- First Came 9/11, Then COVID-19, What's The Next Crisis To Lockdown The Nation?
First Came 9/11, Then COVID-19, What’s The Next Crisis To Lockdown The Nation?
Authored by John and Nisha Whitehead via The Rutherford Institute,
“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by an endless series of hobgoblins, most of them imaginary.”
– H.L. Mencken
First came 9/11, which the government used to transform itself into a police state.
Then the COVID-19 pandemic hit, which the police state used to test out its lockdown powers.
In light of the government’s tendency to exploit crises (legitimate or manufactured) and capitalize on the nation’s heightened emotions, confusion and fear as a means of extending the reach of the police state, one has to wonder what so-called crisis it will declare next.
It’s a simple enough formula: first, you create fear, then you capitalize on it by seizing power.
Frankly, it doesn’t even matter what the nature of the next national emergency might be (terrorism, civil unrest, economic collapse, a health scare, or the environment) as long as it allows the government to lockdown the nation and justify all manner of tyranny in the so-called name of national security.
Cue the Emergency State.
Terrorist attacks, mass shootings, “unforeseen economic collapse, loss of functioning political and legal order, purposeful domestic resistance or insurgency, pervasive public health emergencies, and catastrophic natural and human disasters”: the government has been anticipating and preparing for such crises for years now.
As David C. Unger writes for the New York Times: “Life, liberty, and the pursuit of happiness have given way to permanent crisis management: to policing the planet and fighting preventative wars of ideological containment, usually on terrain chosen by, and favorable to, our enemies. Limited government and constitutional accountability have been shouldered aside by the kind of imperial presidency our constitutional system was explicitly designed to prevent.”
Here’s what we know: given the rate at which the government keeps devising new ways to establish itself as the “solution” to all of our worldly problems at taxpayer expense, each subsequent crisis ushers in ever larger expansions of government power and less individual liberty.
This is the slippery slope to outright tyranny.
You see, once the government acquires (and uses) authoritarian powers—to spy on its citizens, to carry out surveillance, to transform its police forces into extensions of the military, to seize taxpayer funds, to wage endless wars, to censor and silence dissidents, to identify potential troublemakers, to detain citizens without due process—it does not voluntarily relinquish them.
The lesson for the ages is this: once any government is allowed to overreach and expand its powers, it’s almost impossible to put the genie back in the bottle. As Harvard constitutional law professor Laurence Tribe recognizes, “The dictatorial hunger for power is insatiable.”
Indeed, the history of the United States is a testament to the old adage that liberty decreases as government (and government bureaucracy) grows. To put it another way, as government expands, liberty contracts.
In this way, every crisis since the nation’s early beginnings has become a make-work opportunity for the government.
Each crisis has also been a test to see how far “we the people” would allow the government to sidestep the Constitution in the so-called name of national security; a test to see how well we have assimilated the government’s lessons in compliance, fear and police state tactics; a test to see how quickly we’ll march in lockstep with the government’s dictates, no questions asked; and a test to see how little resistance we offer up to the government’s power grabs when made in the name of national security.
Most critically of all, it has been a test to see whether the Constitution—and our commitment to the principles enshrined in the Bill of Rights—could survive a national crisis and true state of emergency.
Unfortunately, we’ve been failing this particular test for a long time now.
Indeed, the powers-that-be have been pushing our buttons and herding us along like so much cattle since World War II, at least, starting with the Japanese attacks on Pearl Harbor, which not only propelled the U.S. into World War II but also unified the American people in their opposition to a common enemy.
That fear of attack by foreign threats, conveniently torqued by the growing military industrial complex, in turn gave rise to the Cold War era’s “Red Scare.” Promulgated through government propaganda, paranoia and manipulation, anti-Communist sentiments boiled over into a mass hysteria that viewed anyone and everyone as suspect: your friends, the next-door neighbor, even your family members could be a Communist subversive.
This hysteria, which culminated in hearings before the House Un-American Activities Committee, where hundreds of Americans were called before Congress to testify about their so-called Communist affiliations and intimidated into making false confessions, also paved the way for the rise of an all-knowing, all-seeing governmental surveillance state.
By the time 9/11 rolled around, all George W. Bush had to do was claim the country was being invaded by terrorists, and the government used the USA Patriot Act to claim greater powers to spy, search, detain and arrest American citizens in order to keep America safe.
By way of the National Defense Authorization Act, Barack Obama continued Bush’s trend of undermining the Constitution, going so far as to give the military the power to strip Americans of their constitutional rights, label them extremists, and detain them indefinitely without trial, all in the name of keeping America safe.
Despite the fact that the breadth of the military’s power to detain American citizens violates not only U.S. law and the Constitution but also international laws, the government has refused to relinquish its detention powers made possible by the NDAA.
Then Donald Trump took office, claiming the country was being invaded by dangerous immigrants and insisting that the only way to keep America safe was to expand the reach of the border police, empower the military to “assist” with border control, and essentially turn the country into a Constitution-free zone.
That so-called immigration crisis then morphed into multiple crises (domestic extremism, the COVID-19 pandemic, race wars, civil unrest, etc.) that the government has been eager to use in order to expand its powers.
Joe Biden, in turn, has made every effort to expand the reach of the militarized police state, pledging to hire 87,000 more IRS agents and 100,000 police officers. Read between the lines and you’ll find that Biden has all but declared war on the American people.
What the next crisis will be is anyone’s guess, but you can be sure that there will be a next crisis.
So, what should you expect if the government decides to declare another state of emergency and institutes a nationwide lockdown?
You should expect more of the same, only worse.
More compliance, less resistance.
More fear-mongering, mind-control tactics and less tolerance for those who question the government’s propaganda-driven narratives.
Most of all, as I point out in my book Battlefield America: The War on the American People and in its fictional counterpart The Erik Blair Diaries, you should expect more tyranny and less freedom.
There’s every reason to worry about what comes next.
Certainly, the government’s past track record and its long-anticipated plans for instituting martial law (using armed forces to solve domestic political and social problems) in response to a future crisis are cause enough to worry about the government’s handling of the next “crisis.”
Mark my words: if and when another nationwide lockdown finally hits—if and when we are forced to shelter in place— if and when militarized police are patrolling the streets— if and when security checkpoints have been established— if and when the media’s ability to broadcast the news has been curtailed by government censors—if and when public systems of communication (phone lines, internet, text messaging, etc.) have been restricted—if and when those FEMA camps the government has been surreptitiously building finally get used as detention centers for American citizens—if and when military “snatch and grab” teams are deployed on local, state, and federal levels as part of the activated Continuity of Government plans to isolate anyone suspected of being a threat to national security—and if and when martial law is enacted with little real outcry or resistance from the public—then we will truly understand the extent to which the government has fully succeeded in acclimating us to a state of affairs in which the government has all the power and “we the people” have none.
Tyler Durden
Thu, 09/08/2022 – 00:05 - Virtual 'Teslasuit' Could Make 'Sex In Metaverse' Possible
Virtual ‘Teslasuit’ Could Make ‘Sex In Metaverse’ Possible
Virtual reality suit maker “Teslasuit” has a human-to-digital interface full-body suit with 90 electrodes designed to trick the body into feeling anything from a hug to raindrops to even the impact of a gunshot. The suit user can strap on VR goggles to ‘touch’ objects in the metaverse.
National Enquirer spoke with Teslasuit VP Paul Nickeas earlier this year about the suit’s “wide range of realistic sensations from the feeling of a raindrop to the impact of a gunshot.”
Nickeas told Daily Star this week more about the suit’s capabilities and real-world applications:
“The Teslasuit works via biometry, haptics and motion capture, with the wearer being calibrated via a gaming PC, so can be propelled into extended or virtual reality.
“Obviously the use cases are truly far-reaching – from medical rehabilitation, to training for dangerous work scenarios in a safe to fail environment.
“We are extremely excited about how our technology can be utilised for all aspects of the metaverse from gaming, training to now fashion.”
BBC’s Sarah Cox experienced the world’s first “digital hug” while wearing the suit even though the man on the other end was across the room — she felt the hug via the suit’s electrodes.
“I could feel it all down my back, and on my shoulders, and on my stomach … and it’s just really exciting,” Cox said.
Teslasuit (unaffiliated with Elon Musk’s Tesla Motors) was never designed for hugs nor something more intimate such as sex. However, the sex industry has been quickly moving into VR as lovemaking could take a futuristic sci-fi turn with these suits.
“Users might go online, chat with a sex worker via webcam, agree on terms, and then synchronize their Teslasuits for a completely tactile sexual experience – all the while being thousands of miles away,” The Future of Sex’s Ben Barnes wrote.
One adult industry source told the National Enquirer that the porn industry is closely watching the development of these suits:
“Once they get hold of suits like these, they will hack them for sex or build sensors for erogenous zones.”
With how things are going and the billions of dollars being poured into the metaverse by mega-corporations, there’s no doubt within this decade that some of the human population will be using VR for work, education, and/or sex. It seems wearing full-body haptic suits might also be part of the VR experience.
Tyler Durden
Wed, 09/07/2022 – 23:45 - 'They' Are Definitely Getting Prepared. Are You?
‘They’ Are Definitely Getting Prepared. Are You?
Authored by Michael Snyder via The End of The American Dream blog,
The ultra-wealthy are some of the best preppers in the entire world. I realize that statement may sound strange to many of you, but it is actually true. The elite are very well aware that we are on the precipice of a full-blown societal meltdown, and many of them are spending enormous amounts of time, money and energy to prepare themselves for the extremely difficult times that are rapidly approaching. In some cases, ultra-wealthy individuals are forking out giant mountains of cash for luxurious underground bunkers in the middle of nowhere. In other cases, elitists are actually buying citizenship in far away foreign lands that they think will be safe.
We are talking about some of the smartest and wealthiest people in our entire society, and they are so freaked out about what is coming that they have become absolutely obsessed with trying to save themselves.
Many of these individuals got to where they are today by staying one step ahead of everyone else. That is why it is so alarming that 2,150 corporate executives sold off shares in their own companies in the month August alone. Do they know something that the rest of us don’t?
Of course when things start getting really bad, many among the elite do not plan to stick around to see what happens. The following comes from a Guardian article entitled “The super-rich ‘preppers’ planning to save themselves from the apocalypse”…
Many of those seriously seeking a safe haven simply hire one of several prepper construction companies to bury a prefab steel-lined bunker somewhere on one of their existing properties. Rising S Company in Texas builds and installs bunkers and tornado shelters for as little as $40,000 for an 8ft by 12ft emergency hideout all the way up to the $8.3m luxury series “Aristocrat”, complete with pool and bowling lane. The enterprise originally catered to families seeking temporary storm shelters, before it went into the long-term apocalypse business. The company logo, complete with three crucifixes, suggests their services are geared more toward Christian evangelist preppers in red-state America than billionaire tech bros playing out sci-fi scenarios.
There’s something much more whimsical about the facilities in which most of the billionaires – or, more accurately, aspiring billionaires – actually invest. A company called Vivos is selling luxury underground apartments in converted cold war munitions storage facilities, missile silos, and other fortified locations around the world. Like miniature Club Med resorts, they offer private suites for individuals or families, and larger common areas with pools, games, movies and dining. Ultra-elite shelters such as the Oppidum in the Czech Republic claim to cater to the billionaire class, and pay more attention to the long-term psychological health of residents. They provide imitation of natural light, such as a pool with a simulated sunlit garden area, a wine vault, and other amenities to make the wealthy feel at home.
