company which is not waiting to see what happens to the economy or to euphoria investor risk appetite, is the iconic distressed investor, Cerberus Capital, which has taken the CLO example above one step further, and instead of selling repackaging loans, has taken a bunch of freefalling, and potentially worthless, CMBS interest-only tranches and repackaged this steaming pile of dogshit into a $300 million product that the rocket scientists at DBRS rated, drumroll, AAA.
The product? A CDO, or Collateralized Debt Obligation, very much of the type that led to the collapse of the financial system in 2007/2008 when a handful of banks repackaged subprime mortgages into CDOs (and CDO squareds), giving the impression of riskless securities, which were virtually all wiped out once the housing market crashed, and one-hit wonder investors such as John Paulson made billions.
As Bloomberg details this latest “Wall Street alchemy” enabled by the Fed’s idiotic bubble-blowing policies, “in a maneuver that recalls the complex home mortgage investments in the mid-2000s, Cerberus Capital Management has used relatively low-quality commercial mortgage bonds to create triple-A debt.” In doing so, it is taking advantage of the greed and stupidity of the prevailing investor, because as we have repeatedly noted, the commercial real estate market has been clobbered especially hard by the pandemic, and a CMBX series focusing on hotels has emerged as the “Big Short 3.0” trade.
Just how bad is the CRE market? Consider that according to Trepp, around 9% of all commercial mortgages that have been bundled into bonds were delinquent in August, as Covid-19 keeps shoppers out of malls, travelers away from hotels and workers home from offices. The real number is far higher, and only the fact that $20 billion in CMBS forbearances have been granted is preventing this chart from exploding.
This is why hedge funds that find themselves holding to these securities are looking for creative ways to offload them to the army of idiot investors spawned by Jerome Powell’s monetary idiocy, while also making money from flipping them. Sure enough, Cerberus will likely strike gold in both regards: the securities sold by the hedge fund mature in 2.2 years, and the AAA portion is being marketed at a price of between 1.4 and 1.5 percentage points over benchmarks, according to Bloomberg sources. The high ratings combined with relatively high yields and short-term maturity could attract some investors.
Specifically, Cerberus – where Dan Quayle is Chairman of Global investments and may explain how Cerberus ended up with this pile of steaming horseshit in the first place – is taking derivatives of commercial mortgage bonds, known as interest-only strips, and packaging them into around $390 million of notes, about $300 million of which have top ratings from DBRS Morningstar.
As Bloomberg explains the structured product “alchemy” we first deconstructed back in May, “most of the commercial mortgage securities at the foundation of this transaction have the lowest investment-grade rating, BBB-, but through the magic of securitization they’re transmuted into AAA instruments, similar to subprime mortgage bond derivatives that were bundled into top-rated collateralized debt obligations during the U.S. housing bubble.”
Attempting to explain why investors have once again learned absolutely nothing from the financial crisis, Jason Callan, head of structured assets at Columbia Threadneedle Investments said “I’m sure the ratings are what’s driving the demand.” He is right, although it’s worth remembering that rating agencies rated hundreds of similar CDOs AAA in the summer of 2007, only to see them completely wiped out less than a year later.
“This is a CDO,” said Jen Ripper, an investment specialist at Penn Mutual Asset Management. “There could be a real risk of some principal loss at the BBB- level, which most of these interest-only tranches are ‘stripped’ off of.”
As Bloomberg adds, the transaction is being referred to as a “resecuritization”, according to deal docs, which say it’s structured so that cash flows have some protection from early repayment of principal through refinancing, and losses due to defaults. By some protection it likely means 1-2 months of capital buffer after which buyers are on their own. And in a world where a $700 million mall-backed CMBS portfolio is about to become the first mega casualty of the covid crisis, they will be on their own very soon.
Not convinced yet? Well, the deal is backed by about 9,300 mortgages, 27.6% of which are office, 25% retail and 15.5% hotel – the three hardest hit sectors in the post-covid age – while the rest is a mix of other commercial real estate sectors, initial marketing materials show.
Worse, CMBS “interest-only strips” are linked to the performance of corresponding bonds with the same ratings that pay both principal and interest. They represent securities backed by the excess interest generated from a pool of commercial mortgages. In other words, these securities default first, before any other impairments hit the capital structure. It also means that anyone who investors in such a “resecuritization” will lose money, guaranteed… unless of course the Fed buys it all.
Completing the farce, the Cerberus deal is being arranged by Deutsche Bank, JPMorgan Chase and Wells Fargo, the three banks that have the worst criminal record in the world and which collectively have paid tens of billions of legal fees, penalties and settlements. And soon, once this deal also blows up, we can add a few more billion in legal penalties.
But don’t worry, nobody will go to prison, because if anyone is guilty of anything, it is the Fed for allowing this kind of financial crisis stupidity to make a triumphal return.
- Military Bases On The Moon: US Plans To Weaponize The Earth's Satellite
Military Bases On The Moon: US Plans To Weaponize The Earth’s Satellite
Tyler Durden
Sun, 10/04/2020 – 18:15Authored by T.J.Coles via Counterpunch.org,
In July, Dmitry Rogozin, Director General of Roscosmos, cited the U.S. “retreat from principles of cooperation and mutual support” to justify Russia’s refusal to join the latest U.S. space initiative: to build lunar bases. Rogozin was likely referring to the U.S. refusal to renew the Intermediate-range Forces Treaty and its intention to back out of the Open Skies Treaty.
Russia responded by declaring that Venus is a “Russian planet.” The U.S. continues to reject Sino-Russian efforts to strengthen the Outer Space Treaty 1967, to prohibit the weaponization of space. Doing so would interfere with U.S. plans for “full spectrum dominance.”
MOON LANDING 2.0
Last week on 22 September, the National Aeronautical and Space Administration (NASA) signed a memorandum with the Department of Defense (DOD). The signers were NASA’s administrator, Jim Bridenstine, and the U.S. Space Force Chief of Operations General, John Raymond.
The signing of the memo took place in the broader context of NASA’s Artemis program. In December 2017, Donald Trump signed the Presidential Memorandum on Reinvigorating America’s Human Space Exploration Program. It was an update of Obama’s space policy, adding that the U.S. will: “Lead an innovative and sustainable program of exploration with commercial and international partners to enable human expansion across the solar system and to bring back to Earth new knowledge and opportunities.”
NASA’s Artemis program oversees the U.S. mission to exploit the moon, including the construction of the Artemis Base Camp at the lunar South Pole, probably near the Shackleton Crater. This will serve as a forerunner to building a base on Mars. It “builds on a half-century of experience and preparation to establish a robust human-robotic presence on and around the Moon,” says NASA. Artemis includes a Space Launch System and the Orion spacecraft. These operations will enable “U.S. commercial companies and international partners to further contribute to the exploration and development of the Moon.”
International partners, at present, include Canada, Japan, and the EU. Though, as we shall see, weaponization and competition remain serious threats to international peace and human survival. Other elements of the program include a Power and Propulsion Element (PPE) and the Habitation and Logistics Outpost (HALO), which Artemis hopes to finalize by 2023. The international efforts include deploying “science payloads” and CubeSats, as well as refueling the Gateway: an orbiting lunar outpost.
WEAPONIZED MOON
Contracts for the Human Landing System (HLS) have gone to Blue Origin, Dynetics (Leidos), and SpaceX. The HLS team includes Draper, Lockheed Martin, and Northrop Grumman. Draper will provide avionics, guidance, navigation, and software. The Integrated Lander Vehicle will launch on United Launch Alliance’s Vulcan heavy-lift rocket. Maxar Technologies will develop the PPE. HALO is an initial crew cabin for astronauts visiting the Gateway and will likely be built by Northrop. Pressurized and unpressurized cargo, including space instruments and food, will be delivered by SpaceX.