Of course the vast majority of us don’t have lots of extra money to spend on a giant underground bunker.
But for those that can afford it, I certainly can’t blame them for wanting one.
Things are going to get really bad in the years ahead.
Other ultra-wealthy individuals are shelling out cash for “golden passports” that grant them citizenship in a second country…
Loaded liberals are forking out millions of dollars for ‘golden passports’ because they are scared of a Trump-led civil war in 2024, immigration lawyers have revealed.
The wealthy wokes are spending huge sums to bag visas that allow them escape to countries like Austria, Turkey, Jordan and the Caribbean, according to attorneys running the processes.
Consultants say they’ve seen a massive spike in interest for citizenships for second countries over the last few years.
In theory, such a plan sounds good.
If things get crazy in the United States, just hop on a private plane and head to a nice peaceful nation on the other side of the planet.
But what if we are facing emergencies that are truly global in nature?
In that case, such a plan may not work as well.
If you would like a “golden passport” in the future, you might want to start saving up your money, because they aren’t cheap…
The cost of acquired citizenship ranges from the low six-figures to many millions of dollars.
Some Atlantic islands are ultimately affordable, while chic-European countries will cost you a pretty-penny.
Sadly, the vast majority of the population simply cannot afford to do much at all to prepare for the hard times that are approaching because most people are just barely scraping by these days.
In fact, many Americans that are working as hard as they can “do not earn enough to cover a basic family budget”…
More than one-third of U.S. families that work full time year-round do not earn enough to cover a basic family budget, according to a recent report from researchers at Brandeis University’s diversitydatakids.org program at the Institute for Child, Youth and Family Policy.
The situation is even more dire for Black and Hispanic families, according to the report. More than half cannot afford basic needs, compared to 25% of white families and 23% of Asian and Pacific Islander families. Inequities remain even when controlling for education and occupation.
I was stunned when I first came across those numbers.
And things are particularly bad for families that are considered to be “low income”…
For low-income families – those whose income falls below 200% of the supplemental poverty measure, or $52,492 for two adults and two related children in 2020 it’s – 77% who can’t pay the bills despite working full time.
In 2020, more than a quarter of the population, 89.7 million people, were considered low income per the Population Reference Bureau, a nonprofit that collects statistics for research on the health and structure of populations.
So many people out there are just trying to survive from month to month.
In an article that I posted a couple of days ago, I mentioned the fact that about 20 million households in the United States are currently behind on their utility bills.
If you can’t even pay your power bill, of course you don’t have any money for prepping.
Survey after survey has shown that well over half of the country is living paycheck to paycheck, and that means that the majority of the population simply does not have the resources necessary to adequately prepare for what is ahead of us.
But the elite have more cash than they know what to do with, and they are spending big to try to ensure that they will survive whatever happens.
If you have the resources to do so, I would encourage you to also work feverishly to get prepared before the window of opportunity that we currently have closes completely.
* * *
It is finally here! Michael’s new book entitled “7 Year Apocalypse” is now available in paperback and for the Kindle on Amazon.
Tyler Durden
Wed, 09/07/2022 – 23:25 - Putin Threatens "Scam" Ukraine Grain Export Deal, Says Most Ships Diverted To EU
Putin Threatens “Scam” Ukraine Grain Export Deal, Says Most Ships Diverted To EU
President Vladimir Putin on Wednesday threatened to abandon the UN-brokered Ukraine grain export deal which has lately been declared by Turkey to be a ‘success’ – given at this point dozens of cargo ships have now traversed the Black Sea from Ukrainian ports since the agreement signed in Istanbul went into effect.
The Russian leader alleged while giving an opening speech before the Eastern Economic Forum in Vladivostok on Wednesday that Western powers are acting “like colonial powers” and using the deal deceptively. He described that while Western officials decried Russia’s blocking food from getting to global south countries, such as in Africa or in Asia, the reality is that most of the ships to depart through the ‘safety corridor’ so far have ended up in Europe, according to his assertions.
The grain deal, finalized in late July, was preceded by months of EU and US officials decrying Moscow policies in blockading Ukraine’s coast, which they said would cause famine in the developing world – heavily reliant on grain from the region. The Kremlin response was to blame Ukraine’s military for mining its own ports.
“What we see is a brazen deception … a deception by the international community of our partners in Africa, and other countries that are in dire need of food. It’s just a scam,” Putin said.
Putin is accusing Ukraine’s Western backers of “cheating” by adopting the cause of poorer countries when it comes to public rhetoric, but in reality diverting food shipments:
“Only 3% of the grain being exported from Ukraine is going to developing countries, the majority is going to Europe… over the past decades European countries have acted like colonial powers, they are continuing to act like that today,” Putin claimed.
“Once again, they have deceived developing countries,” he continued, saying “it may be worth considering how to limit the export of grain and other food along this route.”
According to the figures offered by Putin during the speech:
Putin said, without citing a source, that only two of 87 ships, carrying 60,000 tonnes of products, went to poor countries, as he accused the West of acting as colonial states.
“That’s how it is – they were once colonisers and have remained so on the inside,” he said of European countries.
“Almost all the grain exported from Ukraine is sent not to the poorest developing countries, but to European Union countries,” Putin told an economic forum in the eastern city of Vladivostok on Wednesday.
“I will certainly consult on this subject with the President of Turkey, Mr. Erdogan, because it was him and me who worked out a mechanism for the export of Ukrainian grain,” Putin said. Putin and Erdogan are expected to meet on the sidelines of a regional summit hosted by Uzbekistan next week. China’s Xi Jinping is also expected to meet with the Russian leader.
Russian President Vladimir Putin says the West deceived poor nations via Ukraine grain deal, claiming Ukraine needed access to sea shipping to stop surging food prices & risk of famine. Almost all grain is flowing into the EU & not the poorest countries.pic.twitter.com/bPdXHMKI4w
— Fiorella Isabel (@FiorellaIsabelM) September 7, 2022
https://platform.twitter.com/widgets.js
CNN and Reuters have attempted to fact-check Putin’s words, and are rejecting his assessment:
In a statement to CNN, the United Nations said that under the Black Sea Grain Initiative, roughly 30% of “grains and other foodstuffs” have made it to low- and lower-middle-income countries, or approximately 700,000 metric tons.
Among countries classified by the World Bank as low- or lower-middle-income, the UN says that 10% of the initiative’s exports have been sent to Egypt, 5% to Iran, 4% to India, 3% to Sudan, 2% to Yemen, 2% to Kenya, 1% to Somalia, 1% to Djibouti, and less than 1% to Lebanon.
If Russia indeed does either back out or attempt to renegotiate the UN grain deal, which required the assent of both the Ukrainian and Russian sides, as well as Turkey, this would mark the collapse of the only ‘bright spot’ to come out of negotiations thus far throughout six months of conflict. It would also no doubt add to growing global economic woes amid rising energy and food prices.
Tyler Durden
Wed, 09/07/2022 – 23:05 - Taibbi: The People Versus The Unelected
Taibbi: The People Versus The Unelected
Authored by Matt Taibbi via TK News,
Review of The Lords of Easy Money, by Christopher Leonard, Simon and Schuster, 384 pages
Click here for Q&A with the author.
The “Lords of Easy Money,” clockwise from top left: Ben Bernanke prepares his cryogenic journey, Jay Powell accidentally signals five more rate hikes, Alan Greenspan cheered by an ancient memory of refusing a child beggar, Janet Yellen attends Halloween Party as George Washington In Chicago on July 8, 1896, a former Nebraska congressman named William Jennings Bryan strode onstage at the Democratic National Convention and delivered one of the most famous speeches in American history. A populist and free silver advocate, Jennings stood in opposition to the Wall Street-backed Republican Party, which sought more power for creditors by supporting a gold standard. “You shall not press down upon the brow of labor this crown of thorns,” Bryan thundered, to close his address. “You shall not crucify mankind upon a cross of gold.”
Bryan’s speech can feel inaccessible today because it belonged to an era when “managing the money supply was still in the public realm of democratic action,” as author Christopher Leonard puts it in his remarkable book The Lords of Easy Money. The fights that now take place in the secrecy of the Federal Reserve were then a near-constant concern of congress and a source of bitter conflict between east and west, rich and poor, city-dwellers and farmers. Silver dollars had the de facto impact of increasing the money supply and making farm or prospecting debt easier to repay, while the “organized wealth” Bryan opposed sought a gold standard to keep returns on those loans high. The “Cross of Gold” speech came just after a Great Financial Panic in 1893, and though he would lose to William McKinley, Bryan set the terms for generations of controversies about who got to control the levers of finance.
On May 15, 2010, at a similar juncture a few years removed from a financial crash, a little-known Federal Reserve Bank president from Kansas City named Thomas Hoenig gave a controversial interview to the Wall Street Journal, called “The Fed’s Monetary Dissident.” Hoenig spoke as the economy was pulling out of the 2008 emergency, and as a voting member of the Federal Open Market Committee or FOMC, which helps set interest rates, he took the rare step of publicly disagreeing with peers. “We’ve gotten through the crisis,” he said. “We ought to be thinking about the long run.” Hoenig violated an unspoken taboo, reminding readers that the Fed’s work isn’t just a technocratic process, but “also an allocative policy,” i.e. one that helped pick society’s economic winners and losers — the stuff of politics.
Under the leadership of its soft-spoken, bearded, nebbishy new chairman Ben Bernanke, the central bank had just undertaken the financial equivalent of a Normandy invasion in response to the 2008 crash, adding $1.2 trillion to the money supply in two years, or more than it had in total in every year between 1913 and 2008. Hoenig was concerned because instead of taking early signs of recovery as a chance to pull back, Bernanke was pouring more troops into theater, flooding the economy with money with plans to keep borrowing rates at or near zero for “an extended period” (it would turn out to be ten years). Hoenig worried the Fed was addicting Wall Street to cheap cash, upsetting the delicate balance of financial power he’d spent a life trying to maintain. “I can’t guarantee the carpenter down the street a margin,” he said. “I really don’t think we should be guaranteeing Wall Street… by guaranteeing them a zero or near zero interest rate environment.”
Hoenig’s clipped remarks didn’t land with the fanfare of Bryan’s grandiloquent oratory. In fact, it’s hard to imagine two men with less in common, stylistically. Hoenig was and is a reserved former soldier and number-cruncher who disdained limelight and believed in economy in all things, including words, while Bryan was a man born for the soapbox. Moreover, in a misdiagnosis that that persists to this day, Hoenig’s remarks were criticized as the tightwad meanderings of a hard-money reactionary, an impression that grew stronger when “The Fed’s dissident” was lionized in congressional hearings by the likes of “End the Fed” campaigner and gold-standard advocate Ron Paul. If Bryan wanted to loosen the money supply, and Hoenig wanted to rein it in, what linked them? What could American history’s prototype populist possibly share with a fusty economic traditionalist like Hoenig?