The recent NASA-DOD memorandum of understanding references the proposed lunar base and says that NASA and the Space Force “reaffirm and continue their rich legacy of collaboration in space launch, in-space operations, and space research activities, all of which contribute to the Parties’ separate and distinct civil and defense endeavors”—the latter are classified. The Space Force will act as the NASA’s guarantor. Space Force’s responsibilities “include developing military space systems and doctrine, as well as presenting space forces to support the warfighting Combatant Commands.” The memo reiterates common NASA-DOD interests.
The memo also seeks to establish a Foundation for Broad Collaboration. General Raymond says:
“A secure, stable, and accessible space domain underpins our nation’s security, prosperity and scientific achievement. Space Force looks forward to future collaboration, as NASA pushes farther into the universe for the benefit of all.”
The Space Force states that it “will secure the peaceful use of space, free for any who seek to expand their understanding of the universe, by organizing, training and equipping forces to protect U.S. and allied interests in space.” “Peace” means U.S. dominance unimpeded by commercial rivals, like China, India, and Russia.
NASA AS STIMULUS FOR HI-TECH
As the BBC acknowledges:
“Many practical products developed by NASA during the Apollo years are well known: cordless drills, PV (solar) panels, freeze-dried food, thermal insulation material, heat coatings and so on.”
Having learned their craft at the Fairchild Semiconductor company, NASA scientists formed Intel, which later worked on personal computers with Microsoft. The so-called Apollo Effect, in reference to the first moon landing, indirectly and reportedly inspired Tim Berners-Lee, who is credited with creating the World Wide Web, Jeff Bezos of Amazon, and Elon Musk of SpaceX, which is now contracted to work on the latest program.
NASA says of the future that taxpayer dollars will fund research and development for corporate, hi-tech innovation: “Space Technology investments will stimulate the economy and build our Nation’s global economic competitiveness through the creation of new products and services, new business and industries, and high-quality, sustainable jobs,” like those above. It notes more broadly:
“Knowledge provided by weather and navigational spacecraft, efficiency improvements in both ground and air transportation, super computers, solar- and wind-generated energy, the cameras found in many of today’s cell phones, improved biomedical applications including advanced medical imaging and even more nutritious infant formula, as well as the protective gear that keeps our military, firefighters and police safe, have all benefitted from our nation’s investments in aerospace technology.”
Colonel Eric Felt, Director of the Air Force Research Laboratory Space Vehicles Directorate, says: “The space renaissance happening on the commercial side is fantastic, there is innovation we can use.” Felt also notes the link between civilian-commercial and military technology: “We have limited funding in our budget for science and technology … We have to leverage dual-use technologies”—which means weaponized civilian and commercial products.
CONCLUSION
As pundits analyze what was arguably the lowest point of U.S. electoral politics in the mont of September, namely the “debate” between The Donald and Creepy Joe, Sky News reports on the Space Command’s first foreign deployment to Al Udeid Air Base, Qatar:
“Their mission is to confront new threats in the region from Iran’s missile programme – as well as attempts to jam, hack and blind satellites.”
Confront threats means maintain dominance.
The Space Force has also seen the transfer of Air Force personnel to the Marine Expeditionary Unit, indicating that the Force will integrate into all levels of the U.S. military, realizing the U.S. elite dream of “full spectrum dominance.”
- AMC Theaters Will "Run Out Of Liquidity" Within Six Months: S&P
AMC Theaters Will “Run Out Of Liquidity” Within Six Months: S&P
Tyler Durden
Sun, 10/04/2020 – 17:50AMC Entertainment, the largest movie theater chain in the world, will “run out of liquidity” in six months, according to debt ratings agency S&P Global Ratings, which downgraded AMC’s credit rating from CCC+ to CCC- and slapped it with a negative outlook, according to The Hollywood Reporter.
“Given our expectations for a high rate of cash burn, we believe the company will run out of liquidity within the next six months unless it is able to raise additional capital, which we view as unlikely, or attendance levels materially improve,” said the agency.
“The negative outlook reflects our view that a default, distressed exchange, or redemption appears to be inevitable within six months, absent unanticipated significantly favorable changes in the issuer’s circumstances.”