In fact there were similarities. Hoenig’s critics tended to see things backwards, pegging beliefs of his we’d now recognize as economic populism as conservatism, and more importantly mis-labeling the bank-friendly, trickle-down policies of Bernanke as liberal progressivism. This radical switcheroo, turning traditional perceptions of liberalism and conservatism on their head, soon spread to non-financial arenas, as elite officials pitched themselves as progressives, deriding opponents as conspiracist reactionaries. Hoenig is essentially patient zero of this phenomenon, and his story is explained brilliantly in The Lords of Easy Money, in my mind the first book that makes the inner workings of the Fed truly accessible to ordinary readers.
Leonard gets particularly high marks because the Fed — whose officials always used dullness and inscrutability to deflect public scrutiny — is nearly impossible to make interesting and understandable. Leonard pulls it off. A neophyte will come away from The Lords of Easy Money understanding the mechanics of money creation, and the bank’s awesome influence in widening the wealth gap and driving political divisions.
Subscribers can read more here…
Tyler Durden
Wed, 09/07/2022 – 22:45 - "Winter Is Coming": Taiwan Export Slowdown Implies Darkening Clouds For Global Economy
“Winter Is Coming”: Taiwan Export Slowdown Implies Darkening Clouds For Global Economy
The slowdown in Taiwan’s exports is further evidence that the risks to the global economic outlook are tilted to the downside and could imply more turmoil is ahead.
A statement from the Finance Ministry in Taipei said exports grew a paltry 2% in August compared with the same month last year — the slowest pace of growth since July 2020, when exports only grew by .3%. Bloomberg noted economists were expecting an increase of 11.6%.
Source: Bloomberg Imports also decelerated, rising by 3.5% in August, compared to a 19.4% expansion in July. Economists were anticipating an 8.7% rise.
Beatrice Tsai, the Ministry of Finance’s chief statistician, said the trade slowdown suggests “winter is coming.” She outlined how double-digit export growth in the third quarter is unlikely, adding September exports could contract by 3% versus a year ago.
Taiwan’s dominance in semiconductor fabrication is a good barometer of global chip demand.
“While demand for integrated circuits and mineral products continued to be hot, export sales of traditional products such as plastics and base metals were sluggish due to weak end-user demand,” according to a statement from the finance ministry.
The slowdown in exports is a troubling sign that the global tech sector could be entering an alarming downturn due to lackluster consumer demand worldwide:
“There are clearer signs showing that the tech sector has entered a downturn, driven by weakening global demand for mobile phones, PCs and other consumer electronics products, which also weighs on demand for the upstream semiconductors,” said Ma Tieying, an economist at DBS Group Holdings Ltd.
Some macro-tourists closely watch Taiwan’s export data as an early indicator of turning points for the global economy.
Global growth from Asia to Europe to the US has shown signs of deceleration this summer (IMF warned about this in July), with fears major economies could slide into recession amid a flurry of central banks increasing interest rates to combat the highest inflation in decades.
A notable index followed by many is JP Morgan Global Manufacturing PMI. The latest print last month showed global manufacturing is nearing contraction. It fell from 51.1 in July to 50.3 in August.
To sum up, consumer demand is weakening in an environment of high inflation. Central banks aggressively raise interest rates that could tilt developed and emerging economies into recession.
Tyler Durden
Wed, 09/07/2022 – 22:25 - Hedges: Stop Pretending US Is A Functioning Democracy
Hedges: Stop Pretending US Is A Functioning Democracy
Authored by Chris Hedges via Scherpost.com,
There are no institutions, including the press, an electoral system, the imperial presidency, the courts or the penal system, that can be defined as democratic. Only the fiction of democracy remains.
End Game. (Mr. Fish)
There is a fatal disconnect between a political system that promises democratic equality and freedom while carrying out socioeconomic injustices that result in grotesque income inequality and political stagnation.
Decades in the making, this disconnect has extinguished American democracy. The steady stripping away of economic and political power was ignored by a hyperventilating press that thundered against the barbarians at the gate — Osama bin Laden, Saddam Hussein, the Taliban, ISIS, Vladimir Putin — while ignoring the barbarians in our midst.
The slow-motion coup is over. Corporations and the billionaire class have won. There are no institutions, including the press, an electoral system that is little more than legalized bribery, the imperial presidency, the courts or the penal system, that can be defined as democratic. Only the fiction of democracy remains.
The political philosopher Sheldon Wolin in Democracy Incorporated: Managed Democracy and the Specter of Inverted Totalitarianism calls the U.S. system “inverted totalitarianism.” The façade of democratic institutions and the rhetoric, symbols and iconography of state power have not changed. The Constitution remains a sacred document.
Collective Self-Delusion
July 4, 2019, Washington, D.C. (Joe Lauria)
The U.S. continues to posit itself as a champion of opportunity, freedom, human rights and civil liberties, even as half the country struggles at subsistence level, militarized police gun down and imprison the poor with impunity, and the primary business of the state is war.
This collective self-delusion masks what America has become — a nation where the citizenry has been stripped of economic and political power and where the brutal militarism practiced overseas is practiced at home.
In classical totalitarian regimes, such as Nazi Germany or Stalin’s Soviet Union, economics was subordinate to politics. But under inverted totalitarianism, the reverse is true. There is no attempt, unlike fascism and state socialism, to address the needs of the poor. Rather, the poorer and more vulnerable you are, the more you are exploited, thrust into a hellish debt peonage from which there is no escape.
Social services, from education to health care, are anemic, nonexistent or privatized to gouge the impoverished. Further ravaged by 8.5 percent inflation, wages have decelerated sharply since 1979. Jobs often do not offer benefits or security.
[You can watch an interview I conducted in 2014 with Sheldon Wolin here.]
In my book America: The Farewell Tour, I examined the social indicators of a nation in serious trouble. Life expectancy in the U.S. fell in 2021, for the second year in a row. There have been over 300 mass shootings this year. Close to a million people have died from drug overdoses since 1999. There are an average of 132 suicides every day. Nearly 42 percent of the country is classified as obese, with one in 11 adults considered severely obese.
These diseases of despair are rooted in the disconnect between a society’s expectations of a better future and the reality of a system that does not provide a meaningful place for its citizens. Loss of a sustainable income and social stagnation causes more than financial distress.
Diseased Society
Evicted from their homes, Seattle. (Joe Lauria)
As Émile Durkheim points out in The Division of Labor in Society, it severs the social bonds that give us meaning. A decline in status and power, an inability to advance, a lack of education and adequate health care, and a loss of hope result in crippling forms of humiliation. This humiliation fuels loneliness, frustration, anger and feelings of worthlessness.
In Hitler and the Germans, the political philosopher Eric Voegelin dismisses the idea that Hitler — gifted in oratory and political opportunism but poorly educated and vulgar — mesmerized and seduced the German people. The Germans, he writes, supported Hitler and the “grotesque, marginal figures” surrounding him because he embodied the pathologies of a diseased society, one beset by economic collapse and hopelessness.
Voegelin defines stupidity as a “loss of reality.” The loss of reality means a “stupid” person cannot “rightly orient his action in the world, in which he lives.” The demagogue, who is always an idiote, is not a freak or social mutation. The demagogue expresses the society’s zeitgeist.
The acceleration of deindustrialization by the 1970s, as I write in America, The Farewell Tour, created a crisis that forced the ruling elites to devise a new political paradigm, as Stuart Hall explains in Policing the Crisis. Trumpeted by a compliant media, this paradigm shifted its focus from the common good to race, crime and law and order. It told those undergoing profound economic and political change that their suffering stemmed not from rampant militarism and corporate greed but from a threat to national integrity.
The old consensus that buttressed New Deal programs and the welfare state was attacked as enabling criminal Black youth, “welfare queens” and other alleged social parasites. This opened the door to a faux populism, begun by Ronald Reagan and Margaret Thatcher, which supposedly championed family values, traditional morality, individual autonomy, law and order, the Christian faith and the return to a mythical past, at least for white Americans.
The Democratic Party, especially under Bill Clinton, moved steadily to the right until it became largely indistinguishable from the establishment Republican Party to which it is now allied. Donald Trump, and the 74 million people who voted for him in 2020, were the result.
Political Theater
Biden speaks in Philadelphia. (White House Photo)
It will do no good, as Biden did on Thursday in Philadelphia, to demonize Trump and his supporters in the way they demonize Biden and the Democrats. Biden, raising clenched fists, backlit by Stygian red lights and flanked by two U.S. Marines in dress uniforms, announced from his Dantesque stage set that “Donald Trump and the MAGA Republicans represent an extremism that threatens the very foundations of our Republic.”
Trump called the speech the most “vicious, hateful and divisive speech ever delivered by an American president” and attacked Biden as “an enemy of the state.”
Biden’s frontal assault widens the divide. It solidifies a system where voters do not vote for what they want, since neither side delivers anything of substance, but against what they despise. Biden did not address our socioeconomic crisis or offer solutions. It was political theater.
Anti-politics masquerades as politics. No sooner does one money-drenched election cycle end, the next one begins, perpetuating what Wolin calls “politics without politics.” These elections do not permit citizens to participate in power.
The public is allowed to voice opinions to scripted questions, which are repackaged by publicists, pollsters, political consultants and advertisers and fed back to them. Few races, including only 14 percent of congressional districts, are considered competitive. Politicians do not campaign on substantial issues but on skillfully manufactured political personalities and emotionally charged culture wars.
Omnipotence
The Pentagon. (Joe Lauria)
The militarists, who have created a state within a state and who plunge us into one military debacle after another, consuming half of all discretionary spending, are omnipotent. The corporations and billionaires, which orchestrated a virtual tax boycott and gutted regulation and oversight, are omnipotent.
The industrialists who wrote trade deals to profit from unemployment and underemployment of U.S. workers and sweatshop labor overseas are omnipotent. The insurance and pharmaceutical industries that run the healthcare system, whose primary concern is profit not health and who are responsible for 16 percent of the worldwide reported deaths from COVID-19 although we are less than 5 percent of the global population, are omnipotent.
The intelligence agencies that carry out wholesale surveillance of the public are omnipotent.
The courts that reinterpret laws to strip them of their original meaning to ensure corporate control and excuse corporate crimes, are omnipotent. The courts gave us Citizens United, for example, which permits unlimited corporate financing of elections by claiming it upholds the right to petition the government and is a form of free speech.
Spectacle
July 4, 2019, parade in Washington, D.C. (Joe Lauria)
Politics is spectacle, a tawdry carnival act where the constant jockeying for power by the ruling class dominates the news cycles, as if politics were a race to the Super Bowl. The real business of ruling is hidden, carried out by corporate lobbyists who write the legislation, banks that loot the Treasury, the war industry and an oligarchy that determines who gets elected and who does not. It is impossible to vote against the interests of Goldman Sachs, the fossil fuel industry or Raytheon, no matter which party is in office.
The moment any segment of the population, left or right, refuses to participate in this illusion, the face of inverted totalitarianism resembles the face of classical totalitarianism, as Julian Assange is experiencing.
Our corporate overlords and militarists prefer the decorum of George W. Bush, Barack Obama and Joe Biden. But they worked closely with Trump and are willing to do so again.
What they will not allow are reformers such as Bernie Sanders, who might challenge, however tepidly, their obscene accumulation of wealth and power. This inability to reform, to restore democratic participation and address social inequality, means the inevitable death of the republic.
Biden and the Democrats rail against the cultish Republican Party and their threat to democracy, but they too are the problem.
* * *
Author’s Note to Readers: There is now no way left for me to continue to write a weekly column for ScheerPost and produce my weekly television show without your help. The walls are closing in, with startling rapidity, on independent journalism, with the elites, including the Democratic Party elites, clamoring for more and more censorship. Bob Scheer, who runs ScheerPost on a shoestring budget, and I will not waiver in our commitment to independent and honest journalism, and we will never put ScheerPost behind a paywall, charge a subscription for it, sell your data or accept advertising. Please, if you can, sign up at chrishedges.substack.com so I can continue to post my Monday column on ScheerPost and produce my weekly television show, “The Chris Hedges Report.”
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Tyler Durden
Wed, 09/07/2022 – 22:05 - Xi's First Overseas Meeting In Years Will Be With Putin In Uzbekistan Next Week
Xi’s First Overseas Meeting In Years Will Be With Putin In Uzbekistan Next Week
Russian President Vladimir Putin confirmed Wednesday while addressing the Eastern Economic Forum (EEF) in Vladivostok that he will soon meet in person with Chinese President Xi Jinping, which will mark a significant first bilateral summit since Russia launched the Ukraine invasion on Feb.24.
Putin told the forum held in Russia’s far east that “I hope to see Xi Jinping in Uzbekistan soon.” As we described earlier, the Chinese delegation was the largest in attendance for the annual economic meeting.
Kremlin officials also confirmed to the Associated Press that “Putin and Chinese President Xi Jinping to meet next week at summit in Uzbekistan.” The two large nuclear-armed nations also just wrapped up a week of joint war games, among multiple other nations represented, at Vostok 2022 in the same far eastern region of Russia.
CNN notes that “On Wednesday, China’s number three leader Li Zhanshu, a member of the Chinese Communist Party’s Politburo Standing Committee, became the highest ranking official to leave China since 2020, when he arrived in Vladivostok to attend the Eastern Economic Forum. Li was expected to meet Putin on Wednesday, according to Tass.”
As for President Xi, he rarely leaves the country, and the Uzbekistan summit will be his first overseas trip since the beginning of the coronavirus pandemic in 2020.
Russia’s ambassador to Beijing Andrey Denisov described the significance in state media:
“This summit promises to be interesting, because it will be the first full-fledged summit since the pandemic,” Denisov said, according to Tass.
“I do not want to say that online summits are not full-fledged, but still, direct communication between leaders is a different quality of discussion … We are planning a serious, full-fledged meeting of our leaders with a detailed agenda, which we are now, in fact, working on with our Chinese partners,” the diplomat said.
On Tuesday the Kremlin had issued a statement underscoring the importance growing Chinese cooperation: “Russia-China relations of comprehensive partnership and strategic cooperation are developing progressively,” it said just ahead of Putin’s address to the EEF.
The statement further hailed “China’s balanced approach to the Ukraine crisis” and its “understanding” of what’s driving Moscow’s ‘special operation’ in Ukraine.
Vladimir Putin oversaw “Vostok 2022”, the military drills in Russia’s far east involving over 50,000 troops from 14 countries pic.twitter.com/EHtMIaY0XP
— South China Morning Post (@SCMPNews) September 7, 2022
https://platform.twitter.com/widgets.js
Just days before the Russian invasion of Ukraine, Moscow and Beijing had declared a “no limits” partnership amid a growing standoff with the West, which has since included unprecedented sanctions and economic war against Russia as punishment for its military offensive.
In October, Russia and China held joint naval drills in the Sea of Japan. Days later, Russian and Chinese warships held their first joint patrols in the western Pacific. The next month, South Korea’s military said it had scrambled fighter jets after two Chinese and seven Russian warplanes intruded into its air defense identification zone during what Beijing called regular training. Thus it’s clear that the past years have seen these two nuclear-armed superpowers grow in not only economic cooperation but military coordination as well.
Tyler Durden
Wed, 09/07/2022 – 21:45 - ECB Preview: 50 or 75?
ECB Preview: 50 or 75?
Submitted by Newsquawk
Summary:
- Up until a few weeks ago, expectations for the September meeting had been coalescing around the prospect of an additional 50bps hike by the ECB, taking the deposit rate to 0.5%. However, a source report on 26th August revealed that some policymakers wish to discuss a 75bps rate rise due to the deterioration in the inflation outlook, with the prospect of a looming recession not a justification for slowing or halting policy normalisation.
- Thereafter, a speech by Germany’s Schnabel reinforced the Governing Council’s tightening ambitions by noting that both the likelihood and the cost of current high inflation becoming entrenched in expectations are uncomfortably high, and she added that central banks need to act forcefully in this environment.
- August HICP data saw the headline rate climb to 9.1% Y/Y from 8.9%, and the super-core metric advance to 4.3% Y/Y from 4.0%, prompting concerns that second-round effects from energy inflation are making their way through the economy.
- Accordingly, the likes of Goldman Sachs, Credit Suisse, BofA, JPM and several others adjusted their calls in favour of a 75bps move, an outcome that markets are currently assigning with an approximate 95% probability. Looking further ahead, markets are pricing just under 175bps of tightening by year-end (including September).
- Elsewhere, aspects of the Q&A will likely focus on the ECB’s plans for its APP reinvestments after reports suggested that it could begin discussing ending reinvestments, albeit a decision is not expected to be forthcoming with rates viewed as the preferred tool for tightening.
- The accompanying staff economic forecasts will likely see upward revisions to the 2022 and 2023 inflation projections of 6.8% and 3.5% respectively, with Morgan Stanley pencilling in an upgrade to the 2024 forecast of 2.1% to 2.2%. From a growth perspective, 2022 GDP is expected to forecast trivially higher at 2.9% vs. 2.8% in June, with 2023 growth expected to be cut to 0.4% from 2.1%.
PRIOR MEETING: Despite expectations for a 25bps hike across the ECB’s three key rates, policymakers opted to “go big” and deliver 50bps worth of tightening, taking the deposit rate to 0% and therefore drawing a line under the Bank’s NIRP. Alongside this, the Bank refrained from providing explicit guidance for the September meeting and instead adopted a meeting-by-meeting approach. The Governing Council was also able to agree on an anti-fragmentation tool named the Transmission Protection Instrument (TPI), aimed at ensuring that the monetary policy stance is transmitted smoothly across all euro area countries. That said, PEPP will remain the first line of defence to counter risks to the transmission mechanism related to the pandemic. President Lagarde said that the Governing Council rallied around the consensus of a 50bps hike and that the ECB is accelerating the normalisation process, but not changing the ultimate point of arrival. In terms of the details of TPI, Lagarde noted that all nations are eligible, the ECB is capable of “going big” on the instrument, whilst the activation of TPI is at the discretion of the Governing Council. Furthermore, the followup press release noted that purchases under TPI could be suspended if it is judged that persistent tensions are due to country fundamentals.
RECENT ECONOMIC DEVELOPMENTS: August inflation metrics continued to advance further with Y/Y HICP climbing to 9.1% from 8.9% and the super-core metric advancing to 4.3% from 4.0%, prompting concerns that second-round effects from energy inflation are making their way through the economy. The Eurozone’s 5y5y inflation expectations metric sits around 2.16% compared to 2.05% at the time of the July meeting. From a growth perspective, Q2 Q/Q GDP was revised lower to 0.6% from 0.7%. The more timely PMI data showed the August composite-wide metric falling to 48.9 from 49.9 amid a decline in services to 49.8 from 51.2 and a drop in manufacturing to 46.9 from 49.8. The report made for grim reading with S&P Global noting “the latest PMI data for the eurozone point to an economy in contraction during the third quarter of the year”, adding that “cost of living pressures mean that the recovery in the services sector following the lifting of pandemic restrictions has ebbed away”. On the employment front, S&P Global stated that “the rebuilding of workforces following the pandemic is also losing steam, with firms increasingly reluctant to hire additional staff”. The Eurozone unemployment rate as of July, remains at its historical low of 6.6%.
RECENT COMMUNICATIONS: At Jackson Hole, Germany’s Schnabel (27th Aug) stated that both the likelihood and the cost of current high inflation becoming entrenched in expectations are uncomfortably high, adding that central banks need to act forcefully in this environment. Her German counterpart Nagel (30th Aug) echoed this sentiment noting that rate hikes should not be delayed by fears of a possible recession. Other known hawks on the Board such as Latvia’s Kazaks, Austria’s Holzmann and Estonia’s Mueller suggested that 50bps and 75bps should be on the table for the upcoming meeting, whilst Netherland’s Knot noted that he is leaning towards a 75bps move. Elsewhere, the typically more centrist Villeroy of France (27th Aug) suggested that the Bank could be at the neutral rate before year-end with another significant step in September (his estimate of neutral is somewhere between 1-2%). Belgium’s Wunsch (30th Aug) suggested that the Bank could need to raise rates to a level that starts to restrict economic activity or above what is considered the “neutral” rate. Chief Economist Lane (29th Aug) called for a more measured approach by suggesting that it makes sense to allow the financial system to absorb rate changes in a step-by-step manner, adding that “the same cumulative rate hike over a fixed interval is less likely to generate adverse feedback loops if it takes the form of a multistep calibrated series rather than a smaller number of larger rate increases”. Known-dove Stournaras of Greece (30th Aug) stated that further and gradual normalisation will be appropriate, adding that the ECB does not need to take very large steps. Stournaras estimates the neutral rate to be between 0.5-1.5%.
RATES: Consensus expects the ECB to raise the deposit rate by 75bps to 0.75%. However, there is a notable split in analyst views as per Reuters polling with 34/67 expecting 75bps, 29 expecting 50bps and four expecting just a 25bps move. Market pricing is more convinced over a larger-than-usual increment with 75bps priced at a circa 95% probability. Expectations for a 75bps move were stoked after a source report on 26th August revealed that some policymakers wish to discuss a 75bps rate rise due to the deterioration in the inflation outlook, with the prospect of a looming recession not a justification for slowing or halting policy normalisation. Thereafter, a speech by Germany’s Schnabel and rhetoric from other officials (see above) reinforced the Governing Council’s tightening ambitions. Accordingly, and in the wake of another firmer-than-expected Eurozone inflation report, the likes of Goldman Sachs, Credit Suisse, BofA, JPM and several others adjusted their calls in favour of a 75bps move with desks of the view that such a move would provide policymakers an opportunity to front-load hikes and signal their tightening ambitions. That said, the likes of ING, who expect just a 50bps move, think that such a magnitude would be a compromise, with a 75bps rise looking like “one bridge too far” for the doves. Beyond Thursday’s decision, markets price in around 100bps of tightening (excluding this week) by year-end which would imply 50bps moves at the October and November meetings. One nuance for the press conference and highlighted by SGH Macro is that markets will be looking to see whether a 75bps move would see 25bps “borrowed or brought forward from a future hike” given that at the July meeting, President Lagarde suggested that the larger-than-expected move did not change the ultimate destination of the policy path. Elsewhere, market participants will be looking for any indications as to where the ECB sees the neutral rate (generally considered to be somewhere between 1-2%) and how far the ECB is willing to go above the neutral rate into restrictive territory.