Box office sales have cratered in the wake of the COVID-19 pandemic, despite 70% of US movie theaters estimated to have re-opened with social-distance seating as of Labor Day.
After major theater re-openings on Labor Day pulled in a collective $28.4 million for 25 film releases, according to IMDB’s Box Office Mojo.com, the next two following weekends saw declines: $12.6 million for 24 releases (September 11-13) and $11.3 million for 28 releases (September 18-20). –MediaDailyNews
In July, AMC completed a debt restructuring with bondholders which saw $200 million in fresh cash, as well as the purchase of $100 million in new senior notes by the Silver Lake Group. The chain also raised $77 million by selling nine theaters in Europe’s Baltic region.
According to S&P Global, AMC “continues to struggle operationally and financially because U.S. attendance remains weak after reopening, additional major theatrical releases are delayed and its cash burn might accelerate now that its theaters are open,” and that continued reduced capacity combined with customers who are increasingly embracing streaming platforms, is likely to persist into next year.
Most exhibition companies — or 93 percent — weathered losses of 75 percent in the second quarter of 2020 after moviegoing came to an unprecedented stop in mid-March. While more than half of theaters are now reopened, Hollywood continues to delay its major fall releases out of concern that many moviegoers aren’t yet ready to return. –The Hollywood Reporter
On Wednesday, the National Association of Theatre Owners, the Directors Guild of America and the Motion Picture Association were joined by dozens of influential filmmakers to beg Congress for money, warning that many cinemas may not survive.
- How Three Prior Pandemics Triggered Massive Societal Shifts
How Three Prior Pandemics Triggered Massive Societal Shifts
Tyler Durden
Sun, 10/04/2020 – 17:25Authored by Andrew Latham via TheConversation.com,
Before March of this year, few probably thought disease could be a significant driver of human history.
Not so anymore. People are beginning to understand that the little changes COVID-19 has already ushered in or accelerated – telemedicine, remote work, social distancing, the death of the handshake, online shopping, the virtual disappearance of cash and so on – have begun to change their way of life. They may not be sure whether these changes will outlive the pandemic. And they may be uncertain whether these changes are for good or ill.
Three previous plagues could yield some clues about the way COVID-19 might bend the arc of history. As I teach in my course “Plagues, Pandemics and Politics,” pandemics tend to shape human affairs in three ways.
First, they can profoundly alter a society’s fundamental worldview.
Second, they can upend core economic structures.
And, finally, they can sway power struggles among nations.
Sickness spurs the rise of the Christian West
The Antonine plague, and its twin, the Cyprian plague – both now widely thought to have been caused by a smallpox strain – ravaged the Roman Empire from A.D. 165 to 262. It’s been estimated that the combined pandemics’ mortality rate was anywhere from one-quarter to one-third of the empire’s population.
While staggering, the number of deaths tells only part of the story. This also triggered a profound transformation in the religious culture of the Roman Empire.
On the eve of the Antonine plague, the empire was pagan. The vast majority of the population worshipped multiple gods and spirits and believed that rivers, trees, fields and buildings each had their own spirit.
Christianity, a monotheistic religion that had little in common with paganism, had only 40,000 adherents, no more than 0.07% of the empire’s population.
Yet within a generation of the end of the Cyprian plague, Christianity had become the dominant religion in the empire.
How did these twin pandemics effect this profound religious transformation?
Rodney Stark, in his seminal work “The Rise of Christianity,” argues that these two pandemics made Christianity a much more attractive belief system.
While the disease was effectively incurable, rudimentary palliative care – the provision of food and water, for example – could spur recovery of those too weak to care for themselves. Motivated by Christian charity and an ethic of care for the sick – and enabled by the thick social and charitable networks around which the early church was organized – the empire’s Christian communities were willing and able to provide this sort of care.
Pagan Romans, on the other hand, opted instead either to flee outbreaks of the plague or to self-isolate in the hope of being spared infection.
This had two effects.