BALANCE SHEET: At the July meeting, the Governing Council was also able to agree on an anti-fragmentation tool named the Transmission Protection Instrument (TPI), aimed at ensuring that the monetary policy stance is transmitted smoothly across all euro area countries. That said, it was noted that PEPP remains the first line of defence to counter risks to the transmission mechanism related to the pandemic. In terms of the details of TPI, Lagarde noted that all nations are eligible, the ECB is capable of “going big” on the instrument, whilst the activation of TPI is at the discretion of the Governing Council. Lagarde later clarified that the four conditions for TPI are as follows: 1. Compliance of EU fiscal framework, 2. Absence of severe macro imbalances, 3. Fiscal sustainability, 4. Sound and sustainable macro policies. The follow-up press release noted that purchases under TPI could be suspended if it is judged that persistent tensions are due to country fundamentals. Traders will be cognisant of the upcoming Italian election on September 25th. Elsewhere, aspects of the Q&A will likely focus on the ECB’s plans for its APP reinvestments. Recent reports suggested that the Bank could begin discussing ending reinvestments at an upcoming meeting, albeit September is judged to be too soon for such a discussion with rate hikes viewed as the preferred tool for tightening. As such, Lagarde is unlikely to give too much away on this front. Furthermore, when such a move comes, it will potentially need to be squared up against ongoing reinvestments under PEPP and any potential purchases under TPI.
ECONOMIC PROJECTIONS: The accompanying staff economic forecasts will likely see upward revisions to the 2022 and 2023 inflation projections of 6.8% and 3.5% respectively to somewhere in the region of 8.1% and 4.5%. As ever, the 2024 projection will be a key focus to see how the Governing Council judges the impact of current policy on the medium-term inflation outlook, with the current 2.1% forecast expected to be nudged higher to 2.2%. It is worth noting that the projections will likely need to be taken with a huge pinch of salt given the uncertainty of the outlook and the fluidity of the European gas situation. On that very point, the cut-off date for submitting forecasts will have pre-dated the recent shutting off of NS1 which subsequently sent European gas prices surging. From a growth perspective, 2022 GDP is expected to forecast trivially higher at 2.9% vs. 2.8% in June with 2023 growth expected to be cut to 0.4% from 2.1% and 2024 to be lowered to 1.6% from 2.1%.
MARKET REACTIONS: Finally, ahead of tomorrow’s ECB meeting, the team from ING Economics analyze four potential scenarios on a scale from dovish to ultra-hawkish and what this can mean for EUR/USD and EUR rates (full report link here):
Tyler Durden
Wed, 09/07/2022 – 21:25 - Maryland County To Enforce Youth Curfew After "Armed And Dangerous Children" Spark Murderous Month
Maryland County To Enforce Youth Curfew After “Armed And Dangerous Children” Spark Murderous Month
A county in Maryland near Washington, D.C., just recorded the deadliest month in decades. Local government officials are fed up with the surge in violent crime and announced a curfew for young people, which will last for a month, according to The Washington Times.
Prince George’s County Executive Angela Alsobrooks held a press conference Monday about the new curfew would begin next weekend and last for 30 days. Anyone under 17 will be forbidden from public areas between 10 pm and 5 am on weeknights unless escorted by a parent. On weekends the curfew begins at midnight and will be enforced by police.
Alsobrooks’ announcement comes as county police investigated 24 killings in August alone, a record high.
She said an “eye-popping” 430 arrests of juveniles this year is a doubling of last year’s figures — adding a lot of violent crime is being committed by young people.
“At this point, these kids don’t just need a hug, they need to be held accountable,” Alsobrooks said. “I know it’s not a popular thing to say, but it’s a fair question: Where are their parents? Where are the aunties, where are the uncles and other family members who are responsible for them?”
She warned there’d been a dangerous spike in carjackings by “armed and dangerous children,” calling it a severe problem.
The last time a youth curfew was implemented in the county was in 1995. Punishments for parents are fines up to $250.
Prince George’s County Police Chief Malik Aziz said the number of juveniles being repeatedly arrested is “deeply troubling.”
Gun blog Bearing Arms pointed out:
“So I have to give Prince George’s County credit for looking for ways to reduce homicides that don’t involve gun control, but I’m not sure interfering with the rights of an entire segment of people of whom a small percentage are bad actors, but still account for less than a quarter of all violent crimes is the way to go.”
… and what happens if the curfew doesn’t work?
Curious what you think… weigh in. Do you think enforcing the curfew will help stop the violence?
Prince George’s County Executive Alsobrooks announced Monday a curfew that would ban youth from public places late at night, citing an increase in gun violence & carjackings. pic.twitter.com/dysRnrxvab— Annie Yu (@AnnieYuTV) September 6, 2022
Tyler Durden
Wed, 09/07/2022 – 21:05 - Despite Unprecedented Tightening This Year, The Fed's Still Nowhere Near 'Destination Restrictive Territory'
Despite Unprecedented Tightening This Year, The Fed’s Still Nowhere Near ‘Destination Restrictive Territory’
By Ven Ram, Bloomberg markets analyst and reporter
US nominal yields are quite the rage these days.
And the dollar is having a heyday like no other, with the yen, the euro and the pound desperately in need of some smelling salts – except that there is just no one to nurse the non-dollars back to health in quick order.
Underpinning the inexorable increase in dollar-denominated nominal yields and the chutzpah in the greenback is, of course, the surge in inflation-adjusted yields in the state-side.
Five-year real rates have shot up some 100 basis points in the space of just over a month, and so have 10-year rates – more or less.
And yet it doesn’t look like we are almost there when it comes to the end of possible strength in the dollar and the surge in nominal rates.
Witness Fed Richmond President Thomas Barkin remarking that the “destination is real rates in positive territory and my intent would be to maintain them there until such time as we are really convinced that we put inflation to bed.”
That, of course, means that after spades of tightening so far this year, the Fed is still nowhere in sight of Destination Restrictive Territory.
If the Fed was naive (or artful enough to make everyone buy the story) in projecting just 75 basis points of increase for all of 2022 at the end of last year, now the boot is fully on the other foot.
Having already raised rates by 225 basis points, the prospect of taking it higher by another 150 basis points in short order is now more or less the base case.
On the other side of the pond, the European Central Bank is prepared to be more hawkish than even real hawks that spread their wings and soar over the sky… and that means euro-area rates are going to end up a lot higher this year than anyone imagined.
Still, that’s not to say that President Christine Lagarde and her governing council will be able to match Chair Jerome Powell and Co. in their fire power. And that will still mean vulnerability for the euro.
And we haven’t even mentioned the Bank of Japan’s nonchalance amid all this tumult, which of course leaves the yen exposed toward 150 per dollar.
And there is no need to shed a tear for the pound.
If you are going to fiddle as London burns and inflation comes scorching down, you could hardly persuade currency traders to accept deeply negative real yields as compensation and put up with it with a happy face.
It just ain’t happening, Mr. Andrew Bailey, unless the Bank of England decides to amuse everyone with fairy tales. Not that anyone is in the mood for it…
Tyler Durden
Wed, 09/07/2022 – 20:45 - When The Tide Turns, Brace For A Face-Ripping Yen Rally
When The Tide Turns, Brace For A Face-Ripping Yen Rally
As discussed earlier, the yen (and the yuan, and the euro, and pretty much every non-USD currency) is in the midst of a steep sell-off, but – as Bloomberg’s Simon White warns – when the trend turns, underlying processes are primed to see it rise significantly.
As we pointed out this afternoon, the Japanese currency is on course for its weakest annual performance versus the dollar since at least the 1960s…
… and as White notes, on the surface the reason is simple: the Federal Reserve is raising rates aggressively while the Bank of Japan is keeping them ultra-low. But the underlying processes are less obvious
Understanding the yen means understanding capital flows. Japan is a net capital exporter, which means the capital flows of domestic investors, rather than foreign investors, are the dominant long-term driver of the currency.
Momentum is driving the yen now, but its fall this year likely has two principal underlying drivers:
- Japanese investors have been buying more foreign equities
- Rising energy prices are leading to more capital outflow
Yield differentials are having little direct impact. The rise in US short-term yields relative to long-term ones has made FX-hedged USTs unattractive to Japanese investors.
Instead, the Japanese have ramped up net purchases of foreign equities. Unlike debt, equity purchases tend to be unhedged or underhedged, meaning the flow is yen-negative.
Rising energy prices are also leaning on the yen. In normal times, when energy prices are more contained, a weaker yen boosts exports and therefore Japanese growth. But growth is not picking up. Exports have risen, but imports have climbed even more, meaning the trade balance is now in deficit.
With not enough dollars from exports to pay for more expensive energy, in aggregate Japan is selling foreign assets — mainly debt securities — to get dollars. As debt is more likely to be FX hedged, unwinding the hedge is yen-negative as there is no offsetting capital flow back into Japan.
Normally a large yen-stabilizing flow would come from Japanese investors FX hedging their international portfolios, but it doesn’t look like this is happening. The chart below shows Japan listed-companies’ FX-hedging sensitivity is low right now. Simply put, if the trend in the yen is bolstering your returns, why stand in the way of it?
Moreover, foreigners have been largely absent from Japanese asset markets. Also, tourism has slumped. Japan has been all but closed to foreigners since the pandemic, taking the net annual travel surplus of over $50 billion in 2019 to almost zero now.
But here’s the thing about the yen — it’s like a catapult. The more it’s stretched, the greater its propensity to rebound.
Japan is the world’s largest net creditor. Rather than triggering a capital outflow, any domestic shock in Japan tends to trigger net inflows as capital is repatriated. With a net international investment position (NIIP) of almost $3.5 trillion, the amount of capital returning is potentially vast, with a powerful strengthening effect on the yen.
The yen’s slide is slowing growth, making a real-growth shock more likely, especially as there are signs inflation is moving to a higher and unstable regime. Furthermore, the risk is increasing the government or central bank intervenes to stabilize the currency, or the BoJ abandons or loosens its cap for 10-year JGB yields.
Any of those would trigger a reversal in the yen that could very quickly become self-reinforcing. Firms would be more inclined to reset FX hedges if they thought the yen’s trend had reversed. Foreign assets would be sold for yen as capital would be returned home.
Demand for dollars to pay for energy would decline. Foreigners would be more inclined to buy Japanese assets if they thought the currency was on an upward trend. And as the border is gradually opened up, there will be plenty of pent-up demand for cheap Japanese holidays and business travel.
The yen after such a catalyst could very quickly change direction and rally hard. Suddenly, USDJPY at 120 looks more likely than USDJPY at 160. Options currently imply the second is seven times more probable than the first by the end of the year. As contrarian trades go, they don’t get much more compelling than a stronger yen.
Tyler Durden
Wed, 09/07/2022 – 20:25 - The 'Inflation Reduction Act' Will Increase Inflation & Impoverish Middle-Class Americans
The ‘Inflation Reduction Act’ Will Increase Inflation & Impoverish Middle-Class Americans
Authored by Pete Hoekstra via The Gatestone Institute,
House Speaker Nancy Pelosi wondered aloud how Republicans could vote against Mother Earth. West Virginia Senator Joe Manchin possibly wondered how Republicans could vote against his so-called “Inflation Reduction Act (IRA).” In reality, Pelosi was closer to describing the contents of the IRA than was Manchin.
The IRA is revolutionary in what it purports to do for the climate. The only impact it will have on inflation is to increase it.
The IRA deliberately sets about impoverishing many Americans by increasing taxes “on everyone” and increasing tax audits at the same time as prices are skyrocketing. Imposing steeper taxes at a time of steeper prices may not mean that much to the rich, but has the effect of a stealth double-tax that crushes especially middle- and working-class families, who now find themselves forced to choose between necessities such as food, gasoline or rent. Reports state that 42% of Americans are struggling financially.
The political theory governing this economic sledgehammer seems to be seems to be that a bigger, centralized government that controls people is “better” — at least for the politicians — than a government that prizes the individual, individual freedoms and the ability to spend hard-earned money the way he or she wishes, rather than how government chooses to spend it for him. This Marxist view looks at people not as individuals, but as a collective for the government to organize as it wishes or “thinks best” (for whom? The government or the people it is organizing?) — not quite what the framers of our Constitution had in mind. It is apparently easier for a government to control citizens without freedoms – economic or otherwise, as in China or North Korea — than citizens with free choice, unpredictability and the opportunity to achieve the American Dream — who will not as dependent on the government to be a nanny-state for them. The government can then promise everyone goodies to keep them dependent, while it decides what to dole out, when and to whom: what cars you must buy, what doctors and healthcare you are allowed to have; what “social justice” (here and here) and gender issues your children are to be taught in school; which companies — possibly of campaign donors — should be rewarded with subsidies and handouts, and which, such as donors to other political parties, should be targeted for audits and confiscations.
As the cost of energy — gasoline, heating, air-conditioning — continues to rise, in addition to financing America’s adversaries that produce oil and gas such as Iran, Russia and Venezuela, all purchases for Americans, in an increasing downward spiral, become increasingly unaffordable. All goods that are manufactured or transported continue to cost more, forcing Americans to pay even higher prices for virtually everything. Already squeezed, many Americans will be forced to start buying less. Restaurants, even fast-food places, for instance, will become luxury items and attract fewer customers; many small businesses will be forced to close and their employees will be laid off, creating still less purchasing power. Even if the government hands out a few hundred dollars, that is hardly enough to keep up with an 8.5% inflation rate. If the Biden administration believes that the top earners in the US are not paying their fair share of taxes, then Congress should change the tax laws. Between incentivizing the golden goose and killing it are many shades of gray.
If all that were not punishing enough for the average American, the Internal Revenue Service will now get $80 billion to hire 87,000 new IRS agents to conduct more audits and tax-collection. The Biden administration’s promise not to increase the taxes of households making less than $400,000 a year is about as solid as the Obama administration’s promise that “You can keep your doctor [and] healthcare”. The White House has been claiming that the government is going after only “the ultra-wealthy and corporations.” Really?
First, as the adage goes, “Corporations don’t pay corporate taxes, people do.” Corporations simply pass on the increased expense by raising the price of their products or cutting jobs. The result, of course, is that even more people will be thrown out of work and unable to buy these now “luxury” items.
Second, of course, whoever imagined that doubling the size of the IRS is just what the American people have been pining for — spending $80 billion of the American taxpayers’ hard-earned money to target not Russia, China or Iran — but Americans? Or political opponents? On the charm scale, it is right up there with the government labeling parents “domestic terrorists.”
Moreover, these 87,000 new IRS agents will likely have zero interest in taking on either well-lawyered corporations or “ultra-wealthy” individuals. Incidentally, at what dollar amount does a wealthy person become “ultra”? Any self-respecting IRS agent would presumably prefer to come away from an IRS chat with something to show for it. The easiest target, of course, would be small business owners and middle-class individuals, for whom hiring a lawyer or accountant to refute a claim would cost more than just paying the IRS to go away. Just think of the IRS auditing, say, a lawyered-up Amazon corporation, which, until 2020, paid no taxes: “So, Walter, how’d it go today?” “Uh, zip.” What sort of return on investment for hiring 87,000 new IRS agents is that?
The best news of all, however, is that they are armed! The IRS recently took down a recruiting ad — at the same time as many Americans are advocating for gun control — saying that agents must be “willing to carry a firearm” and “use deadly force, if necessary.” Now, that is what you might call persuasive. It also uncomfortably resembles the start of an armed federal militia to federalize the police, replace those precincts that were defunded, and begin targeting Americans — call it the Papa Doc or Venezuela model — definitely not what the founding fathers had in mind. That is where they came in, and the reason for the Second Amendment.
The government, the Wall Street Journal determined, was embarking on a plan, to “raise a total of $739 billion in revenue, and spend a total of $433 billion…. to reduce the deficit by about $102 billion over a decade” – in government terms, a rounding error, with your tax dollars. But not a dollar for more Homeland Security agents to address the nearly 5 million illegal aliens — including 900,000 “gotaways” — rampant human trafficking, escalating child sex slavery, and massive drug smuggling that resulted, last year alone, in more than 107,000 deaths.
Just as ruinous for Americans but a windfall again for Russia, are the new taxes the IRA slaps on oil and natural gas — precisely when much of the world, and Europe in particular, are counting on the US to help them out this winter after Russian President Vladimir Putin turned off the taps.
If the Inflation Reduction Act has nothing to do with bringing down inflation, what it does have something to do with is purportedly funding climate change and green energy. “The package,” again according to the Wall Street Journal, “will spend roughly $369 billion on climate and energy programs, including tax credits for buying electric and hydrogen vehicles and making energy-efficient home improvements,” most of which are made in — China. Reality, as author and climate change expert Bjørn Lomborg keeps insisting, is that when alternatives to fossil fuels become “much less expensive and more effective,” everyone will choose them without being forced:
“By forcing up the price of fossil fuels, policy-makers have put the cart before the horse. Instead, we need to make green energy much cheaper and more effective.
“Humanity has relied on innovation to fix other big challenges. We didn’t solve air pollution by forcing everyone to stop driving, but by inventing the catalytic converter that drastically lowers pollution. We didn’t slash hunger by telling everyone to eat less, but through the Green Revolution that enabled farmers to produce much more food.”
How comforting, however, to see that families having trouble buying gasoline at $4.50 a gallon (down from $5!) will now be able to rush out and buy a $60,000 electric vehicle! Not surprisingly, the minute tax credits to buy electric vehicles was announced, some car companies, while insisting the two events were not connected — perish the thought! – raised their prices by $6,000-$8,500, “roughly matching the $7,500 tax credit introduced under the inflation bill.”
If there are cuts in drug prices, ordinarily that would be wonderful – if they did not also mean government interference in the private business of pharmaceuticals and the resultant impediment to research and development in tackling diseases, among others, such as cancer, Alzheimer’s and Parkinson’s.
As for Nancy Pelosi’s climate change part: as long as China “is building more than half of the world’s new coal power plants,” and all of us on the planet are breathing the same air, we are essentially depriving Americans of low-cost energy independence while enriching, again, overt adversaries such as Russia and Iran that export oil for as high a price as they can. Other countries are likely to be less passionate about having clean energy and more passionate about the bottom line. Russia, for instance, has been trying for years to limit America’s oil production to prod the US to transfer its dependence on oil to, you guessed it again!, Russia. If the US had the widespread, inexpensive oil production it enjoyed two years ago, Putin would never have had the resources even to think of invading Ukraine. The US is, quixotically, funding both sides of this war.
Last week, the US Congress approved a $10,000-$20,000 Student Loan Relief plan – with the actual cost to taxpayers estimated at $1 trillion — with a T — over ten years. The cost of that will be unfairly dumped on the shoulders of the 62% majority of Americans — often lower-income, blue-collar Uber-drivers, welders, small shopkeepers — who never went to college. It is a grotesque reverse transfer of wealth from the poor to the rich. As Florida Governor Ron DeSantis put it:
“It’s unfair to force a truck driver to pay a loan for someone who got a PhD in gender studies. Taxpayers shouldn’t be footing the bill for student loan relief and Biden’s order isn’t constitutional. If anything, universities handing out worthless degrees should be on the hook.”
“Constitutional” in his statement means that the president does not have the power to allocate money; that is the Congress’s job.
Moreover, no one will ever repay a student-loan again – why should they? The giveaway incentivizes people just to hang around and wait for loans to be forgiven. Anyone who ever struggled or held down two jobs to repay a student loan must now feel like a chump. Worse, universities — who are not being called on to use part of their gargantuan endowments to help cover this lavishness — will simply be encouraged to raise their fees even further.
The biggest surprise of all in the IRA may have been, unbelievably, a new “Green Bank”, filled with $27 billion of your money for the Environmental Protection Agency — which, of course, knows so much about banking. It is supposed to be a “fund for clean energy projects,” but, as the government, cagily warns, “false claims risks exist.” What could possibly go wrong?
The Inflation Reduction Act and Student Loan Relief Act and all these giveaways by the government, are yet more examples of government largess with the money of its citizens. Once again, politicians are taking taxpayer money and distributing it to favored causes and businesses, and then limiting the choices we can make as to how we want to live. It is bad policy in a country where freedom is supposed to reign.
Tyler Durden
Wed, 09/07/2022 – 20:05 - Florida 'Mother Theresa' Was Actually Running $196 Million Ponzi Scheme According To SEC
Florida ‘Mother Theresa’ Was Actually Running $196 Million Ponzi Scheme According To SEC
A Florida woman whose website claimed she was “often referred to as ‘Mother Teresa’ in her community” was actually running a multi-million dollar Ponzi scheme which promised investors 120% – 180% annual returns, federal prosecutors allege.
Broward County resident Johanna Garcia, connected investors with companies which needed short-term financing – promising the investors huge returns. Between June 2020 and August 2021, her company, MJ Capital Funding LLC took in more than $196 million from over 15,400 investors. She created a tool known as a “merchant cash advance” or MCA to provide loans to small businesses via a now-defunct website.
Garcia told prospective investors that they were “purchasing future receivables,” which guaranteed them a share of the recipient businesses’ income for months. According to the SEC, however, she was using new investors’ funds to satisfy payments to existing investors – fueling a Ponzi scheme, NPR reports. Company insiders, meanwhile, are accused of spending millions of dollars on travel, luxury goods, clothing and other items.
“From June 1, 2020 through August 31, 2021, the MJ Companies misused investor funds by making payments totaling at least $61.8 million to sales agents for promoting investments in the MJ Companies,” reads a new complaint against unlicensed broker, Pavel Ruiz.
The SEC also alleges that MJ Capital used unlicensed brokers and sales agents to sell unregistered securities. Supporting the scheme, the authorities allege, was Pavel Ruiz, 29, an MJ Capital board member whose sales team of some 70 agents allegedly reeled in at least $46 million from more than 5,100 investors.
Ruiz reaped large rewards from his work, allegedly taking in $292,000 in commissions. But he also diverted some $7.7 million directly into his personal accounts or ones he controlled, according to the SEC. It says he used some of the money to “purchase crypto assets and a luxury vehicle.” -NPR
After initially filing a complaint against Garcia last year, a federal judge has since frozen her companies’ assets and ordered them into receivership.
Last week, the SEC filed the second complaint – this one against Ruiz, which came on the same day as the US Attorney’s Office in the Southern District of Florida accused the unlicensed broker of conspiracy to commit wire fraud – which could land him in prison for 20 years.