First, Christians survived the ravages of these plagues at higher rates than their pagan neighbors and developed higher levels of immunity more quickly. Seeing that many more of their Christian compatriots were surviving the plague – and attributing this either to divine favor or the benefits of the care being provided by Christians – many pagans were drawn to the Christian community and the belief system that underpinned it. At the same time, tending to sick pagans afforded Christians unprecedented opportunities to evangelize.
Second, Stark argues that, because these two plagues disproportionately affected young and pregnant women, the lower mortality rate among Christians translated into a higher birth rate.
The net effect of all this was that, in roughly the span of a century, an essentially pagan empire found itself well on its way to becoming a majority Christian one.
The plague of Justinian and the fall of Rome
The plague of Justinian, named after the Roman emperor who reigned from A.S. 527 to 565, arrived in the Roman Empire in A.D. 542 and didn’t disappear until A.D. 755. During its two centuries of recurrence, it killed an estimated 25% to 50% of the population – anywhere from 25 million to 100 million people.
This massive loss of lives crippled the economy, triggering a financial crisis that exhausted the state’s coffers and hobbled the empire’s once mighty military.
In the east, Rome’s principal geopolitical rival, Sassanid Persia, was also devastated by the plague and was therefore in no position to exploit the Roman Empire’s weakness. But the forces of the Islamic Rashidun Caliphate in Arabia – which had long been contained by the Romans and Sasanians – were largely unaffected by the plague. The reasons for this are not well understood, but they probably have to do with the caliphate’s relative isolation from major urban centers.
Caliph Abu Bakr didn’t let the opportunity go to waste. Seizing the moment, his forces swiftly conquered the entire Sasanian Empire while stripping the weakened Roman Empire of its territories in the Levant, the Caucasus, Egypt and North Africa.
Muslim forces of the Rashidun Caliphate captured the Levant – a region of the Middle East – from the Byzantine Empire in A.D. 636. Wikimedia Commons
Pre-pandemic, the Mediterranean world had been relatively unified by commerce, politics, religion and culture. What emerged was a fractured trio of civilizations jockeying for power and influence: an Islamic one in the eastern and southern Mediterranean basin; a Greek one in the northeastern Mediterranean; and a European one between the western Mediterranean and the North Sea.
This last civilization – what we now call medieval Europe – was defined by a new, distinctive economic system.
Before the plague, the European economy had been based on slavery. After the plague, the significantly diminished supply of slaves forced landowners to begin granting plots to nominally “free” laborers – serfs who worked the lord’s fields and, in return, received military protection and certain legal rights from the lord.
The seeds of feudalism were planted.
The Black Death of the Middle Ages
The Black Death broke out in Europe in 1347 and subsequently killed between one-third and one-half of the total European population of 80 million people. But it killed more than people. By the time the pandemic had burned out by the early 1350s, a distinctly modern world emerged – one defined by free labor, technological innovation and a growing middle class.
Before the Yersinia pestis bacterium arrived in 1347, Western Europe was a feudal society that was overpopulated. Labor was cheap, serfs had little bargaining power, social mobility was stymied and there was little incentive to increase productivity.
But the loss of so much life shook up an ossified society.
Labor shortages gave peasants more bargaining power. In the agrarian economy, they also encouraged the widespread adoption of new and existing technologies – the iron plow, the three-field crop rotation system and fertilization with manure, all of which significantly increased productivity. Beyond the countryside, it resulted in the invention of time and labor-saving devices such as the printing press, water pumps for draining mines and gunpowder weapons.
The Black Death created massive labor shortages. Universal History Archive/Universal Images Group via Getty Images
In turn, freedom from feudal obligations and a desire to move up the social ladder encouraged many peasants to move to towns and engage in crafts and trades. The more successful ones became wealthier and constituted a new middle class. They could now afford more of the luxury goods that could be obtained only from beyond Europe’s frontiers, and this stimulated both long-distance trade and the more efficient three-masted ships needed to engage in that trade.
The new middle class’s increasing wealth also stimulated patronage of the arts, science, literature and philosophy. The result was an explosion of cultural and intellectual creativity – what we now call the Renaissance.