Garcia’s name does not appear in the criminal filing against Ruiz; she is referred to only as “Co-conspirator 1,” identified as the company’s leader. When NPR asked the U.S. Attorney’s Office if Garcia might also face criminal charges, a representative said on Monday, “Pursuant to DOJ policy, we can neither confirm nor deny the existence of an investigation.”
Last week, the SEC and Garcia agreed to a partial settlement that would essentially put the agency’s complaint against her on the back burner. They jointly asked Judge Raag Singhal to approve the deal, citing potential complications from what Garcia has called a “parallel federal criminal investigation.”
The proposed wording of the order accepting the partial settlement states, “the SEC can address its request for monetary relief once criminal sentencing is concluded (in the event that the Defendant does not prevail at trial).” -NPR
The investigation began in 2021, when someone created a website with a URL similar to MJ Capital’s, but which accused them of running a Ponzi scheme. Garcia sued the site’s creator in federal court, demanding a jury trial on grounds of defamation. Two months later the FBI became involved – with an undercover agent visiting MJ Capital’s office posing as a prospective investor. The agent gave them $10,000, which they were told would generate a guaranteed 10% annual return.
A change.org petition in support “to come together in support of Johanna in this time of need” has reached more than 3,200 signatures as of this writing.
Tyler Durden
Wed, 09/07/2022 – 19:45 - Buchanan: How Liberal Elites Detest Middle America
Buchanan: How Liberal Elites Detest Middle America
Speaking at a San Francisco fundraiser in 2008, Barack Obama sought to explain the reluctance of working-class Pennsylvanians to rally to his cause.
“You go into these small towns in Pennsylvania and … the jobs have been gone now for 25 years, and nothing’s replaced them.”
“And it’s not surprising, then, they get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment … as a way to explain their frustrations.”
Translation: The world has left Middle America behind, and Middle America has reacted by clinging to its bibles, bigotries and guns.
Eight years later, Hillary Clinton was the Democratic nominee and, at a fundraiser in New York, addressed the same issue:
“You know, to just be grossly generalistic, you could put half of Trump’s supporters into what I call the basket of deplorables. Right? … The racist, sexist, homophobic, xenophobic, Islamaphobic — you name it.”
“Now, some of those folks — they are irredeemable, but thankfully they are not America.”
Last week, President Joe Biden addressed the same issue. But it was not with an off-the-cuff remark that our president revealed his thoughts.
At Independence Hall in Philadelphia, whence came the Declaration of Independence and Constitution, and flanked by two U.S. Marines, Biden described the Middle Americans of 2022. Only now they’re known as “MAGA Republicans,” and no more anti-American assemblage is to be imagined.
In a speech he labored on for days, the president described that half of the Republican Party he sees as wedded to “semi-fascism.”
“The Republican Party today is dominated, driven and intimidated by Donald Trump and the MAGA Republicans. And that is a threat to this country.”
“MAGA Republicans represent an extremism that threatens the very foundations of our Republic.”
“MAGA forces … promote authoritarian leaders, and they fan the flames of political violence that are a threat to our personal rights, to the pursuit of justice, to the rule of law, to the very soul of this country.”
“MAGA forces are determined to take this country backwards — backwards to an America where there is no right to choose, no right to privacy, no right to contraception, no right to marry who you love.”
Biden is here hypocritically denouncing as “backward” moral stands championed by his own Catholic faith — opposition to abortion and same-sex marriage — that he himself held not so long ago.
Biden went on:
“MAGA Republicans do not respect the Constitution. They do not believe in the rule of law. They do not recognize the will of the people. They refuse to accept the results of a free election.”
“MAGA Republicans … embrace anger. They thrive on chaos. They live, not in the light of truth but in the shadow of lies.”
“MAGA Republicans look at America and see carnage and darkness and despair. They spread fear and lies. Lies told for profit and power.”
“MAGA Republicans … are destroying American democracy.”
On Labor Day, Biden returned to the theme:
“Extreme MAGA Republicans … embrace political violence … (and) defend the mob that stormed the Capitol. And people died.”
This is the place at which Biden has arrived, 19 months into a presidency that began with his commitment to bring America together:
“Today, on this January day, my whole soul is in this: Bringing America together. Uniting our people. And uniting our nation. I ask every American to join me in this cause.”
After 19 months in office, Biden has given up on that cause, for a new cause. The name of the game now is an old one: divide et impera, divide and conquer. Biden hopes to split “mainstream Republicans” off from “MAGA Republicans” and demonize the latter as intolerable allies or partners in our democracy.
Indeed, the catalogue of sins and crimes Biden attributes to MAGA Republicans — extremism, violence, mendacity, authoritarianism — not only raises a question as to the state of the soul of the nation; it raises a question of its continuance as a democratic republic.
At his first rally following the Biden diatribe, Trump called the president “an enemy of the state” and Biden’s speech, “the most vicious, hateful and divisive … ever delivered by an American president.”
In an earlier time, this exchange between the two presidents might have been settled with pistols at dawn.
A house divided against itself cannot stand, said Abraham Lincoln, invoking a biblical truth. While the attributes and conduct Biden attributes to MAGA Republicans may not be such as to make a civil war inevitable, they surely do raise the question of whether our republic ought to endure or to be dissolved.
Indeed, Biden should be asked what differentiates MAGA Republicans who back Trump, given the crimes Biden listed, from the Black Shirts who accompanied Benito Mussolini on the March on Rome?
Does Biden believe MAGA Republicans are as sincere in their beliefs and the methods they espouse to advance those beliefs, as Biden himself, Nancy Pelosi and Kamala Harris are in theirs?
And if so, what do we have left in common?
Tyler Durden
Wed, 09/07/2022 – 19:25 - Pentagon Halts F-35 Stealth Jet Deliveries Over Use Of Chinese Alloy
Pentagon Halts F-35 Stealth Jet Deliveries Over Use Of Chinese Alloy
The Pentagon suspended the Lockheed Martin F-35 Lightning II deliveries over Chinese rare-earth metals used in magnets for pumps on the stealth fighter jet.
Defense Department spokesman Russell Goemaere told Bloomberg in an email that the F-35 program office “temporarily paused the acceptance of new F-35 aircraft to ensure the F-35 program’s compliance” with DoD rules sourcing “specialty metals.”
Goemaere said the Chinese alloy won’t disrupt operations with F-35s in deployment with US military and global partners because “the magnet does not transmit information or harm the integrity of the aircraft and there are no performance, quality, safety or security risks associated with this issue.”
The defense official said the F-35 program office “found an alternative source for the alloy that will be used in future turbomachines.”
“We are working with our partners and DoD to ensure contractual compliance within the supply chain … and are working with the DoD to resolve the issue as quickly as possible to resume deliveries,” Lockheed told Bloomberg.
Chinese alloy found in F-35s is no surprise, considering the country controls the global rare-earth metals market.
A Congressional Research Service report found that F-35s use about 920 pounds of rare earths per plane, mainly for electronic warfare sensors, electrical power systems, and magnets.
The US relies heavily on Asian countries for 80% of its rare-earths needs. There have been moves by the Biden administration to increase domestic supply chains as a priority to mitigate if China were to impose an export ban on US defense companies.
Rare earths are also central in manufacturing night vision goggles, precision-guided missiles, and drones. On the civilian side, metals are critical for electric vehicles and smartphones.
Tyler Durden
Wed, 09/07/2022 – 19:05 - IRS Official in Charge Of 87,000 New Agents Played Key Role In Obama-Era Targeting Scandal
IRS Official in Charge Of 87,000 New Agents Played Key Role In Obama-Era Targeting Scandal
Authored by Fred Lucas via The Epoch Times (emphasis ours),
House Republicans say they will keep a “watchful eye” on the Internal Revenue Service official tapped to run the centralized office housing 87,000 incoming new agents because she has ties to the IRS’ targeting of tea party groups during the Obama administration.
The Internal Revenue Service (IRS) building is seen in Washington on Sept. 28, 2020. (Erin Scott/Reuters) The Daily Signal first reported that IRS Commissioner Charles Rettig had appointed Nikole Flax, commissioner in charge of the IRS’ Large Business & International Division, to lead the establishment of the agency’s centralized office.
In 2014, Flax was among seven IRS employees who said their computers had crashed, making it impossible for them to provide information sought by the House Ways and Means Committee in investigating the agency’s targeting of tea party and other conservative groups.
Flax made 31 visits to the Obama White House from July 2010 through May 2013.
“Every American should be concerned that a key player in the IRS’ targeting of conservative groups and ensuing cover-up has been tapped to oversee the implementation of Democrats’ tax and spending bill,” Rep. James Comer (R-Ky.), ranking member of the House Oversight and Reform Committee, told The Daily Signal.
Nikole Flax, the IRS official in charge of a centralized office for 87,000 new agents, was part of the 2013 scandal exposing IRS targeting of conservative organizations. Pictured: Lois Lerner, then director of IRS’ exempt organizations unit, is sworn in May 22, 2013, before a House committee investigating the scandal. (Chip Somodevilla/Getty Images) Lois Lerner Connection
In an email sent May 8, 2013, Lois Lerner, head of the IRS’ tax-exempt organizations unit when the scandal erupted, told Flax that she received a call about working with the Justice Department to pursue certain political organizations that “lied” on IRS forms.
Lerner was the central figure of the Obama administration’s IRS targeting scandal. She said her computer also crashed.
Lerner invoked her Fifth Amendment right not to incriminate herself in testimony before the House Oversight and Reform Committee. After being placed on paid administrative leave, she retired later in 2013.
The IRS didn’t respond directly to the concerns raised by Flax’s background. Instead, the agency referred The Daily Signal to Rettig’s memo to staff announcing that Flax would run a new “centralized office” to implement elements of the tax and spending legislation that Democrats dubbed the Inflation Reduction Act. The package, signed into law by President Joe Biden, provides $80 billion for the IRS to add almost 87,000 new agents.
Despite the computer crash during the congressional investigation of IRS targeting, Rettig said that Flax would work with Congress and others in her new role leading the effort.
“Nikole has an extensive background in a variety of roles across the IRS since 2008,” Rettig’s memo says, adding: “Her wide range of experience will serve her well as she works with internal and external stakeholders, including Treasury, Congress, IRS employees and taxpayers.”
Rettig’s memo to IRS staffers about the new office also quotes Flax.
“This is a historic time for the IRS, and we are working to move quickly to begin work on the Inflation Reduction Act signed into law earlier this week,” Flax is quoted as saying. “This is an exciting opportunity, and we will be moving quickly with our work.”
Flax became director of the IRS Large Business & International Division in 2021. Previously, she had been deputy commissioner for the division since 2017.
Flax also is a former chief of staff to IRS Commissioner Steve Miller and was assistant deputy IRS commissioner for services and enforcement.
Republicans on the House Oversight and Reform Committee will monitor the IRS’ actions, Comer said.
“This entrenched bureaucrat will oversee the establishment of a new, centralized IRS office and the hiring of up to 87,000 IRS agents, which raises concerns that the Swamp could weaponize new resources to target and harass Americans,” Comer said in a statement provided to The Daily Signal.
“Oversight Committee Republicans will keep a watchful eye on this office. If there is a whiff of government abuse, we will work to hold bad actors accountable,” he said.
‘Frequent Visitor to White House’
In 2014, then-House Ways and Means Chairman Dave Camp (R-Mich.) accused the IRS of “lying” by attempting to hide two years of emails from Lerner and other officials.
“Despite their attempt to bury the missing Lerner emails on page 15 of a 27-page letter that arrived late Friday, we now know documents from other central figures, like Nikole Flax, are missing,” Camp said in a joint statement with Rep. Charles Boustany (R-La.), then-chairman of the Ways and Means oversight subcommittee.
The two Republican lawmakers added:
“The fact that Ms. Flax was a frequent visitor to the White House and the Eisenhower Executive Office Building only raises more questions. Who was she visiting at the White House and what were they talking about? Was she updating the White House on the targeting or was she getting orders?
“These are answers we don’t yet have, because—surprise, surprise—a few computers crashed. Plot lines in Hollywood are more believable than what we are getting from this White House and the IRS.”
When testifying before the House Ways and Means Committee in 2014, IRS Commissioner John Koskinen defended Flax, saying she had two IRS computers and that her IRS emails should be intact.
“Those press releases with regard to Nicole Flax were inaccurate and misleading and it demonstrates why we’ll provide this committee a full report … when it is completed,” Koskinen told the committee. “We are not going to dribble out the information and have it played out in the press.”
A string of audits and congressional investigations found that the IRS improperly targeted tea party and other conservative groups during the 2010 and 2012 election cycles by holding up their applications for tax-exempt status.
Chronology of IRS Scandal
In May 2013, the Treasury Department’s inspector general for tax administration released a report asserting that in the 2010 and 2012 election cycles, the IRS “used inappropriate criteria that identified tea party and other organizations applying for tax-exempt status based upon their policy positions.”
That finding prompted investigations by the House Ways and Means Committee and the House Oversight and Reform Committee, which concluded in 2014 that top IRS officials knew of the targeting of conservative groups and decided against informing Congress.
In 2015, the Senate Finance Committee released its findings that Lerner’s personal and political views played a role. The report said:
“Lerner orchestrated a process that subjected these applicants to multiple levels of review by numerous components within the IRS, thereby ensuring that they would suffer long delays and be required to answer burdensome and unnecessary questions.”
Another report, from the Government Accountability Office in 2016, stated that the IRS still might be targeting some nonprofits unfairly “based on an organization’s religious, educational, political, or other views.”
Nevertheless, Justice Department prosecutor Barbara Bosserman—who had donated a total of $6,750 to Barack Obama’s presidential campaigns and the Democratic National Committee from 2004 to 2012—declined to press charges after investigating the matter.
The IRS ultimately settled lawsuits with several tea party and other conservative groups in 2017 and 2018.
In 2016, Congress approved a provision to prevent the IRS from doing anything to target organizations or groups applying for tax-exempt status.
Reprinted by permission from The Daily Signal, a publication of The Heritage Foundation.
Tyler Durden
Wed, 09/07/2022 – 18:45 - Retail Traders Throw In The Towel
Retail Traders Throw In The Towel
Two months ago, when stocks were still sliding ahead of the mid-summer bear market meltup, we looked at investor sentiment and found that retail (as well as institutional) investors were in the process of capitulating.
This capitulatory sentiment quickly reversed however, once stocks first rose above 4,000, then the 500% retracement and eventually were on the verge of breaking above the 200DMA… but failed and have since stumbled again dragging everyone’s mood along with them.
So fast forwarding two months, and taking another look at sentiment again, it would be safe to assume that with stocks sliding, that the mood has once again turned dire. And sure enough, as Vanda Research observes in its latest weekly note (available to pro subscribers), speculative retail traders are throwing in the towel.
As Goldman’s Michael Nocerino wrote in his market wrap, saying that the bank is “seeing the absence of the retail investors (just look at bitcoin/meme stocks) as it’s back to school/work”, Vanda Research confirms that retail investors’ inflows into US securities continue to drop as the sell-off deepens, and suspects that “the lack of buying is originated from the increasing risk aversion of retail traders – who are waiting for a more favorable environment before trying to time the market or pick new stocks.” Translation: it makes no sense to buy the dip if tomorrow a bigger dip will emerge.
The lack of retail engagement can be observed by the low turnover (in line with 2019 levels). At the same time, individuals with a long term investment horizon are still net bullish – and indeed, net purchases remain relatively strong, close to the 2020-2022 average.
That said, Vanda expects the retail inflows to slow further if equities continue to fall – especially if the sell-off is driven by the underperformance of mega-caps.
A better indicator of retail capitulation comes from Vanda’s tracker of total retail investors’ traded value in US securities, which has dropped to pre-Covid levels, or around $11BN per day…
… and while net inflows have also been dropping, they remain in line with the post-Covid average. Vanda believes that this discrepancy is due to a change in investors’ behavior, as most of the active retail speculative investors gave up on day trading and now prefer to wait for a change in the macro-economic conditions. On the other side, a large portion of retail traders buy the dip with ETFs or favorite stocks in auto-pilot as they have a long term investment horizon.
Of course, when one cuts to the chase, sentiment is always just a function of price, which is a problem since the average retail investor’s portfolio drawdown is again approaching -30%. As a result, risk-aversion is likely to only pick-up as the YTD PnL dramatically declines.
In this context, Vanda thinks that the main risk on the downside is an underperformance of mega-caps – as retail investors are heavily exposed to stocks like: AAPL, TSLA, AMZN and NVDA; the retail tracking company expects portfolios to experience large losses if these companies underperform over the next few weeks which could eventually lead to a full-scale capitulation.
Another pattern that reinforces this bearish view is the recent drop in levered long ETFs net inflows. After an initial rebound in TQQQ purchases during the first stage of the sell-off, which started with the Jackson Hole symposium, Vanda noticed a sharp decline in net inflows. Probably, retail traders do not dare to bet on a quick rebound – or they even added bearish positions by buying SQQQ (most bought security yesterday).
A more granular look at retail flows finds that investors’ flows into semis stocks show resilience as the US unveils the details of its Chips plan. One possible catalyst is the signing of the $52BN Chips for America plan into law on 9th August. The package is expected to funnel more than $70bn into the US semiconductor industry and set aside approximately $200bn for scientific and technological research. However, shares of semiconductor stocks (SOXX) have shed more than 16% since mid-August, lagging broader US equity indices as Fed tightening and global slowdown fears dominated headlines. Nevertheless, as the charts below show, the recent slump hasn’t deterred retail investors who have continued to step up buying in both cash equity and options markets ($730MM and $310MM in the last five trading days, respectively).
Interestingly, despite its recent woes, NVDA remains a retail favorite within the semiconductor universe, with over $600MM net retail flows over the past two weeks. The stock has now slid 29% since the disappointing earnings pre-announcement on August 8th. The move was likely also driven by worries about the knock-on impacts of the CHIPS bills on its sales to China. According to Bloomberg data, the stock derives around 57% of its revenue from China and Taiwan, but that doesn’t seem to worry retail investors much as they continue offering exit liquidity to the pros.
One place where the retail mania has certainly burst is Bed Bath stock – here, retail investors appear to have abandoned this summer phenomenon stock entirely as the company announced plans to lay off 20% of staff and close 150 stores, and following the sudden death of its CFO. That said, sporadic bursts in the trading of meme stocks will remain a feature of equity markets in the future. However, repeated attempts have displayed a decreasing impact on overall markets over time as investors of all stripes have learned how to navigate these highly speculative events. In particular, meme stock trading phases are shorter and unsustainable during bear markets.
So could a rush for the safe havens foreshadow better times ahead? Vanda thinks so, noting that the recent rout in financial markets has pushed retail investors towards bonds and gold, driving a change in their short-term purchasing pattern. As frequently noted, retail investors’ bias is predominantly contrarian when it comes to risky assets. Conversely, this investor cohort tends to momentum-trade safe havens such as bonds and gold. So, the jump in purchases for these havens – off the back of price declines – indicates an increasingly bearish shift in sentiment. When considering retail’s ‘late-to-the-party’ track record in timing bottoms, this could actually foreshadow an improving outlook for equities in the days ahead.
More in the full note available to pro subscribers.
Tyler Durden
Wed, 09/07/2022 – 18:26 - Inflation Now Causing Hardship For Majority In US: Gallup
Inflation Now Causing Hardship For Majority In US: Gallup
By Jeffrey Jones of Gallup
A majority of Americans, 56%, now say price increases are causing financial hardship for their household, up from 49% in January and 45% in November.
The latest reading includes 12% who describe the hardship as severe and 44% as moderate.
The results are based on an Aug. 1-22 web survey that interviewed over 1,500 members of Gallup’s probability-based panel.
Although more Americans now than last fall say they are experiencing hardship, the percentage who are suffering severe hardship has held relatively steady at around 10%. Lower-income Americans are more likely than others to be experiencing severe hardship — 26% of those whose annual household income is less than $48,000 say prices are causing severe hardship for their families. That compares with 12% of middle-income Americans and 4% of upper-income Americans.
Lower-income Americans are about as likely now as last fall to say they are experiencing either severe or moderate hardship — 74%, compared with 70% in November.
Middle-income (63%) and upper-income (40%) Americans remain significantly less likely than lower-income Americans to say they are experiencing hardship. However, sharply more middle- and upper-income Americans are struggling now than were last November. The increase has been greater among middle-income Americans — up 17 percentage points — than among upper-income Americans — up 12 points.
Reports of financial hardship also differ by partisanship. Republicans (67%) are far more likely than Democrats (44%) to say rising prices are hurting their families. Independents fall between the party groups, at 56%.
These party differences are consistent with Republicans’ being more likely to mention inflation as the most important problem and to rate the economy more negatively than Democrats and independents do, likely because of the presence of a Democratic president in the White House.
Spending, Travel, Driving Cutbacks Most Common Response to Inflation
A new question in the survey asked those experiencing hardship to list some of the specific things they are doing to respond to the effects of inflation.
The most common action, mentioned by 24% of those experiencing hardship, is to reduce spending, including buying less in general or buying only essential items. Another 17% say they are traveling less or canceling vacations, while the same percentage indicate they are driving less or trying to use less gas.
Other common strategies for dealing with higher prices are buying cheaper goods or generic brands of products (12%), eating out less (10%), buying fewer groceries or growing their own food (10%), staying home (8%), and cutting down on entertainment expenses (8%).
Seven percent say they have tried to increase their income by working more hours, finding a second job or looking for a new job. Three percent say they are delaying medical procedures or appointments, and another 3% are delaying home improvement or maintenance projects.
Two percent each say they are downsizing or selling things they own, using savings, or using credit cards or loans. One percent are using food banks or applying for assistance.
Adults of different income levels are about equally likely to report taking the most commonly mentioned actions. However, upper-income people are more likely than lower-income people to say they have cut back on travel and eating out, perhaps because they are more likely to do those activities under normal circumstances.
Bottom Line
With high inflation persisting for over a year, a majority of Americans now say they are experiencing financial hardship from higher prices. Lower-income Americans were mainly affected early on, but most middle-income Americans and a substantial minority of upper-income Americans are now feeling the strain of higher prices.
To address the hardship inflation is causing them, Americans are largely making sacrifices by buying less, cutting back on discretionary spending and cutting back on recreational activities. Some have resorted to more significant measures such as finding another job, incurring debt, postponing medical care or applying for assistance.
Tyler Durden
Wed, 09/07/2022 – 18:05
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