Our present future
None of this is to argue that the still-ongoing COVID-19 pandemic will have similarly earth-shattering outcomes. The mortality rate of COVID-19 is nothing like that of the plagues discussed above, and therefore the consequences may not be as seismic.
But there are some indications that they could be.
Will the bumbling efforts of the open societies of the West to come to grips with the virus shattering already-wavering faith in liberal democracy, creating a space for other ideologies to evolve and metastasize?
In a similar fashion, COVID-19 may be accelerating an already ongoing geopolitical shift in the balance of power between the U.S. and China. During the pandemic, China has taken the global lead in providing medical assistance to other countries as part of its “Health Silk Road” initiative. Some argue that the combination of America’s failure to lead and China’s relative success at picking up the slack may well be turbocharging China’s rise to a position of global leadership.
Finally, COVID-19 seems to be accelerating the unraveling of long-established patterns and practices of work, with repercussions that could affet the future of office towers, big cities and mass transit, to name just a few. The implications of this and related economic developments may prove as profoundly transformative as those triggered by the Black Death in 1347.
Ultimately, the longer-term consequences of this pandemic – like all previous pandemics – are simply unknowable to those who must endure them. But just as past plagues made the world we currently inhabit, so too will this plague likely remake the one populated by our grandchildren and great-grandchildren.
- With White House In "Vulnerable" State, North Korea Seen Moving 'Largest' ICMB To Date
With White House In “Vulnerable” State, North Korea Seen Moving ‘Largest’ ICMB To Date
Tyler Durden
Sun, 10/04/2020 – 17:00South Korean media is reporting that Korean intelligence as well as US intelligence are closely monitoring the movement of an ultra-large intercontinental ballistic missile along with four mobile launchers by the north.
The Korean Herald describes, citing a Seoul government official, “South Korean and US intelligence have spotted North Korea moving an intercontinental ballistic missile, along with four mobile launchers, at an auto plant on the outskirts of Pyongyang, a Seoul official told a local media outlet on Saturday.”
The official said, “The missile is larger than the one they fired in 2017 and we believe they will showcase that at a military parade on Oct. 10,” the official said.
KCNA-Yonhap: “Intercontinental ballistic missiles, Hwasong-15, are seen at a military parade marking the 70th founding anniversary of the Korean People’s Army at Kim Il-sung Square in Pyongyang in February 2018.” That 2017 test had been the Hwasong-15, widely considered the most powerful missile North Korea tested to date, and purported to be capable of hitting anywhere on the continental United States.
Korea watchers say that Seoul is deeply concerned that Pyongyang could be readying the unveiling of an even more advanced, larger ICBM.
There’s also of course the sensitive timing of President Trump’s admission to Walter Reed Hospital after becoming sick with COVID-19. A Friday report in Politico cited US intelligence and Pentagon officials who say they are closely monitoring how America’s rivals and enemies “react” to Trump’s coronavirus diagnosis, and to ensure they don’t “exploit” the situation.
One former CIA officer emphasized that “Our enemies will see us in a vulnerable state.” The report specifically cited heightened US intelligence monitoring of China, North Korean, Iran, and Russia.
Also of note is that Kim Jong Un on Saturday sent a message for President Trump and the First Lady, wishing them a speedy recovery from COVID-19, according to state media. “He sincerely hoped that they would recover as soon as possible. He hoped they will surely overcome it,” the Korean Central News Agency said. “He sent warm greetings to them.”
North Korea’s Kim wishes Trump recovery from COVID-19 https://t.co/TnENvKHs49 pic.twitter.com/ZdumXeGFxa
— CNA (@ChannelNewsAsia) October 3, 2020
https://platform.twitter.com/widgets.js
But could the unveiling of a new ICBM at this moment of the US Commander-in-Chief being vulnerable and possibly less than ready to deal with such a threat erase these warm feelings sent by Kim?
- Morgan Stanley: The 2020 Market Cycle Is Actually… Normal
Morgan Stanley: The 2020 Market Cycle Is Actually… Normal
Tyler Durden
Sun, 10/04/2020 – 16:30By Andrew Sheets, chief global strategist at Morgan Stanley
This Normal Cycle
Of all the adjectives to describe 2020, ‘normal’ seems pretty far down the list. The year has witnessed a global pandemic and the worst quarter for global growth on record. Those emergencies produced the highest levels of government and central bank support ever seen. And beyond these obvious extremes are the daily disruptions that remain impossible to ignore. The family and friends not seen. The offices sitting empty. The stadiums filled with artificial noise.
All this (and more) has made it tempting to think of 2020 as so unusual and extreme that any historical playbook needs to be thrown out the window. Don’t. We think that this current market cycle is surprisingly normal, a view that continues to underpin our investment strategy. While we expect choppy, range-bound markets between now and the US election, reflationary, early-cycle strategies should ultimately prevail.
Although all economic cycles are different, they often share characteristics which drive similar patterns of market performance. This is a central tenet of our cross-asset framework, which combines cycle-adjusted return expectations with our bottom-up strategy forecasts. We think that this still applies in these unusual times:
First, ‘normal’ late-cycle markers had emerged before the recession of 2020 hit, and we’d disagree with the notion that all was well before the arrival of COVID-19.
Consider the following: Prior to the US recessions of 1990, 2001 and 2007, core CPI had risen above the five-year trend, unemployment had dipped below trend and the yield curve had inverted. On average, those recessions started 15 months after the last Fed rate hike.
And prior to February 2020? Core CPI had risen above trend, unemployment was below trend and the yield curve had inverted. February 2020 was 14 months after the last Fed rate hike. Eerie.
Other ‘normal’ late-cycle patterns were also apparent. Consumer and investor confidence were high, expected volatility was low and equity leadership was narrow. And while markets hadn’t reached dotcom or subprime levels of excess, we had an unusually large late-cycle fiscal stimulus and record levels of corporate gearing, which suggest at least some animal spirits.
The second sign of normalcy came in what followed: The argument that ‘this time is different’ is rooted in just how extreme this recession was. But if we look at the way markets performed relative to these extreme data, the pattern is, again, eerily familiar.
Back in late March, we looked at where asset classes made their ultimate lows in the prior five US recessions, relative to when the data bottomed.
Assuming a data ‘low’ in April, the prior five recessions would have suggested the following months for bottoms in the S&P 500, US high yield, US 10-year yields and the 2s10s curve:
March 2020, March 2020, April 2020 and August 2019.
And when were the actual lows?
March 2020, March 2020, August 2020 and August 2019.
In other words, even with the most extreme decline in data on record and a global pandemic, markets mostly led the data by the ‘normal’ interval.
* * *
The final chapter of this story is how markets have behaved following the March lows: This recovery has seen its share of ‘unusual’ events, especially the stunning outperformance of the NASDAQ. But plenty of familiar post-recession patterns are on view: EM equities have performed well, the US dollar has weakened, inflation expectations have risen, yield curves have steepened, small caps have outperformed and defensive stocks have lagged (even as yields have remained range-bound).
So yes, there’s a lot about 2020 that is unusual, extreme and unprecedented. A lot that is scary. A lot that tempts one to throw out the rulebook. There’s more uncertainty to come, not the least of which is the outcome of the US election in less than a month. But for investors, we think the inquiry into whether this cycle will be ‘normal’ needs to begin with the presumption of innocence, especially when so many historical patterns are evident.
We think plenty of skepticism remains about that ‘normality’, which means that valuations for many early-cycle winners remain attractive. In equities, that’s in places like US small over large caps, US financials, European cyclicals and Australian equities. In macro markets, it’s why our strategists like being short US 30-year duration.
Twists and turns as the US election nears, the uncertainty regarding additional US fiscal stimulus, a rise in global COVID-19 cases and a still-unresolved Brexit saga all create significant uncertainty, and should keep markets volatile and range-bound over the next month. But amid that volatility, we maintain our central tendency – this cycle is more normal than appreciated, and should be treated as such until proven otherwise.
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